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, 2023, 2022, and 2021, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):


	Year ended December 31,
	2023		2022		2021
Fixed lease income	$	172,580	$	176,080	$	157,842
Variable lease income		13,892		13,654		11,487
Total lease income	$	186,472	$	189,734	$	169,329

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, 2023 (in thousands):


	Future Minimum Annual Rental Payments
2024	$	12,167
2025		7,382
2026		4,904
2027		3,035
2028		1,295
Thereafter		1,106
Total	$	29,889

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, 2023, have an average remaining term of 2.2 years.

We are lessee to finance leases for the land underlying the development sites at Upton Place, Strathmore Square, and Oakshore.

As of December 31, 2023 and 2022, our finance leases had weighted-average remaining terms of 93.4 years and 94.2 years, respectively, and weighted-average discount rates of 6.1% and 6.1%, respectively.

For the year ended December 31, 2023, amortization related to finance leases was $0.0 million, net of amounts capitalized, compared to $6.7 million for the year ended December 31, 2022 and $8.3 million for the year ended December 31, 2021. In addition, for the year ended December 31, 2023, we capitalized $8.0 million of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets, compared to $8.5 million for the year ended December 31, 2022 and $22.7 million for the year ended December 31, 2021.

For the year ended December 31, 2023, interest expense, net of amounts capitalized, related to our finance leases was $0.3 million compared to $7.5 million for the year ended December 31, 2022, and $9.2 million for the year ended December 31, 2021.

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.

We have operating leases primarily for corporate office space. Substantially all of the payments under our office leases are fixed. As of December 31, 2023 and December 31, 2022, our operating leases had weighted-average remaining terms of 5.2 years and 6.3 years, respectively. As of December 31, 2023 and December 31, 2022, our operating leases had weighted-average discount rates of 3.3% and 3.4%, 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, 2023, 2022, and 2021 was $1.5 million, $1.1 million and $1.0 million, respectively. As of December 31, 2023 and December 31, 2022, operating lease right-of-use assets of $6.2 million and $6.7 million, respectively, are included in Other assets, net in our Consolidated Balance Sheets. As of December 31, 2023 and December 31, 2022, operating lease liabilities of $11.5 million and $12.8 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 finance 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. For each year ended December 31, 2023, 2022, and 2021, we recognized sublease income of $1.4 million.

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, 2023 (in thousands):


	Sublease Income		Operating Lease Future Minimum Rent			Finance Leases Future Minimum Payments
2024	$	1,413	$	2,500		$	3,921
2025		1,423		2,355			4,437
2026		1,433		2,341			4,954
2027		1,443		2,380			5,483
2028		1,453		2,181			5,596
Thereafter		630		805			1,427,620
Total	$	7,795		12,562			1,452,011
Less: Discount				(1,079	)		(1,333,314	)
Total lease liabilities			$	11,483		$	118,697