Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

We have leases with various tenants across our portfolio of properties, which generate rental income and operating cash flows for our benefit. Through these leases, we provide tenants with the right to control the use of our real estate, which tenants agree to use and control. The right to control our real estate conveys to our tenants substantially all of the economic benefits and the right to direct how and for what purpose the real estate is used throughout the period of use, thereby meeting the definition of a lease. Leases will be classified as either operating, sales-type or direct finance leases based on whether the lease is structured in effect as a financed purchase.

Property rentals revenue includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease. When a renewal option is included within the lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Further, property rentals revenue includes tenant reimbursements revenue from the recovery of all or a portion of the operating expenses and real estate taxes of the respective assets, which are accrued as variable lease payments in the same periods as the related expenses are incurred. We commence rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and when the leased space is substantially ready for its intended use. In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of property rentals revenue on a straight-line basis over the term of the lease. Differences between rental revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to "Deferred rent receivable, net" on our balance sheets. Property rentals revenue also includes the amortization or accretion of acquired above-and below-market leases. We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for the estimated losses resulting from the inability of tenants to make required payments under lease agreements. Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rentals" in our statements of operations. We exercise judgment in assessing the probability of collection and consider payment history and current credit status in making this determination.

Third-party real estate services revenue, including reimbursements, is determined in accordance with the terms specific to each arrangement and includes property and asset management fees and transactional fees for leasing, acquisition, development and

construction, financing, and legal services. These fees are determined in accordance with the terms specific to each arrangement and are recognized as the related services are performed in accordance with ASU 2014-09, Revenue from Contracts with Customers, ("Topic 606").

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant of these estimates include: (i) the underlying cash flows used in assessing impairment and (ii) the determination of useful lives for tangible and intangible assets. Actual results could differ from these estimates.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Adoption of Topic 842

We enter into various lease agreements to make our properties available for use by third parties in exchange for cash consideration or to obtain the right to use properties owned by third parties to administer our business operations. We account for these leases under Topic 842, which we adopted as of January 1, 2019 using a modified retrospective approach and by applying the several transitional practical expedients including the Comparatives Under 840 expedient, the Relief Package for existing leases and the Easement expedient for existing easements, but not the Hindsight expedient. The Comparatives Under 840 expedient allows us not to recast our comparative periods in the period of adoption, and the Relief Package and Easement expedients allow us to maintain our historical accounting conclusions on current leases as of the date of adoption with respect to whether a contract contains a lease, what a lease’s classification should be, what initial direct costs are capitalizable and whether a land easement constituted a lease. We made a policy election to forgo recording right-of-use assets and the related lease liabilities for leases with initial terms of 12 months or less.

The adoption of Topic 842 did not result in a material change to our recognition of property rental revenue and did not impact our opening accumulated deficit balance, but resulted in:

(i) the inclusion of tenant reimbursements in "Property rentals" in our statements of operations. Such amounts were previously separately presented as "Tenant reimbursements" in the statements of operations;

(ii) the recognition, as of January 1, 2019, of right-of-use assets totaling $35.3 million in "Other assets, net" and lease liabilities totaling $37.9 million in "Other liabilities, net" in our accompanying balance sheet, associated with our corporate office lease and various ground leases for which we are the lessee. The initial right-of-use assets comprised $37.9 million of lease liabilities, $3.5 million of ground lease deferred rent payable reclassified from "Other liabilities, net" and $767,000 of identified net intangible assets and $140,000 of prepaid expenses both reclassified from "Other assets, net;"

(iii) the inclusion as a deduction to revenue, as of January 1, 2019, of the impact of previously recognized revenue deemed improbable of collection. Such amounts were previously recognized within "Property operating expense" in the statements of operations; and

(iv) the change, as of January 1, 2019, in our capitalization policy for direct leasing costs to include only incremental costs associated with successful leasing arrangements, which would not have been incurred if the leasing arrangements had not been obtained. As a result, we no longer capitalize internal leasing costs, which are now expensed as incurred within "Corporate and other - general and administrative costs" in the statements of operations. Internal leasing costs capitalized for the three and nine months ended September 30, 2018 totaled $1.5 million and $4.3 million.

