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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lease Obligations

The Company owns 11 apartment communities, one community under development, and two commercial properties, located on land subject to land leases expiring between October 2026 and March 2142. All of the ground leases, except for one of the apartment communities, are accounted for as operating leases, for which the Company recognizes rental expense on a straight-line basis over the lease term. These operating leases have varying rental escalation terms, primarily based on variables determined at future dates such as changes in the Consumer Price Index, and five of these leases have purchase options exercisable through 2095. In addition, the Company is party to 15 leases for its corporate and regional offices with varying terms through 2031, all of which are accounted for as operating leases, two of which have been executed and do not commence until 2020.

As of June 30, 2019, the Company has total operating lease assets of $100,377,000 and lease obligations of $117,938,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets. The Company incurred costs of $3,568,000 and $7,105,000 for the three and six months ended June 30, 2019, respectively, related to operating leases.

One apartment community is located on land subject to a land lease which is accounted for as a finance lease and has the option for the Company to purchase the land at some point during the lease term which expires in 2046. In addition to the leases described above, the Company is party to two leases for portions of parking garages, one adjacent to an apartment community and one adjacent to a community under development, accounted for as finance leases and subject to the Company's lease accounting policies discussed in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies.” The Company has total finance lease assets of $22,004,000 and lease obligations of $20,225,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets.

The following table details the weighted average remaining lease term and discount rates for the Company’s ground and office leases:

Weighted-average remaining lease term - finance leases	27 years
Weighted-average remaining lease term - operating leases	54 years
Weighted-average discount rate - finance leases	4.63	%
Weighted-average discount rate - operating leases	4.45	%

The following tables details the future minimum lease payments under the Company's current leases and a reconciliation of undiscounted and discounted cash flows for operating and finance leases (dollars in thousands):

	Payments due by period
	2019				2020				2021				2022				2023				Thereafter
Operating Lease Obligations	$	6,676			$	11,787			$	13,432			$	13,355			$	12,810			$	372,696
Finance Lease Obligations	538				1,077				1,080				1,082				1,084				41,220
	$	7,214			$	12,864			$	14,512			$	14,437			$	13,894			$	413,916

	Total undiscounted cash flows				Total lease liabilities				Difference between discounted and undiscounted cash flows
Operating Lease Obligations	$	430,756			$	117,938			$	312,818
Finance Lease Obligations	46,081				20,225				25,856
	$	476,837			$	138,163			$	338,674

Commitments and Contingencies

Commitments and Contingencies

Lease Obligations

The Company owns 11 apartment communities, one community under development, and two commercial properties, located on land subject to land leases expiring between October 2026 and March 2142. All of the ground leases, except for one of the apartment communities, are accounted for as operating leases, for which the Company recognizes rental expense on a straight-line basis over the lease term. These operating leases have varying rental escalation terms, primarily based on variables determined at future dates such as changes in the Consumer Price Index, and five of these leases have purchase options exercisable through 2095. In addition, the Company is party to 15 leases for its corporate and regional offices with varying terms through 2031, all of which are accounted for as operating leases, two of which have been executed and do not commence until 2020.

As of June 30, 2019, the Company has total operating lease assets of $100,377,000 and lease obligations of $117,938,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets. The Company incurred costs of $3,568,000 and $7,105,000 for the three and six months ended June 30, 2019, respectively, related to operating leases.

One apartment community is located on land subject to a land lease which is accounted for as a finance lease and has the option for the Company to purchase the land at some point during the lease term which expires in 2046. In addition to the leases described above, the Company is party to two leases for portions of parking garages, one adjacent to an apartment community and one adjacent to a community under development, accounted for as finance leases and subject to the Company's lease accounting policies discussed in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies.” The Company has total finance lease assets of $22,004,000 and lease obligations of $20,225,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets.

The following table details the weighted average remaining lease term and discount rates for the Company’s ground and office leases:

Weighted-average remaining lease term - finance leases	27 years
Weighted-average remaining lease term - operating leases	54 years
Weighted-average discount rate - finance leases	4.63	%
Weighted-average discount rate - operating leases	4.45	%

The following tables details the future minimum lease payments under the Company's current leases and a reconciliation of undiscounted and discounted cash flows for operating and finance leases (dollars in thousands):

	Payments due by period
	2019				2020				2021				2022				2023				Thereafter
Operating Lease Obligations	$	6,676			$	11,787			$	13,432			$	13,355			$	12,810			$	372,696
Finance Lease Obligations	538				1,077				1,080				1,082				1,084				41,220
	$	7,214			$	12,864			$	14,512			$	14,437			$	13,894			$	413,916

	Total undiscounted cash flows				Total lease liabilities				Difference between discounted and undiscounted cash flows
Operating Lease Obligations	$	430,756			$	117,938			$	312,818
Finance Lease Obligations	46,081				20,225				25,856
	$	476,837			$	138,163			$	338,674

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- References

No definition available.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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X

- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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