Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

LEASES

Effective January 1, 2019, we adopted the new accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients in Topic 842. See Note 1 for additional disclosure on Topic 842.

As a Lessor. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents, if applicable, are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the condensed consolidated statements of operations.

A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of September 30, 2020 is as follows (in thousands): 

Years Ended December 31,	Minimum Future Rents(1)
2020 (remaining)	$	1,983
2021	6,337
2022	4,300
2023	3,010
2024	1,773
Thereafter	1,526
Total	$	18,929

(1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed.

As a Lessee. On February 1, 2017, Pillarstone signed a lease with Whitestone for the premises located at 2600 S. Gessner Road, Suite 555 Houston, Texas 77063. The lease term is three years, five months. The rentable area of the premises is approximately 678 square feet. Total rent expense for the three and nine months ended September 30, 2020 was $3,780 and $13,588, respectively, compared to $3,705 and $10,899 for the three and nine months ended September 30, 2019, respectively. The weighted average incremental borrowing rate was 4.5% at September 30, 2020. The current lease term expired on June 30, 2020 and a renewal lease was signed extending the term through June 30, 2021. The remaining lease term as of September 30, 2020 was nine months.

The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of September 30, 2020 (in thousands):

Years Ended December 31,	Minimum Future Rents
2020 (remaining)	$	4
2021	7
Total undiscounted rental payments	11
Total lease liabilities (2)	$	11

(2) Imputed interest is immaterial and therefore not disclosed in the above table.

Leases

LEASES

Effective January 1, 2019, we adopted the new accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients in Topic 842. See Note 1 for additional disclosure on Topic 842.

As a Lessor. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents, if applicable, are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the condensed consolidated statements of operations.

A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of September 30, 2020 is as follows (in thousands): 

Years Ended December 31,	Minimum Future Rents(1)
2020 (remaining)	$	1,983
2021	6,337
2022	4,300
2023	3,010
2024	1,773
Thereafter	1,526
Total	$	18,929

(1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed.

As a Lessee. On February 1, 2017, Pillarstone signed a lease with Whitestone for the premises located at 2600 S. Gessner Road, Suite 555 Houston, Texas 77063. The lease term is three years, five months. The rentable area of the premises is approximately 678 square feet. Total rent expense for the three and nine months ended September 30, 2020 was $3,780 and $13,588, respectively, compared to $3,705 and $10,899 for the three and nine months ended September 30, 2019, respectively. The weighted average incremental borrowing rate was 4.5% at September 30, 2020. The current lease term expired on June 30, 2020 and a renewal lease was signed extending the term through June 30, 2021. The remaining lease term as of September 30, 2020 was nine months.

The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of September 30, 2020 (in thousands):

Years Ended December 31,	Minimum Future Rents
2020 (remaining)	$	4
2021	7
Total undiscounted rental payments	11
Total lease liabilities (2)	$	11

(2) Imputed interest is immaterial and therefore not disclosed in the above table.