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v3.22.2.2

Leases | 9 Months Ended
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Sep. 30, 2022
Leases [Abstract] |
Leases | Leases Significant Lease Transactions The following table summarizes the significant lease transactions during the nine months ended September 30, 2022 (in thousands):
|  |  |  |  |  |  |  | Renewal/Termination Options excluded |  |  |  | Net Incremental (1)
Lease |  | Quarter |  | Transaction |  |  |  |  | Lease Classification |  | ROU assets |  | ROU liabilities
Atlanta 1 ("AT1") data center lease extended & expansion (2) |  | Q1 |  | Extended lease term by 12 years with additional three 10-year renewal options |  |  |  | Two 10-year renewal options |  | Finance Lease |  | $ | 71,994 |  |  | $ | 72,549 |
|  |  |  |  |  | Operating Lease |  | (1,836) |  |  | (2,391) |
Hong Kong 6 ("HK6") new land and building construct site |  | Q2 |  | New lease-15 year term |  |  |  | 5-year renewal option |  | Operating Lease |  | 195,245 |  | 195,245
Hong Kong 2 ("HK2") data center lease renewal |  | Q2 |  | Exercised the 3-year renewal option for Phase 1 & 2 (3) |  |  |  | Two 3-year renewal options |  | Operating Lease |  | 81,504 |  | 81,504
(1) The net incremental amounts represent the adjustments to the right of use ("ROU") assets and liabilities recorded during the quarter that the transactions were entered. (2) This lease had components previously classified as operating leases. (3) The incremental balance includes the impact of reassessing lease terms of complementary leases within HK2, resulting in new lease end dates ranging from June 2030 to October 2031 from including renewal options that are reasonably certain to be exercised. Lease Expenses The components of lease expenses are as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Finance lease cost |  |  |  |  |  |  |
Amortization of ROU assets (1) | $ | 39,456 |  |  | $ | 41,983 |  |  | $ | 120,684 |  |  | $ | 115,221 |
Interest on lease liabilities | 27,742 |  |  | 28,672 |  |  | 84,986 |  |  | 88,688 |
Total finance lease cost | 67,198 |  |  | 70,655 |  |  | 205,670 |  |  | 203,909 |
Operating lease cost | 55,031 |  |  | 54,340 |  |  | 159,632 |  |  | 167,839 |
Variable lease cost | 12,721 |  |  | 8,323 |  |  | 30,003 |  |  | 23,993 |
Total lease cost | $ | 134,950 |  |  | $ | 133,318 |  |  | $ | 395,305 |  |  | $ | 395,741 |
(1) Amortization of ROU assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations. Other Information Other information related to leases is as follows (in thousands):
| Nine Months Ended September 30, 2022 |  |  | Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from finance leases | $ | 82,841 |  |  |  | $ | 85,141 |
Operating cash flows from operating leases | 144,954 |  |  |  | 202,861 |
Financing cash flows from finance leases | 97,808 |  |  |  | 130,129 |
ROU assets obtained in exchange for lease obligations: (1) |  |  |  |
Finance leases | $ | 78,432 |  |  |  | $ | 374,529 |
Operating leases | 318,882 |  |  |  | 9,359 |
| As of September 30, 2022 |  |  | As of December 31, 2021
Weighted-average remaining lease term - finance leases (2) | 14 years |  |  | 14 years
Weighted-average remaining lease term - operating leases (2) | 12 years |  |  | 12 years
Weighted-average discount rate - finance leases | 6 | % |  |  | 7 | %
Weighted-average discount rate - operating leases | 4 | % |  |  | 4 | %
Finance lease ROU assets (3) | $ | 1,777,807 |  |  |  | $ | 1,875,696 |
(1) Represents all non-cash changes in ROU assets. (2) Includes lease renewal options that are reasonably certain to be exercised. (3) As of September 30, 2022 and December 31, 2021, we recorded accumulated amortization of finance lease ROU assets of $783.7 million and $726.4 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets. Maturities of Lease Liabilities Maturities of lease liabilities as of September 30, 2022 are as follows (in thousands):
| Operating Leases |  | Finance Leases |  | Total
2022 (3 months remaining) | $ | 37,716 |  |  | $ | 64,070 |  |  | $ | 101,786 |
2023 | 181,874 |  |  | 230,923 |  |  | 412,797 |
2024 | 178,703 |  |  | 231,316 |  |  | 410,019 |
2025 | 173,446 |  |  | 229,443 |  |  | 402,889 |
2026 | 171,270 |  |  | 218,926 |  |  | 390,196 |
Thereafter | 1,090,190 |  |  | 2,046,538 |  |  | 3,136,728 |
Total lease payments | 1,833,199 |  |  | 3,021,216 |  |  | 4,854,415 |
Plus amount representing residual property value | — |  |  | — |  |  | — |
Less imputed interest | (468,808) |  |  | (979,144) |  |  | (1,447,952) |
Total | $ | 1,364,391 |  |  | $ | 2,042,072 |  |  | $ | 3,406,463 |
We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of September 30, 2022. These leases will commence between year 2022 and 2025, with lease terms of 2 to 26 years and total lease commitments of approximately $551.5 million.
