XML 122 R11.htm IDEA: XBRL DOCUMENT

Leases

12 Months Ended

Dec. 31, 2019

Leases

Lessor Accounting Under ASC 842

The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2035. Some leases provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s portfolio of single-tenant net leases generally requires the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property. The Company records these expenses on a net basis, with the exception of property taxes. Property taxes are recorded on a gross basis as a lessor cost in which the tenant reimburses the Company. The Company generally expects that collectibility is probable at lease commencement. If the assessment of collectibility changes after the lease commencement date and Rental income is not considered probable, Rental income is recognized on a cash basis and all previously recognized uncollectible Rental income is reversed in the period in which the it is

determined not to be probable of collection. In addition to the lease-specific collectibility assessment performed under Topic 842, the Company may also apply a general reserve ("provision for bad debt"), as a reduction to Rental income, for its portfolio of operating lease receivables.

The Company's leases typically have escalators that are either based on a stated percentage or an index such as CPI (consumer price index). In addition, most of the Company's leases include nonlease components such as reimbursement of operating expenses as additional rent or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the twelve months ended December 31, 2019 was $462.2 million.

Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2019 are as follows:



In thousands
2020	$	360,340
2021	315,426
2022	275,798
2023	233,424
2024	177,738
2025 and thereafter	501,849
	$	1,864,575

Revenue Concentrations

The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2019, 2018 and 2017.

Purchase Option Provisions

Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had investments of approximately $96.0 million in four real estate properties as of December 31, 2019 that were subject to purchase options that were exercisable.

Lessor Accounting Under ASC 840

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2036. Some leases and financial arrangements provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease and for a short period thereafter, with an option or a right of first refusal to purchase the leased property. The Company’s portfolio of single-tenant net leases generally requires the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2018 were as follows:



In thousands
2019	$	326,441
2020	279,211
2021	235,660
2022	201,072
2023	163,978
2024 and thereafter	476,673
	$	1,683,035

Lessee Accounting Under ASC 842

As of December 31, 2019, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of December 31, 2019, the Company had 108 properties totaling 8.9 million square feet that were held under ground leases. Some of the ground leases renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2117. Any rental increases related to the Company’s ground leases are generally either stated or based on the Consumer Price Index. The Company had 46 prepaid ground leases as of December 31, 2019. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.6 million for the twelve months ended December 31, 2019, 2018 and 2017 respectively.

The Company’s future lease payments (primarily for its 62 non-prepaid ground leases) as of December 31, 2019 were as follows:



In thousands	OPERATING			FINANCING
2020	$	4,814		$	746
2021	4,844			754
2022	4,875			763
2023	4,913			774
2024	4,969			795
2025 and thereafter	307,665			83,404
Total undiscounted lease payments	332,080			87,236
Discount	(240,506		)	(69,199		)
Lease liabilities	$	91,574		$	18,037

Lessee Accounting Under ASC 840

As of December 31, 2018, the Company was obligated under operating lease agreements consisting primarily of the Company’s ground leases. At December 31, 2018 the Company had 107 properties totaling 8.8 million square feet that were held under ground leases with a remaining weighted average term of 53.9 years, excluding renewal options. These ground leases typically have initial terms of 50 to 75 years with one or more renewal options extending the terms to 75 to 100 years, with expiration dates through 2117. Any rental increases related to the Company’s ground leases are generally either stated or based on the Consumer Price Index.

The Company’s future minimum lease payments (primarily for its 60 non-prepaid ground leases) as of December 31, 2018 were as follows:



In thousands
2019	$	5,288
2020	5,260
2021	5,238
2022	5,207
2023	5,224
2024 and thereafter	323,533
	$	349,750

The following table provides details of the Company's total lease expense for the year ended December 31, 2019:



In thousands	YEAR ENDED Dec. 31, 2019
Operating lease cost
Operating lease expense	$	4,623
Variable lease expense	3,161

Finance lease cost
Amortization of right-of-use assets	165
Interest on lease liabilities	616
Total lease expense	$	8,565

Other information
Operating cash flows outflows related to operating leases	$	6,972
Financing cash flows outflows related to financing leases	$	379
Right-of-use assets obtained in exchange for new finance lease liabilities	$	17,800

Weighted-average remaining lease term (excluding renewal options) - operating leases	49.5
Weighted-average remaining lease term (excluding renewal options) -finance leases	65.2
Weighted-average discount rate - operating leases	5.7		%
Weighted-average discount rate - finance leases	5.4		%

Leases, Finance