Lessor Accounting

Leases in which we are the lessor provide for the payment of fixed base rents payable monthly as well as reimbursements of real estate taxes, insurance and maintenance costs. The reimbursement of real estate taxes, insurance and maintenance costs, which vary each period, are non-lease components that are not the predominant activity within the contract. We have elected a practical expedient which allows us to combine certain lease and non-lease components of our operating leases. Non-lease components are recognized together with fixed base rent in "Property rentals", as variable lease income in the same periods as the related expenses are incurred. Certain commercial leases may also provide for the payment by the lessee of additional rents based on a percentage of sales, which are recorded as variable lease income in the period the additional rents are earned.

The following is a summary of revenue from our non-cancellable leases included in the statements of operations:



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
	(In thousands)
Property rentals:
Fixed	$	114,538	$	342,268
Variable	9,425		23,434
Total	$	123,963	$	365,702

As of September 30, 2019, the undiscounted cash flows to be received from lease payments under our operating leases on an annual basis for the next five years and thereafter are as follows:



Year ending December 31,	Amount
	(In thousands)
2019 ⁽¹⁾	$	101,929
2020	367,750
2021	307,251
2022	273,711
2023	235,298
2024	208,243
Thereafter	1,109,914

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⁽¹⁾	Amount is for the remainder of 2019.

As of December 31, 2018, future base rental revenue under our non-cancellable operating leases, as determined under Topic 840, were as follows:



Year ending December 31,	Amount
	(In thousands)
2019	$	377,427
2020	321,205
2021	287,463
2022	256,352
2023	215,203
Thereafter	1,188,767

Lessee Accounting

We are obligated under non-cancellable operating leases, including ground leases on certain of our properties through 2061 and our corporate office leases. When a renewal option is included within a lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the corresponding lease liability and right-of-use asset. Rent expense for our operating leases is recognized on a straight-line basis over the expected lease term and is included in our statements of operations in either "Property operating expense" or "General and administrative expense" depending on the nature of the lease. Further, we are also obligated under a non-cancellable ground lease, which we classify as a finance lease. Because ownership of the land associated with this finance lease is reasonably certain to transfer to us upon the conclusion of the lease, we recorded $16.0 million to "Land and improvements" on our balance sheet when the lease commenced in 2017.

Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, market rates or our share of expenditures of the leased premises. Such variable payments are recognized in rent expense in the period in which the variability is determined. Certain lease agreements may also include various non-lease components that primarily relate to property operating expenses associated with our office leases, which also vary each period. We have elected the practical expedient which allows us not to separate lease and non-lease components for our ground and office leases and recognize variable non-lease components in rent expense when incurred.

We discount our future lease payments for each lease to calculate the related lease liability using an estimated incremental borrowing rate computed based on observable corporate borrowing rates reflective of the general economic environment, taking into consideration our creditworthiness and various financing and asset specific considerations, adjusted to approximate a secured borrowing for the lease term.

As of September 30, 2019, the weighted average discount rate used in calculating lease liabilities for our active operating and finance leases were 5.3% and 5.8%, which have weighted average remaining lease terms of 20.7 years and 7.3 years.

As of September 30, 2019, future minimum lease payments under our non-cancellable operating and finance leases are as follows:



Year ending December 31,	Operating			Finance
	(In thousands)
2019 ⁽¹⁾	$	1,573		$	266
2020	6,272			1,073
2021	6,201			1,095
2022	5,257			1,117
2023	2,000			1,139
2024	2,061			1,162
Thereafter	36,579			15,977
Total future minimum lease payments	59,943			21,829
Imputed interest	(25,403		)	(6,228		)
Total ⁽²⁾	$	34,540		$	15,601

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⁽¹⁾	Amounts are for the remainder of 2019.


⁽²⁾	The total for operating leases of $34.5 million corresponds to lease liabilities related to operating right-of-use assets and the total for finance leases of $15.6 million represents our finance lease liability, both of which are included in "Other liabilities, net" as of September 30, 2019. See Note 8 for additional information.

As of December 31, 2018, future minimum rental payments under our non-cancellable operating leases, capital leases and lease assumption liabilities, as determined under Topic 840, were as follows:



Year ending December 31,	Amount
	(In thousands)
2019	$	13,991
2020	13,710
2021	13,395
2022	12,554
2023	9,489
Thereafter	55,780
Total	$	118,919

For the three and nine months ended September 30, 2019, we incurred $662,000 and $1.9 million of fixed operating and finance lease costs and $437,000 and $1.3 million of variable operating lease costs.