Leases

3 Months Ended

Mar. 31, 2025

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 Operations, as either fixed or variable lease income based on the criteria specified in ASC 842, for the three months ended March 31, 2025 and 2024, was as follows (in thousands):


	Three Months Ended March 31,
	2025			2024
Lease income:
Fixed lease income (1)	$	416,171		$	397,695
Variable lease income (2)		112,987			98,281
Above-market and below-market leases amortization, net		5,314			5,901
Adjustments for potentially uncollectible lease income or disputed amounts		(3,186	)		(2,972	)
Total lease income	$	531,286		$	498,905

(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 80.1 years, some of which include options to extend the terms for up to an additional 60 years.

The Company had three properties under finance ground lease agreements that consisted of variable lease payments with a bargain purchase option. During 2025, the Company acquired the fee interest in two properties under finance ground lease agreements through the exercise of its call option for an aggregate purchase price of $24.2 million. This transaction resulted in a decrease in Other assets of $26.2 million and a decrease in Other liabilities of $24.2 million on the Company’s Condensed Consolidated Balance Sheets related to the finance right-of-use assets and lease liabilities. As of March 31, 2025, the Company has a property under a finance ground lease agreement with a right-of-use asset of $6.8 million, which is included in Other assets 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 leases as of March 31, 2025 were as follows:


	Operating Leases
Weighted-average remaining lease term (in years)		30.41
Weighted-average discount rate		6.79	%

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 Operations for the three months ended March 31, 2025 and 2024, were as follows (in thousands):


	Three Months Ended March 31,
	2025		2024
Lease cost:
Finance lease cost	$	43	$	366
Operating lease cost		3,441		3,871
Variable lease cost		841		659
Total lease cost	$	4,325	$	4,896