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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Employment Agreements and Arrangements At December 31, 2021, the Company has no employment agreements with its executive officers other than an agreement executed on December 4, 2020, with Benjamin W. Schall, who joined the Company on January 25, 2021 as President and a member of the Board of Directors and has been appointed to the additional role of Chief Executive Officer effective January 3, 2022. The standard restricted stock and option agreements used by the Company in its compensation program provide that upon an employee's termination without cause or the employee's Retirement (as defined in the agreement), all outstanding stock options and restricted shares of stock held by the employee will vest, and the employee will have up to 12 months or until the fifth anniversary of the grant date, if later, or until the option expiration date, if earlier, to exercise any options then held. Under the agreements, Retirement generally means a termination of employment and other business relationships, other than for cause, after attainment of age 50, provided that (i) the employee has worked for the Company for at least 10 years, (ii) the employee's age at Retirement plus years of employment with the Company equals at least 70, (iii) the employee provides at least six months written notice of intent to retire, and (iv) the employee enters into a one year non-compete and employee non-solicitation agreement. The Company also has an Officer Severance Program (the “Program”). Under the Program, in the event an officer who is not otherwise covered by a severance arrangement is terminated (other than for cause), or chooses to terminate his or her employment for good reason (as defined), in either case in connection with or within 24 months following a sale event (as defined) of the Company, such officer will generally receive a cash lump sum payment equal to a multiple of the officer's covered compensation (base salary plus annual cash bonus). The multiple is one time for vice presidents and senior vice presidents, two times for executive vice presidents and three times for the chief executive officer. The officer's restricted stock and options would also vest. Costs related to the Program are deferred and recognized over the requisite service period when considered by management to be probable and estimable. Legal Contingencies The Company recognizes a loss associated with contingent legal matters when the loss is probable and estimable. The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of its business. While no assurances can be given, the Company does not currently believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations. In addition, the Company accounts for recoveries from legal matters as a reduction in the legal and related costs incurred associated with the matter, with recoveries in excess of these costs reported as a gain or, where appropriate, a reduction in the net cost basis of a community to which the suit related. During the year ended December 31, 2019, the Company recognized $6,292,000 in legal recoveries. Legal recoveries recognized during the year ended December 31, 2019 include $3,126,000 in proceeds related to a former Development Right and $2,237,000 in proceeds related to a construction defect at a community, reported as a component of general and administrative expense on the accompanying Consolidated Statements of Comprehensive Income. There were no material receipts during the year ended December 31, 2021 and 2020. Lease Obligations The Company owns seven apartment communities and two commercial properties, located on land subject to ground leases expiring between July 2046 and April 2106. The Company has purchase options for all ground leases expiring prior to 2095. The ground leases for six of the seven apartment communities and the two commercial properties, are operating leases, with rental expense recognized on a straight-line basis over the lease term. In addition, the Company is party to 13 leases for its corporate and regional offices with varying terms through 2031, all of which are operating leases. During the year ended December 31, 2021, the Company exercised its purchase option and acquired the land encumbered by the ground lease for Avalon Hackensack at Riverside for $10,336,000. As of December 31, 2021 and 2020, the Company had total operating lease assets of $118,370,000 and $133,581,000, respectively, and lease obligations of $146,377,000 and $161,313,000, respectively, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Consolidated Balance Sheets. The Company incurred costs of $15,458,000, $16,011,000 and $14,371,000 in the years ended December 31, 2021, 2020 and 2019, respectively, related to operating leases. The Company has one apartment community located on land subject to a ground lease and four leases for portions of parking garages, adjacent to apartment communities, that are finance leases. As of December 31, 2021 and 2020, the Company had total finance lease assets of $28,229,000 and $21,685,000, respectively, and total finance lease obligations of $20,120,000 and $20,166,000, respectively, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying 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 | 24 years
Weighted-average remaining lease term - operating leases | 38 years
Weighted-average discount rate - finance leases | 4.63 | %
Weighted-average discount rate - operating leases | 4.61 | %
The following tables detail 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
| 2022 |  | 2023 |  | 2024 |  | 2025 |  | 2026 |  | Thereafter
Operating Lease Obligations | $ | 13,797 |  |  | $ | 13,558 |  |  | $ | 13,324 |  |  | $ | 13,575 |  |  | $ | 13,358 |  |  | $ | 290,869 |
Finance Lease Obligations | 1,082 |  |  | 1,084 |  |  | 1,087 |  |  | 1,089 |  |  | 1,092 |  |  | 37,952 |
| $ | 14,879 |  |  | $ | 14,642 |  |  | $ | 14,411 |  |  | $ | 14,664 |  |  | $ | 14,450 |  |  | $ | 328,821 |
| Total undiscounted cash flows |  | Total lease liabilities |  | Difference between discounted and undiscounted cash flows
Operating Lease Obligations | $ | 358,481 |  |  | $ | 146,377 |  |  | $ | 212,104 |
Finance Lease Obligations | 43,386 |  |  | 20,120 |  |  | 23,266 |
| $ | 401,867 |  |  | $ | 166,497 |  |  | $ | 235,370 |

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