Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

 Leases

Lessee accounting

Future minimum lease payments under non-cancellable leases as of the three months ended March 31, 2020 where we are the lessee include:

Maturity of lease liabilities (in thousands)
	Operating Leases			Finance Leases			Total
2020 (Excluding three months ended March 31, 2020)	$	2,186		$	112		$	2,298
2021	2,842			120			2,962
2022	2,863			120			2,983
2023	2,994			120			3,114
2024	3,300			4,060			7,360
Thereafter	32,773			—			32,773
Total Lease Payments	$	46,958		$	4,532		$	51,490
Less: Imputed interest	(20,875		)	(433		)	(21,308		)
Present Value of Lease Liabilities	$	26,083		$	4,099		$	30,182

ROU assets and lease liabilities for finance and operating leases as included in our Consolidated Financial Statements are as follows:

Lease Asset and Liabilities (in thousands)
Description	Financial Statement Classification	March 31, 2020		December 31, 2019
Lease Assets
Right-of-use asset obtained in exchange for new finance lease liabilities	Other asset, net	$	4,099	$	4,081
Right-of-use asset obtained in exchange for new operating lease liabilities	Other asset, net	$	25,442	$	23,751
Right-of-use asset obtained relative to below market operating lease	Other asset, net	$	28,178	$	28,366
Lease Liabilities
Finance lease liabilities	Other liabilities	$	4,099	$	4,081
Operating lease liabilities	Other liabilities	$	26,083	$	24,222

Lease expense for finance and operating leases as included in our Consolidated Financial Statements are as follows:

Lease Expense (in thousands)		Three Months Ended			Three Months Ended
Description	Financial Statement Classification	March 31, 2020			March 31, 2019
Finance lease expense
Amortization of right-of-use assets	Interest expense	$	(18	)	$	(18	)
Interest on lease liabilities	Interest expense	26			26
Operating lease cost	General and administrative expense, Property operating and maintenance	974			822
Variable lease cost	Property operating and maintenance	369			319
Total Lease Expense		$	1,351		$	1,149

Lease term, discount rates and additional information for finance and operating leases are as follows:

Lease Term and Discount Rate
	March 31, 2020
Weighted-average remaining lease terms (years)
Finance lease	4.25
Operating lease	25.60
Weighted-average discount rate
Finance lease	2.50	%
Operating lease	4.14	%

Other Information (in thousands)	Three Months Ended
	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating Cash Flow from Operating leases	$	590	$	450
Financing Cash Flow from Finance leases	8		8
Total Cash Paid on Lease Liabilities	$	598	$	458

As of the three months ended March 31, 2020, we have an additional executive office space operating lease for $2.9 million with a lease term of seven years.

Related Party Leases: Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 103,100 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026, and the current average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rental increases thereafter. We entered into an additional office space operating lease which commenced in January 2020. Under this agreement, we lease approximately 20,087 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026 and the average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rent increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC.

Lessor Accounting

We are not the lessor for any finance leases as of March 31, 2020. Over 95 percent of our operating leases where we are the lessor are either month to month or for a time period not to exceed one year.  As of the reporting date, future minimum lease payments would not exceed twelve months. Similarly, over 94 percent of our investment property, net on the Consolidated Balance Sheets, and related depreciation amounts relate to assets whereby we are the lessor under an operating lease.

Leases

Lessee accounting

Future minimum lease payments under non-cancellable leases as of the three months ended March 31, 2020 where we are the lessee include:

Maturity of lease liabilities (in thousands)
	Operating Leases			Finance Leases			Total
2020 (Excluding three months ended March 31, 2020)	$	2,186		$	112		$	2,298
2021	2,842			120			2,962
2022	2,863			120			2,983
2023	2,994			120			3,114
2024	3,300			4,060			7,360
Thereafter	32,773			—			32,773
Total Lease Payments	$	46,958		$	4,532		$	51,490
Less: Imputed interest	(20,875		)	(433		)	(21,308		)
Present Value of Lease Liabilities	$	26,083		$	4,099		$	30,182

ROU assets and lease liabilities for finance and operating leases as included in our Consolidated Financial Statements are as follows:

Lease Asset and Liabilities (in thousands)
Description	Financial Statement Classification	March 31, 2020		December 31, 2019
Lease Assets
Right-of-use asset obtained in exchange for new finance lease liabilities	Other asset, net	$	4,099	$	4,081
Right-of-use asset obtained in exchange for new operating lease liabilities	Other asset, net	$	25,442	$	23,751
Right-of-use asset obtained relative to below market operating lease	Other asset, net	$	28,178	$	28,366
Lease Liabilities
Finance lease liabilities	Other liabilities	$	4,099	$	4,081
Operating lease liabilities	Other liabilities	$	26,083	$	24,222

Lease expense for finance and operating leases as included in our Consolidated Financial Statements are as follows:

