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Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases Leases
As lessor
We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rent payable monthly in advance. Leases typically provide for periodic step‑ups in rent over the term of the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Certain leases also require additional variable rent payments based on a percentage of the tenants’ sales. Electricity is provided to tenants on a sub-metered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also typically provide for free rent and tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.
As of December 31, 2022, future undiscounted cash flows under non-cancelable operating leases were as follows:
(Amounts in thousands)As of December 31, 2022
For the year ended December 31, 
2023$1,304,777 
20241,200,544 
20251,102,476 
20261,053,948 
2027950,515 
Thereafter6,515,202 
As lessee
We have a number of ground leases which are classified as operating leases. As of December 31, 2022, our ROU assets and lease liabilities were $684,380,000 and $735,969,000, respectively. As of December 31, 2021, our ROU assets and lease liabilities were $337,197,000 and $370,206,000, respectively.
In January 2022, we exercised a 25-year renewal option on our PENN 1 ground lease extending the term through June 2073. As a result of the exercise, we remeasured the related ground lease liability to include our 25-year extension option and recorded an estimated incremental right-of-use asset and lease liability of approximately $350,000,000 which is included in "right-of-use assets" and "lease liabilities", respectively, on our consolidated balance sheets. The ground lease is subject to fair market value resets every 25 years over the lease term, with the next reset occurring in June 2023.
When the rate implicit in a lease is not readily determinable, the discount rate applied to measure each ROU asset and lease liability is based on our incremental borrowing rate ("IBR"). We consider the general economic environment and our credit rating and factor in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. Certain of our ground leases offer renewal options which we assess against relevant economic factors to determine whether we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the lease liability and corresponding ROU asset.
Certain of our ground leases are subject to fair market rent resets based on a percentage of the appraised value of the underlying assets at specified future dates. Fair market rent resets occurring during the lease term do not give rise to remeasurement of the related ROU assets and lease liabilities. Fair market rent resets occurring during the lease term, which may be material, will be recognized in the periods in which they are incurred as variable rent expense.
    The following table sets forth information related to the measurement of our lease liabilities as of December 31, 2022, 2021 and 2020:
(Amounts in thousands)For the Year Ended December 31,
202220212020
Weighted average remaining lease term (in years)48.444.444.8
Weighted average discount rate5.54 %4.85 %4.91 %
Cash paid for operating leases$21,861 $22,382 $23,932 
We recognize rent expense as a component of "operating" expenses on our consolidated statements of income. Rent expense is comprised of fixed and variable lease payments. The following table sets forth the details of rent expense for the years ended December 31, 2022, 2021 and 2020:
(Amounts in thousands)For the Year Ended December 31,
202220212020
Fixed rent expense$45,211 $24,901 $28,503 
Variable rent expense14,180 13,078 1,178 
Rent expense$59,391 $37,979 $29,681 
19. Leases - continued
As lessee - continued
As of December 31, 2022, future lease payments under operating ground leases were as follows:
(Amounts in thousands)As of December 31, 2022
For the year ended December 31,
2023$34,782 
202446,859 
202547,227 
202647,616 
202748,027 
Thereafter1,949,551 
Total undiscounted cash flows2,174,062 
Present value discount(1,438,093)
Lease liabilities
$735,969 
The Farley Building
The future lease payments detailed above exclude the ground and building lease at The Farley Building. The consolidated joint venture, in which we own a 95% controlling interest, has a 99-year triple-net lease with Empire State Development ("ESD") for 846,000 rentable square feet of commercial space at the property, comprised of approximately 730,000 square feet of office space and approximately 116,000 square feet of restaurant and retail space. Our lease of the commercial space at the property is accounted for as a “failed sale-leaseback” as a result of us being deemed the "accounting owner" during development of the property in accordance with ASC 842-40-55 and the lease subsequently meeting "finance lease" classification pursuant to ASC 842-40-25 upon substantial completion. The lease calls for annual rent payments and fixed payments in lieu of real estate taxes ("PILOT") through June 2030. Following the fixed PILOT payment period, the PILOT is calculated in a manner consistent with buildings subject to New York City real estate taxes and assessments. As of December 31, 2022, future rent and fixed PILOT payments are $535,188,000.
