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 nine months ended September 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Fixed lease income	$	44,239	$	39,382	$	137,519	$	113,726
Variable lease income		3,443		3,046		10,853		8,760
Total lease income	$	47,682	$	42,428	$	148,372	$	122,486

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 four leases entered into on January 1, 2021 that pertained to our North Tower of Flamingo Point, 707 Leahy, The Fremont, and Prism properties. This agreement terminated the four finance leases on September 1, 2022. Upon termination, both parties were released of any and all liabilities and obligations under each respective lease other than those liabilities and obligations, if any, that expressly survived termination. On September 1, 2022, we relinquished control of the leasehold improvements on these four properties as well as the underlying land. In exchange, AIR remitted a total of $200.0 million in consideration to us as termination payments.

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 that ended September 1, 2022. We recorded $69.9 million and $85.7 million of total depreciation expense for the three and nine months ended September 30, 2022, respectively. In addition, we recognized Lease modification income of $1.6 million and $207.0 million, which is included in our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022, respectively.

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, in February 2022, we, as lessee, entered into certain finance lease arrangements concurrent with a purchase agreement to acquire a development site in the Flagler Village neighborhood of Fort Lauderdale, Florida. As of September 30, 2022, we had completed the $100.0 million purchase and recognized an additional $5.9 million of capitalized costs to Land in our Condensed Consolidated Balance Sheets. See Note 3 for additional information.

As of September 30, 2022 and December 31, 2021, our finance leases had weighted-average remaining terms of 93.9 years and 38.5 years, respectively, and weighted-average discount rates of 6.0% and 5.4%, respectively.

As of September 30, 2022, finance lease right-of-use lease assets and liabilities totaled $95.5 million and $98.5 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 nine months ended September 30, 2022, amortization related to finance leases was $0.0 million and $6.7 million, respectively, net of amounts capitalized, compared to $2.1 million and $5.5 million for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2022, we capitalized $1.7 million and $6.5 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 $18.5 million, respectively, for three and nine months ended September 30, 2021.

We have operating leases primarily for corporate office space. As of September 30, 2022 and December 31, 2021, our operating leases had weighted-average remaining terms of 6.6 years and 7.4 years, respectively. As of September 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 nine months ended September 30, 2022 was $0.2 million and $0.5 million, respectively, compared to $0.2 million and $0.5 million for the three and nine months ended September 30, 2021, respectively. As of September 30, 2022 and December 31, 2021, operating lease right-of-use lease assets of $4.6 million and $5.1 million, respectively, are included in Other assets, net in our Condensed Consolidated Balance Sheets. As of September 30, 2022 and December 31, 2021, operating lease liabilities of $11.6 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	$	349	$	314		$	494
2023		1,403		1,922			2,335
2024		1,413		1,935			3,335
2025		1,423		1,930			3,835
2026		1,433		1,960			4,334
Thereafter		3,526		4,847			1,155,089
Total	$	9,547	$	12,908		$	1,169,422
Less: Discount				(1,308	)		(1,070,955	)
Total lease liabilities			$	11,600		$	98,467