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Note 11 - Leases

12 Months Ended

Dec. 31, 2019

11.	Leases

We lease certain property, land and equipment, the majority of which comprise property related leases to provide office space where we operate our business. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Our property related leases typically have terms of between three and five years, with the exception of the lease governing the Company’s headquarters, and are all classified as operating leases. These leases do not contain any residual value guarantees or restrictive covenants and no variable lease payments, except for common area maintenance and real estate taxes. Many of our property related leases give us the option to extend the lease term for a period of time, generally consistent with the initial lease term. These options are excluded from our calculation of the right-of-use asset and lease liability until such time as we determine it is reasonably certain that the option will be exercised.

The property related lease for the Company’s headquarters in Denver, Colorado is ten years in length with an expiration date of October 31, 2026 and contains a ten year option to extend the term of the lease through 2036. This option has been excluded from our calculation of the right-of-use asset and lease liability as it is not currently considered reasonably certain that the option will be exercised.

Operating lease expense is included as a component of selling, general and administrative expenses and expenses in the homebuilding and financial services sections of our consolidated statements of operations and comprehensive income, respectively.

Components of operating lease expense were as follows:

	Year Ended
	December 31, 2019
	(Dollars in thousands)
Operating lease cost ¹	$	7,690
Sublease income (Note 16)		(150	)
Net lease cost	$	7,540

¹ Includes variable lease costs, which are immaterial.

Rent expense under cancellable and non-cancellable operating leases totaled $7.4 million and $7.1 million in 2018 and 2017, respectively.

Supplemental cash flow information related to leases was as follows:

	Year Ended
	December 31, 2019
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,255
Leased assets obtained in exchange for new operating lease liabilities	$	3,255

Supplemental cash flow information related to non-cash transactions also includes the recognition of operating lease right-of-use assets of $33.5 million and operating lease liabilities of $34.3 million upon adoption of ASC 842.

Weighted-average remaining lease term and discount rate for operating leases were as follows:

	December 31, 2019
Weighted-average remaining lease term (years)		6.1
Weighted-average discount rate		5.5	%

Maturities of operating lease liabilities were as follows:

	Year Ended
	December 31,
2020	$	6,300
2021		6,705
2022		6,314
2023		5,294
2024		4,873
Thereafter		8,289
Total operating lease payments ¹	$	37,775

Less: Interest		5,605
Present value of operating lease liabilities ²	$	32,170

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¹ Operating lease payments exclude $3.7 million of legally binding lease payments for leases signed but not yet commenced.
² Homebuilding and financial services operating lease liabilities of $30.8 million and $1.4 million, respectively, are included as a component of accrued and other liabilities and accrued liabilities, respectively, in the homebuilding and financial services section of our consolidated balance sheet at December 31, 2019.