Leases | Leases Significant Lease Transactions The following table summarizes the significant lease transactions during the nine months ended September 30, 2022 (in thousands):
|  |  |  |  |  |  |  | Renewal/Termination Options excluded |  |  |  | Net Incremental (1)
Lease |  | Quarter |  | Transaction |  |  |  |  | Lease Classification |  | ROU assets |  | ROU liabilities
Atlanta 1 ("AT1") data center lease extended & expansion (2) |  | Q1 |  | Extended lease term by 12 years with additional three 10-year renewal options |  |  |  | Two 10-year renewal options |  | Finance Lease |  | $ | 71,994 |  |  | $ | 72,549 |
|  |  |  |  |  | Operating Lease |  | (1,836) |  |  | (2,391) |
Hong Kong 6 ("HK6") new land and building construct site |  | Q2 |  | New lease-15 year term |  |  |  | 5-year renewal option |  | Operating Lease |  | 195,245 |  | 195,245
Hong Kong 2 ("HK2") data center lease renewal |  | Q2 |  | Exercised the 3-year renewal option for Phase 1 & 2 (3) |  |  |  | Two 3-year renewal options |  | Operating Lease |  | 81,504 |  | 81,504
(1) The net incremental amounts represent the adjustments to the right of use ("ROU") assets and liabilities recorded during the quarter that the transactions were entered. (2) This lease had components previously classified as operating leases. (3) The incremental balance includes the impact of reassessing lease terms of complementary leases within HK2, resulting in new lease end dates ranging from June 2030 to October 2031 from including renewal options that are reasonably certain to be exercised. Lease Expenses The components of lease expenses are as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Finance lease cost |  |  |  |  |  |  |
Amortization of ROU assets (1) | $ | 39,456 |  |  | $ | 41,983 |  |  | $ | 120,684 |  |  | $ | 115,221 |
Interest on lease liabilities | 27,742 |  |  | 28,672 |  |  | 84,986 |  |  | 88,688 |
Total finance lease cost | 67,198 |  |  | 70,655 |  |  | 205,670 |  |  | 203,909 |
Operating lease cost | 55,031 |  |  | 54,340 |  |  | 159,632 |  |  | 167,839 |
Variable lease cost | 12,721 |  |  | 8,323 |  |  | 30,003 |  |  | 23,993 |
Total lease cost | $ | 134,950 |  |  | $ | 133,318 |  |  | $ | 395,305 |  |  | $ | 395,741 |
(1) Amortization of ROU assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations. Other Information Other information related to leases is as follows (in thousands):
| Nine Months Ended September 30, 2022 |  |  | Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from finance leases | $ | 82,841 |  |  |  | $ | 85,141 |
Operating cash flows from operating leases | 144,954 |  |  |  | 202,861 |
Financing cash flows from finance leases | 97,808 |  |  |  | 130,129 |
ROU assets obtained in exchange for lease obligations: (1) |  |  |  |
Finance leases | $ | 78,432 |  |  |  | $ | 374,529 |
Operating leases | 318,882 |  |  |  | 9,359 |
| As of September 30, 2022 |  |  | As of December 31, 2021
Weighted-average remaining lease term - finance leases (2) | 14 years |  |  | 14 years
Weighted-average remaining lease term - operating leases (2) | 12 years |  |  | 12 years
Weighted-average discount rate - finance leases | 6 | % |  |  | 7 | %
Weighted-average discount rate - operating leases | 4 | % |  |  | 4 | %
Finance lease ROU assets (3) | $ | 1,777,807 |  |  |  | $ | 1,875,696 |
(1) Represents all non-cash changes in ROU assets. (2) Includes lease renewal options that are reasonably certain to be exercised. (3) As of September 30, 2022 and December 31, 2021, we recorded accumulated amortization of finance lease ROU assets of $783.7 million and $726.4 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets. Maturities of Lease Liabilities Maturities of lease liabilities as of September 30, 2022 are as follows (in thousands):
| Operating Leases |  | Finance Leases |  | Total
2022 (3 months remaining) | $ | 37,716 |  |  | $ | 64,070 |  |  | $ | 101,786 |
2023 | 181,874 |  |  | 230,923 |  |  | 412,797 |
2024 | 178,703 |  |  | 231,316 |  |  | 410,019 |
2025 | 173,446 |  |  | 229,443 |  |  | 402,889 |
2026 | 171,270 |  |  | 218,926 |  |  | 390,196 |
Thereafter | 1,090,190 |  |  | 2,046,538 |  |  | 3,136,728 |
Total lease payments | 1,833,199 |  |  | 3,021,216 |  |  | 4,854,415 |
Plus amount representing residual property value | — |  |  | — |  |  | — |
Less imputed interest | (468,808) |  |  | (979,144) |  |  | (1,447,952) |
Total | $ | 1,364,391 |  |  | $ | 2,042,072 |  |  | $ | 3,406,463 |
We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of September 30, 2022. These leases will commence between year 2022 and 2025, with lease terms of 2 to 26 years and total lease commitments of approximately $551.5 million.

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