Lease Obligaitons

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Lease Obligaitons

Lease Obligations

We are engaged in the operation of shopping centers, which are either owned or, with respect to certain shopping centers, operated under operating ground leases. These ground leases expire at various dates through 2069 with renewal options ranging from five years to 20 years and in some cases, include options to purchase the underlying asset by either the lessor or lessee. Generally, our ground lease variable payments for real estate taxes, insurance and utilities are paid directly by us and are not a component of rental expense. Most of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions and also may include an amount based on a percentage of operating revenues or sublease tenant revenue. Space in our shopping centers is leased to tenants pursuant to agreements that generally provide for terms of 10 years or less and may include multiple options to extend the lease term in increments up to five years, for annual rentals subject to upward adjustments based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements.

Also, we have two properties under a finance lease that consists of variable lease payments with a purchase option. The right-of-use asset associated with this finance lease at December 31, 2019 was $8.9 million. At December 31, 2018, the related assets associated with a capital lease in buildings and improvements totaled $15.7 million, and the balance of accumulated depreciation was $14.1 million. Amortization of property under the finance lease is included in depreciation and amortization expense. Note that amounts prior to January 1, 2019 were accounted for under ASC No. 840.

A schedule of lease costs including weighted average lease terms and weighted-average discount rates is as follows (in thousands, except as noted):

	Year Ended December 31,
	2019
Operating lease cost:
Included in Operating expense	$	3,044
Included in General and administrative expense	302
Finance cost:
Amortization of right-of-use asset (included in Depreciation and Amortization)	174
Interest on lease liability (included in Interest expense, net)	1,642
Short-term lease cost	44
Variable lease cost	309
Sublease income (included in Rentals, net)	(27,400		)
Total lease cost	$	(21,885	)
	December 31, 2019
Weighted-average remaining lease term (in years):
Operating leases	41.5
Finance lease	4.0
Weighted-average discount rate (percentage):
Operating leases	4.9		%
Finance lease	7.5		%

A reconciliation of our lease liabilities on an undiscounted cash flow basis, which primarily represents shopping center ground leases, for the subsequent five years and thereafter, as calculated as of December 31, 2019, is as follows (in thousands):

	Operating		Finance
Lease payments:
2020	$	2,696	$	1,744
2021	2,585		1,751
2022	2,576		1,759
2023	2,458		23,037
2024	2,158
Thereafter	97,187
Total	$	109,660	$	28,291
Lease liabilities(1)	43,063		21,804
Undiscounted excess amount	$	66,597	$	6,487

___________________

(1) Operating lease liabilities are included in Other Liabilities, and finance lease liabilities are included in Debt, net in our Consolidated Balance Sheet.

Scheduled minimum rental payments as defined under ASC No. 840, under the terms of all non-cancelable operating leases in which we are the lessee, principally for shopping center ground leases, for the subsequent five years and thereafter ending December 31, as calculated as of December 31, 2018, were as follows (in thousands):

	Operating		Finance
Lease payments:
2019	$	2,779	$	1,642
2020	2,536		1,635
2021	2,334		1,627
2022	2,318		1,618
2023	2,283		22,878
Thereafter	99,302
Total	$	111,552	$	29,400

Rental expense for operating leases as defined under ASC No. 840 was, in millions: $3.1 in 2018 and $2.9 in 2017, which was recognized in Operating expense. Minimum revenues under subleases, applicable to the ground lease rentals, under the terms of all non-cancelable tenant leases was, in millions: $22.8 million in 2018 and $27.1 million in 2017.

Future undiscounted, sublease payments applicable to the ground lease rentals, under the terms of all non-cancelable tenant leases, excluding estimated variable payments for the subsequent five years and thereafter ending December 31, as calculated as of December 31, 2019 and 2018, were as follows (in thousands):

	December 31, 2019		December 31, 2018
Sublease payments:
Finance lease(1)	$	10,279	$	14,382
Operating leases:
2019			$	22,528
2020	$	24,137	20,903
2021	22,168		18,886
2022	20,400		17,245
2023	18,583		15,128
2024	13,567
Thereafter	39,111		43,439
Total	$	137,966	$	138,129

___________________

(1)

The sublease payments related to our finance lease represents cumulative payments through the lease term ending in 2023.