Leases Leases
As lessor
We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rent payable monthly in advance. Leases typically provide for periodic step‑ups in rent over the term of the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Certain leases also require additional variable rent payments based on a percentage of the tenants’ sales. Electricity is provided to tenants on a sub-metered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also typically provide for free rent and tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.
As of December 31, 2022, future undiscounted cash flows under non-cancelable operating leases were as follows:
(Amounts in thousands)As of December 31, 2022
For the year ended December 31, 
2023$1,304,777 
20241,200,544 
20251,102,476 
20261,053,948 
2027950,515 
Thereafter6,515,202 
As lessee
We have a number of ground leases which are classified as operating leases. As of December 31, 2022, our ROU assets and lease liabilities were $684,380,000 and $735,969,000, respectively. As of December 31, 2021, our ROU assets and lease liabilities were $337,197,000 and $370,206,000, respectively.
In January 2022, we exercised a 25-year renewal option on our PENN 1 ground lease extending the term through June 2073. As a result of the exercise, we remeasured the related ground lease liability to include our 25-year extension option and recorded an estimated incremental right-of-use asset and lease liability of approximately $350,000,000 which is included in "right-of-use assets" and "lease liabilities", respectively, on our consolidated balance sheets. The ground lease is subject to fair market value resets every 25 years over the lease term, with the next reset occurring in June 2023.
When the rate implicit in a lease is not readily determinable, the discount rate applied to measure each ROU asset and lease liability is based on our incremental borrowing rate ("IBR"). We consider the general economic environment and our credit rating and factor in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. Certain of our ground leases offer renewal options which we assess against relevant economic factors to determine whether we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the lease liability and corresponding ROU asset.
Certain of our ground leases are subject to fair market rent resets based on a percentage of the appraised value of the underlying assets at specified future dates. Fair market rent resets occurring during the lease term do not give rise to remeasurement of the related ROU assets and lease liabilities. Fair market rent resets occurring during the lease term, which may be material, will be recognized in the periods in which they are incurred as variable rent expense.
    The following table sets forth information related to the measurement of our lease liabilities as of December 31, 2022, 2021 and 2020:
(Amounts in thousands)For the Year Ended December 31,
202220212020
Weighted average remaining lease term (in years)48.444.444.8
Weighted average discount rate5.54 %4.85 %4.91 %
Cash paid for operating leases$21,861 $22,382 $23,932 
We recognize rent expense as a component of "operating" expenses on our consolidated statements of income. Rent expense is comprised of fixed and variable lease payments. The following table sets forth the details of rent expense for the years ended December 31, 2022, 2021 and 2020:
(Amounts in thousands)For the Year Ended December 31,
202220212020
Fixed rent expense$45,211 $24,901 $28,503 
Variable rent expense14,180 13,078 1,178 
Rent expense$59,391 $37,979 $29,681 
19. Leases - continued
As lessee - continued
As of December 31, 2022, future lease payments under operating ground leases were as follows:
(Amounts in thousands)As of December 31, 2022
For the year ended December 31,
2023$34,782 
202446,859 
202547,227 
202647,616 
202748,027 
Thereafter1,949,551 
Total undiscounted cash flows2,174,062 
Present value discount(1,438,093)
Lease liabilities
$735,969 
The Farley Building
The future lease payments detailed above exclude the ground and building lease at The Farley Building. The consolidated joint venture, in which we own a 95% controlling interest, has a 99-year triple-net lease with Empire State Development ("ESD") for 846,000 rentable square feet of commercial space at the property, comprised of approximately 730,000 square feet of office space and approximately 116,000 square feet of restaurant and retail space. Our lease of the commercial space at the property is accounted for as a “failed sale-leaseback” as a result of us being deemed the "accounting owner" during development of the property in accordance with ASC 842-40-55 and the lease subsequently meeting "finance lease" classification pursuant to ASC 842-40-25 upon substantial completion. The lease calls for annual rent payments and fixed payments in lieu of real estate taxes ("PILOT") through June 2030. Following the fixed PILOT payment period, the PILOT is calculated in a manner consistent with buildings subject to New York City real estate taxes and assessments. As of December 31, 2022, future rent and fixed PILOT payments are $535,188,000.