XML 21 R11.htm IDEA: XBRL DOCUMENT

Leases

6 Months Ended

Jun. 30, 2020

Lessor Accounting

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 single-tenant net leases generally require 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'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 three and six months ended June 30, 2020 was $122.4 million and $245.0 million, respectively.

Tabular Disclosure of the Components of Sales-Type Leases

The table below presents the components of sale-type leases for the thee and six months ended June 30, 2020:



	SALES-TYPE LEASES
In thousands	three months ended June 30, 2020		six months ended June 30, 2020
Profit recognized at commencement date	$	68,267	$	68,267	Gain on sales of real estate assets
Interest income	1,553		1,553		Rental income

Future lease payments under the non-cancelable operating and sales-type leases, excluding any reimbursements, as of June 30, 2020 were as follows:



In thousands	Operating		Sales-type ¹
2020	$	181,180	$	249,042
2021	332,072		—
2022	290,524		—
2023	242,546		—
2024	185,184		—
2025 and thereafter	476,791		—
	$	1,708,297	$	249,042


1	See Footnote 2 to the Condensed Consolidated Financial Statements for additional information.

Lessee Accounting

As of June 30, 2020, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of June 30, 2020, the Company had 104 properties totaling 8.7 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 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on the CPI. The Company had 42 prepaid ground leases as of June 30, 2020. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.2 million of the Company’s rental expense for the three months ended June 30, 2020 and 2019, respectively and $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

The Company’s future lease payments (primarily for its 62 non-prepaid ground leases) as of June 30, 2020 were as follows:



In thousands	OPERATING			FINANCING
2020	$	2,012		$	286
2021	4,844			930
2022	4,875			783
2023	4,913			793
2024	4,969			815
2025 and thereafter	307,665			88,808
Total undiscounted lease payments	329,278			92,415
Discount	(238,019		)	(73,820		)
Lease liabilities	$	91,259		$	18,595

The following table provides details of the Company's total lease expense for the three and six months ended June 30, 2020 and 2019:



	THREE MONTHS ENDED June 30,						SIX MONTHS ENDED June 30,
In thousands	2020			2019			2020		2019
Operating lease cost
Operating lease expense	$	1,175		$	1,163		$	2,349	$	2,279
Variable lease expense	804			795			1,604		1,535

Finance lease cost
Amortization of right-of-use assets	78			51			148		51
Interest on lease liabilities	240			196			477		196
Total lease expense	$	2,297		$	2,205		$	4,578	$	4,061

Other information
Operating cash flows outflows related to operating leases	$	1,416		$	1,402		$	3,972	$	4,173
Financing cash flows outflows related to financing leases	$	2,847		$	142		$	3,168	$	142
Right-of-use assets obtained in exchange for new finance lease liabilities	$	7,212		$	—		$	7,212	$	14,294

Weighted-average remaining lease term (excluding renewal options) - operating leases	49.1			49.9
Weighted-average remaining lease term (excluding renewal options) -finance leases	65.0			70.3
Weighted-average discount rate - operating leases	5.7		%	5.5		%
Weighted-average discount rate - finance leases	5.4		%	5.9		%

Leases