Lease Obligations

Lease Obligations

We are engaged in the operation of shopping centers, which are either owned or, with respect to certain shopping centers, operated under operating ground leases. These ground leases expire at various dates through 2069 with renewal options ranging from five years to 20 years and in some cases, include options to purchase the underlying asset by either the lessor or lessee. Generally, our ground lease variable payments for real estate taxes, insurance and utilities are paid directly by us and are not a component of rental expense. Most of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions and also may include an amount based on a percentage of operating revenues or sublease tenant revenue. Space in our shopping centers is leased to tenants pursuant to agreements that generally provide for terms of 10 years or less and may include multiple options to extend the lease term in increments up to five years, for annual rentals subject to upward adjustments based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements.

Also, we have two properties under a finance lease that consists of variable lease payments with a purchase option. The right-of-use asset associated with this finance lease at December 31, 2019 was $8.9 million. At December 31, 2018, the related assets associated with a capital lease in buildings and improvements totaled $15.7 million, and the balance of accumulated depreciation was $14.1 million. Amortization of property under the finance lease is included in depreciation and amortization expense. Note that amounts prior to January 1, 2019 were accounted for under ASC No. 840.

A schedule of lease costs including weighted average lease terms and weighted-average discount rates is as follows (in thousands, except as noted):

	Year Ended December 31,
	2019
Operating lease cost:
Included in Operating expense	$	3,044
Included in General and administrative expense	302
Finance cost:
Amortization of right-of-use asset (included in Depreciation and Amortization)	174
Interest on lease liability (included in Interest expense, net)	1,642
Short-term lease cost	44
Variable lease cost	309
Sublease income (included in Rentals, net)	(27,400		)
Total lease cost	$	(21,885	)
	December 31, 2019
Weighted-average remaining lease term (in years):
Operating leases	41.5
Finance lease	4.0
Weighted-average discount rate (percentage):
Operating leases	4.9		%
Finance lease	7.5		%

A reconciliation of our lease liabilities on an undiscounted cash flow basis, which primarily represents shopping center ground leases, for the subsequent five years and thereafter, as calculated as of December 31, 2019, is as follows (in thousands):

	Operating		Finance
Lease payments:
2020	$	2,696	$	1,744
2021	2,585		1,751
2022	2,576		1,759
2023	2,458		23,037
2024	2,158
Thereafter	97,187
Total	$	109,660	$	28,291
Lease liabilities(1)	43,063		21,804
Undiscounted excess amount	$	66,597	$	6,487

___________________

(1) Operating lease liabilities are included in Other Liabilities, and finance lease liabilities are included in Debt, net in our Consolidated Balance Sheet.

Scheduled minimum rental payments as defined under ASC No. 840, under the terms of all non-cancelable operating leases in which we are the lessee, principally for shopping center ground leases, for the subsequent five years and thereafter ending December 31, as calculated as of December 31, 2018, were as follows (in thousands):

	Operating		Finance
Lease payments:
2019	$	2,779	$	1,642
2020	2,536		1,635
2021	2,334		1,627
2022	2,318		1,618
2023	2,283		22,878
Thereafter	99,302
Total	$	111,552	$	29,400

Rental expense for operating leases as defined under ASC No. 840 was, in millions: $3.1 in 2018 and $2.9 in 2017, which was recognized in Operating expense. Minimum revenues under subleases, applicable to the ground lease rentals, under the terms of all non-cancelable tenant leases was, in millions: $22.8 million in 2018 and $27.1 million in 2017.

Future undiscounted, sublease payments applicable to the ground lease rentals, under the terms of all non-cancelable tenant leases, excluding estimated variable payments for the subsequent five years and thereafter ending December 31, as calculated as of December 31, 2019 and 2018, were as follows (in thousands):

	December 31, 2019		December 31, 2018
Sublease payments:
Finance lease(1)	$	10,279	$	14,382
Operating leases:
2019			$	22,528
2020	$	24,137	20,903
2021	22,168		18,886
2022	20,400		17,245
2023	18,583		15,128
2024	13,567
Thereafter	39,111		43,439
Total	$	137,966	$	138,129

___________________

(1)

The sublease payments related to our finance lease represents cumulative payments through the lease term ending in 2023.