Lease Expense (in thousands)		Three Months Ended			Three Months Ended
Description	Financial Statement Classification	March 31, 2020			March 31, 2019
Finance lease expense
Amortization of right-of-use assets	Interest expense	$	(18	)	$	(18	)
Interest on lease liabilities	Interest expense	26			26
Operating lease cost	General and administrative expense, Property operating and maintenance	974			822
Variable lease cost	Property operating and maintenance	369			319
Total Lease Expense		$	1,351		$	1,149

Lease term, discount rates and additional information for finance and operating leases are as follows:

Lease Term and Discount Rate
	March 31, 2020
Weighted-average remaining lease terms (years)
Finance lease	4.25
Operating lease	25.60
Weighted-average discount rate
Finance lease	2.50	%
Operating lease	4.14	%

Other Information (in thousands)	Three Months Ended
	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating Cash Flow from Operating leases	$	590	$	450
Financing Cash Flow from Finance leases	8		8
Total Cash Paid on Lease Liabilities	$	598	$	458

As of the three months ended March 31, 2020, we have an additional executive office space operating lease for $2.9 million with a lease term of seven years.

Related Party Leases: Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 103,100 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026, and the current average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rental increases thereafter. We entered into an additional office space operating lease which commenced in January 2020. Under this agreement, we lease approximately 20,087 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026 and the average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rent increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC.

Lessor Accounting

We are not the lessor for any finance leases as of March 31, 2020. Over 95 percent of our operating leases where we are the lessor are either month to month or for a time period not to exceed one year.  As of the reporting date, future minimum lease payments would not exceed twelve months. Similarly, over 94 percent of our investment property, net on the Consolidated Balance Sheets, and related depreciation amounts relate to assets whereby we are the lessor under an operating lease.

Leases

Lessee accounting

Future minimum lease payments under non-cancellable leases as of the three months ended March 31, 2020 where we are the lessee include:

Maturity of lease liabilities (in thousands)
	Operating Leases			Finance Leases			Total
2020 (Excluding three months ended March 31, 2020)	$	2,186		$	112		$	2,298
2021	2,842			120			2,962
2022	2,863			120			2,983
2023	2,994			120			3,114
2024	3,300			4,060			7,360
Thereafter	32,773			—			32,773
Total Lease Payments	$	46,958		$	4,532		$	51,490
Less: Imputed interest	(20,875		)	(433		)	(21,308		)
Present Value of Lease Liabilities	$	26,083		$	4,099		$	30,182

ROU assets and lease liabilities for finance and operating leases as included in our Consolidated Financial Statements are as follows:

Lease Asset and Liabilities (in thousands)
Description	Financial Statement Classification	March 31, 2020		December 31, 2019
Lease Assets
Right-of-use asset obtained in exchange for new finance lease liabilities	Other asset, net	$	4,099	$	4,081
Right-of-use asset obtained in exchange for new operating lease liabilities	Other asset, net	$	25,442	$	23,751
Right-of-use asset obtained relative to below market operating lease	Other asset, net	$	28,178	$	28,366
Lease Liabilities
Finance lease liabilities	Other liabilities	$	4,099	$	4,081
Operating lease liabilities	Other liabilities	$	26,083	$	24,222

Lease expense for finance and operating leases as included in our Consolidated Financial Statements are as follows:

Lease Expense (in thousands)		Three Months Ended			Three Months Ended
Description	Financial Statement Classification	March 31, 2020			March 31, 2019
Finance lease expense
Amortization of right-of-use assets	Interest expense	$	(18	)	$	(18	)
Interest on lease liabilities	Interest expense	26			26
Operating lease cost	General and administrative expense, Property operating and maintenance	974			822
Variable lease cost	Property operating and maintenance	369			319
Total Lease Expense		$	1,351		$	1,149

Lease term, discount rates and additional information for finance and operating leases are as follows:

Lease Term and Discount Rate
	March 31, 2020
Weighted-average remaining lease terms (years)
Finance lease	4.25
Operating lease	25.60
Weighted-average discount rate
Finance lease	2.50	%
Operating lease	4.14	%

Other Information (in thousands)	Three Months Ended
	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating Cash Flow from Operating leases	$	590	$	450
Financing Cash Flow from Finance leases	8		8
Total Cash Paid on Lease Liabilities	$	598	$	458

As of the three months ended March 31, 2020, we have an additional executive office space operating lease for $2.9 million with a lease term of seven years.

Related Party Leases: Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 103,100 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026, and the current average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rental increases thereafter. We entered into an additional office space operating lease which commenced in January 2020. Under this agreement, we lease approximately 20,087 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026 and the average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rent increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC.

Lessor Accounting

We are not the lessor for any finance leases as of March 31, 2020. Over 95 percent of our operating leases where we are the lessor are either month to month or for a time period not to exceed one year.  As of the reporting date, future minimum lease payments would not exceed twelve months. Similarly, over 94 percent of our investment property, net on the Consolidated Balance Sheets, and related depreciation amounts relate to assets whereby we are the lessor under an operating lease.