The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and commercial tenants primarily for utility reimbursements and other services.

For the three and six months ended June 30, 2022 and 2021, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Fixed lease income	$	46,851	$	37,554	$	92,982	$	74,343
Variable lease income		3,673		2,760		7,409		5,714
Total lease income	$	50,524	$	40,314	$	100,391	$	80,057

We, as lessee, and AIR, as lessor, have entered into leases on properties currently under construction or in lease-up. These lease arrangements are governed by separate Master Lease Agreements and the Master Leasing Agreement.

In June 2022, we as lessee and AIR as lessor, entered into a lease termination agreement with respect to the four leases entered into on January 1, 2021. This agreement terminates the four finance leases on September 1, 2022. Upon termination, both parties shall be released of any and all liabilities and obligations under each respective lease other than those liabilities and obligations, if any, that expressly survive termination. On September 1, 2022 we will relinquish control of the leasehold improvements on these four leased properties as well as the underlying land. In exchange, AIR will transfer a total of $200.0 million in consideration to us as termination payments. On June 28, 2022, AIR made a $10.0 million non-refundable termination deposit with the remaining $190.0 million to be paid by AIR on September 1, 2022, both termination payments are accounted for as lease incentives. Based on the present value of the termination payments, net of remaining lease payments, we reduced the lease liability to zero and recorded a receivable from lease termination of $186.3 million in our Condensed Consolidated Balance Sheets at June 30, 2022.

Because the termination agreement modified the expiration date of each lease to September 1, 2022, we accelerated depreciation on the associated leasehold improvements using lease terms ending September 1, 2022. We recorded $13.9 million of additional depreciation expense in our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022. The remaining $66.1 million of depreciation expense will be recognized in the third quarter. In addition, we reduced the associated right-of-use lease assets to zero and recognized lease modification income of $205.4 million, which is included in our Condensed Consolidated Statements of Operations for the periods ended June 30, 2022.

We are lessee to two 99-year ground leases for the land underlying the development site at Upton Place, a mixed-use development project which will create 689 apartment homes and approximately 100,000 square feet of commercial space in upper-northwest Washington, D.C. These ground leases are classified as finance leases.

As described in Note 3, during the quarter ended March 31, 2022, we, as lessee, entered into certain finance lease arrangements concurrent with a contract to acquire a development site in Fort Lauderdale. At lease inception, $20.0 million in deposits were placed in the seller’s name, which subsequently reduced the finance lease liability. The related interest is capitalized as part of the finance right-of-use lease assets.

In June 2022, we purchased a part of the aforementioned development site in Fort Lauderdale for $64.0 million. As a result of the purchase, we derecognized the associated right-of-use lease assets and lease liabilities, and recorded the difference to land. As of June 30, 2022, the remaining right-of-use lease assets and lease liabilities associated with the other parts totaled $34.8 million and $26.3 million, respectively. See Note 3 for further information.

Together, as of June 30, 2022 and December 31, 2021, these finance leases had weighted-average remaining terms of 74.8 years and 38.5 years, respectively, and weighted-average discount rates of 5.5% and 5.4%, respectively.

As of June 30, 2022, finance lease right-of-use lease assets and liabilities totaled $130.5 million and $123.8 million, respectively. As of December 31, 2021, finance right-of-use lease assets and liabilities totaled $429.8 million and $435.1 million, respectively.

For the three and six months ended June 30, 2022, amortization related to finance leases was $3.4 million and $6.7 million, respectively, net of amounts capitalized, compared to $2.1 million and $3.4 million for the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2022, we capitalized $1.8 million and $4.8 million, respectively, of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets, compared to $5.8 million and $12.7 million, respectively, for three and six months ended June 30, 2021.

We have operating leases primarily for corporate office space. As of June 30, 2022 and December 31, 2021, our operating leases had weighted-average remaining terms of 7.1 years and 7.4 years, respectively. As of June 30, 2022 and December 31, 2021, the leases had weighted-average discount rates of 3.1%, and 3.1%, respectively.

We record operating lease expense on a straight-line basis over the lease term. Total operating lease expense for the three and six months ended June 30, 2022 was $0.2 million and $0.3 million, respectively, compared to $0.3 million and $0.5 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2022 and December 31, 2021, operating lease right-of-use lease assets of $4.7 million and $5.1 million, respectively, are included in Other assets, net in our Condensed Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, operating lease liabilities of $12.0 million and $12.7 million, respectively, are included in Accrued liabilities and other in our Condensed Consolidated Balance Sheets.

For finance and operating leases, when the rate implicit in the lease cannot be determined, we estimate the value of our lease liabilities using discount rates equivalent to the rates we would pay on a secured borrowing with terms similar to the leases. We determine if an arrangement is or contains a lease at inception. We have lease agreements with lease and non-lease components, and have elected to not separate these components for all classes of underlying assets. Leases with an initial term of 12 months or less are not recorded in our Condensed Consolidated Balance Sheets.

We have a sublease arrangement to provide space within our corporate office for fixed rents, which commenced on January 1, 2021 and expires on May 31, 2029.

Combined minimum annual lease payments under operating and finance leases, and sublease income that offsets our operating lease rent, are as follows (in thousands):


	Sublease Income and Lease Modification Income		Operating Lease Future Minimum Rent			Financing Leases Future Minimum Payments
Remainder of 2022	$	188,593	$	816		$	1,046
2023		1,403		1,922			2,479
2024		1,413		1,935			3,479
2025		1,423		1,930			32,659
2026		1,433		1,960			4,335
Thereafter		3,526		4,847			1,155,087
Total	$	197,791		13,410			1,199,085
Less: Discount				(1,402	)		(1,075,300	)
Total lease liabilities			$	12,008		$	123,785