Leases

9 Months Ended

Sep. 30, 2024

9. Leases

Lessor Leases

The Company’s primary source of revenues is derived from lease agreements, which includes rental income and expense reimbursement. The Company’s lease income is comprised of minimum base rent, expense reimbursements, percentage rent, lease termination fee income, ancillary income, amortization of above-market and below-market rent adjustments and straight-line rent adjustments.

The disaggregation of the Company’s lease income, which is included in Revenues from rental properties, net on the Company’s Condensed Consolidated Statements of Income, as either fixed or variable lease income based on the criteria specified in ASC 842, for the three and nine months ended September 30, 2024 and 2023, was as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Lease income:
Fixed lease income (1)	$	405,468		$	354,465		$	1,199,803		$	1,052,126
Variable lease income (2)		96,732			85,452			295,019			261,781
Above-market and below-market leases amortization, net		7,222			3,967			17,567			13,969
Adjustments for potentially uncollectible lease income or disputed amounts		(6,547	)		(2,068	)		(14,388	)		(8,714	)
Total lease income	$	502,875		$	441,816		$	1,498,001		$	1,319,162

(1)

Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments.

(2)

Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income.

Lessee Leases

The Company currently leases real estate space under non-cancelable operating lease agreements for ground leases and administrative office leases. The Company’s operating leases have remaining lease terms ranging from less than one year to 81 years, some of which include options to extend the terms for up to an additional 75 years.

In connection with the RPT Merger, the Company obtained a $13.5 million operating right-of-use asset (excluding an intangible right-of-use asset of $7.4 million) in exchange for a new operating lease liability related to a property under an operating ground lease agreement. In addition, the Company obtained a finance intangible right-of-use asset of $6.8 million (which is included in Other assets on the Company’s Condensed Consolidated Balance Sheets).

The Company has three properties under finance leasing arrangements that consist of variable lease payments with a bargain purchase option. As of September 30, 2024, the finance right-of-use assets of $33.0 million are included in Other assets on the Company’s Condensed Consolidated Balance Sheets and finance lease liabilities of $24.2 million are included in Other liabilities on the Company’s Condensed Consolidated Balance Sheets.

The weighted-average remaining non-cancelable lease term and weighted-average discount rates for the Company’s operating and finance leases as of September 30, 2024 were as follows:


	Operating Leases			Finance Leases
Weighted-average remaining lease term (in years)		29.88			0.25
Weighted-average discount rate		6.78	%		6.00	%

The components of the Company’s lease expense, which are included in interest expense, rent expense and general and administrative expense on the Company’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023, were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Lease cost:
Finance lease cost	$	365	$	314	$	1,096	$	949
Operating lease cost		3,797		3,686		11,511		11,064
Variable lease cost		529		486		1,690		1,773
Total lease cost	$	4,691	$	4,486	$	14,297	$	13,786