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 years ended December 31, 2022, 2021, and 2020, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):


	Year Ended December 31,
	2022		2021		2020
Fixed lease income	$	176,080	$	157,842	$	140,140
Variable lease income		13,654		11,487		11,192
Total lease income	$	189,734	$	169,329	$	151,332

In general, our commercial leases have options to extend for a certain period of time at the tenant's option. Future minimum annual rental payments we will receive under commercial leases, excluding such extension options, are as follows as of December 31, 2022 (in thousands):


2023	$	13,031
2024		9,212
2025		5,728
2026		3,430
2027		1,546
Thereafter		800
Total	$	33,747

Generally, our residential leases do not provide extension options, so the average remaining term is less than one year. Our commercial leases, as of December 31, 2022, have an average remaining term of 3.2 years.

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.

As of December 31, 2022, the Master Leasing Agreement governed one finance lease for a 15-acre plot of land in the San Francisco Bay Area. This lease commenced on June 1, 2021, has a term of 25 years, and is governed by both a separate Master Lease Arrangement and this Master Leasing Agreement. In June 2021, we commenced construction of 16 single family rental homes and 8 accessory dwelling units on this land.

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 these 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 $85.7 million of total depreciation expense for the year ended December 31, 2022. In addition, we recognized Lease modification income of $207.0 million, which is included in our Consolidated Statements of Operations for the year ended December 31, 2022.

In December 2022, in conjunction with consolidating the Strathmore Joint Venture 1, which was described in the Note 3, we recognized a 98-year ground lease for the land underlying the development site, a ground up project on the development of a phased multifamily community totaling 220 units in Bethesda, Maryland, initially recording right-of-use lease assets and lease liabilities of $15.0 million and $15.2 million, respectively.

During the year ended December 31, 2020, we entered into 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., initially recording right-of-use lease assets and lease liabilities of $92.8 million and $86.3 million, respectively. Substantially all of the payments under our ground leases are fixed. We exclude options to extend the leases from our minimum lease terms unless the options are reasonably certain to be exercised.

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. During the third quarter of 2022, we completed the $100.0 million purchase and recognized an additional $5.9 million of capitalized costs as Land in our Consolidated Balance Sheets. See Note 3 for further information.

As of December 31, 2022 and December 31, 2021, our finance leases had weighted-average remaining terms of 94.2 years and 38.5 years, respectively, and weighted-average discount rates of 6.1% and 5.4%, respectively.

As of December 31, 2022, finance lease right-of-use assets and liabilities totaled $110.3 million and $114.6 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 year ended December 31, 2022, amortization related to finance leases was $6.7 million, net of amounts capitalized, compared to $8.3 million for the year ended December 31, 2021 and $0.0 million for the year ended December 31, 2020.

For the year ended December 31, 2022, we capitalized $8.5 million of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets, compared to $22.7 million for the year ended December 31, 2021. No lease costs were capitalized on leased assets for the year ended December 31, 2020.

For the year ended December 31, 2022, interest expense net of amounts capitalized related to our finance leases was $7.5 million compared to $9.2 million for the year ended December 31, 2021, and $0.0 million for the year ended December 31, 2020.

We have operating leases primarily for corporate office space. Substantially all of the payments under our office leases are fixed. As of December 31, 2022 and December 31, 2021, our operating leases had weighted-average remaining terms of 5.6 years and 7.4 years, respectively. As of December 31, 2022 and December 31, 2021, our operating leases had weighted-average discount rates of 3.4% and 3.1%, respectively.

We record operating lease expense on a straight-line basis over the lease term. Total operating lease expense for the years ended December 31, 2022, 2021, and 2020 was $1.1 million, $1.0 million and $1.3 million, respectively. As of December 31, 2022 and December 31, 2021, operating lease right-of-use assets of $6.7 million and $5.1 million, respectively, are included in Other assets, net in our Consolidated Balance Sheets. As of December 31, 2022 and December 31, 2021, operating lease liabilities of $12.8 million and $12.7 million, respectively, are included in Accrued liabilities and other in our 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 Consolidated Balance Sheets. Leases with initial terms greater than 12 months are recorded as operating or financing leases in our 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. We sublease office space within our corporate office to AIR which is reflected in the sublease income below. For the years ended December 31, 2022, 2021, and 2020, we recognized sublease income from AIR of $1.4 million, $1.4 million, and $0.1 million, respectively.

Combined minimum annual lease payments under operating and finance leases, and sublease income that offsets our operating lease rent, are as follows as of December 31, 2022 (in thousands):


	Sublease Income and Lease Modification Income		Operating Lease Future Minimum Rent			Finance Leases Future Minimum Payments
2023	$	1,403	$	1,999		$	2,905
2024		1,413		2,298			3,921
2025		1,423		2,302			4,437
2026		1,433		2,341			4,954
2027		1,443		2,380			5,483
Thereafter		2,083		3,024			1,433,295
Total	$	9,198	$	14,344		$	1,454,995
Less: Discount				(1,502	)		(1,340,370	)
Total lease liabilities			$	12,842		$	114,625