Leases

12 Months Ended

Dec. 31, 2024

11.

Leases:

Lessor Leases

The Company’s primary source of revenues is derived from lease agreements, which includes rental income and expense reimbursement. The Company’s lease income is comprised of minimum base rent, expense reimbursements, percentage rent, lease termination fee income, ancillary income, amortization of above-market and below-market rent adjustments and straight-line rent adjustments.

The disaggregation of the Company’s lease income, which is included in Revenue from rental properties, net on the Company’s Consolidated Statements of Income, as either fixed or variable lease income based on the criteria specified in ASC 842, for the years ended December 31, 2024, 2023 and 2022, was as follows (in thousands):


	Year Ended December 31,
	2024			2023			2022
Lease income:
Fixed lease income (1)	$	1,615,352		$	1,409,609		$	1,353,024
Variable lease income (2)		399,627			354,093			339,722
Above-market and below-market leases amortization, net		25,205			17,253			13,591
Adjustments for potentially uncollectible lease income or disputed amounts		(21,119	)		(13,898	)		4,511
Total lease income	$	2,019,065		$	1,767,057		$	1,710,848

(1)

Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments.

(2)

Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income.

Base rental revenues and fixed-rate expense reimbursements from rental properties are recognized on a straight-line basis over the terms of the related leases. The difference between the amount of rental income contracted through leases and rental income recognized on a straight-line basis for the years ended December 31, 2024, 2023 and 2022 was $23.2 million, $22.5 million and $33.8 million, respectively.

The Company is primarily engaged in the operation of shopping centers that are either owned or held under long-term leases that expire at various dates through 2089. The Company, in turn, leases premises in these centers to tenants pursuant to lease agreements which provide for terms ranging generally from five to 25 years and for annual minimum rentals plus incremental rents based on operating expense levels and tenants’ sales volumes. Annual minimum rentals plus incremental rents based on operating expense levels and percentage rents comprised 98% of total revenues from rental properties for each of the three years ended December 31, 2024, 2023 and 2022.

The minimum revenues expected to be received by the Company from rental properties under the terms of all non-cancelable tenant leases for future years, assuming no new or renegotiated leases are executed for such premises and excluding variable lease payments, are as follows (in millions):


	2025		2026		2027		2028		2029		Thereafter
Minimum revenues	$	1,560.2	$	1,432.5	$	1,238.2	$	1,022.6	$	796.2	$	3,574.2

Lessee Leases

The Company currently leases real estate space under non-cancelable operating lease agreements for ground leases and administrative office leases. The Company’s operating leases have remaining lease terms ranging from less than one year to 80.3 years, some of which include options to extend the terms for up to an additional 60 years.

In connection with the RPT Merger, the Company obtained a $13.5 million operating right-of-use asset (excluding an intangible right-of-use asset of $7.4 million) in exchange for a new operating lease liability related to a property under an operating ground lease agreement. In addition, the Company obtained a finance intangible right-of-use asset of $6.8 million (which is included in Other assets on the Company’s Consolidated Balance Sheets).

The Company also has three properties under finance ground lease agreements that consist of variable lease payments with a bargain purchase option. As of December 31, 2024, the finance right-of-use assets of $33.0 million are included in Other assets on the Company’s Consolidated Balance Sheets and finance lease liabilities of $24.2 million are included in Other liabilities on the Company’s Consolidated Balance Sheets. During the three months ended December 2024, the Company exercised its call option to purchase two properties under finance ground lease agreements for an aggregate purchase price of $24.2 million, which was completed in January 2025.

The weighted-average remaining non-cancelable lease term and weighted-average discount rates for the Company’s operating and finance leases as of December 31, 2024 were as follows:


	Operating Leases			Finance Leases
Weighted-average remaining lease term (in years)		30.4			-
Weighted-average discount rate		6.79	%		6.00	%

The components of the Company’s lease expense, which are included in interest expense, rent expense and general and administrative expense on the Company’s Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022, were as follows (in thousands):


	Year Ended December 31,
	2024		2023		2022
Lease cost:
Finance lease cost	$	1,459	$	1,261	$	1,294
Operating lease cost		15,107		14,736		12,994
Variable lease cost		2,300		2,241		4,143
Total lease cost	$	18,866	$	18,238	$	18,431

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating and financing lease liabilities (in thousands):


Year Ending December 31,
	Operating Leases			Financing Leases
2025	$	12,092		$	24,167
2026		11,466			-
2027		11,191			-
2028		11,209			-
2029		10,391			-
Thereafter		255,629			-
Total minimum lease payments	$	311,978		$	24,167

Less imputed interest		(194,779	)	-
Total lease liabilities (1)	$	117,199		$	24,167

(1)

Operating lease liabilities are included in Operating lease liabilities and financing lease liabilities are included in Other liabilities on the Company’s Consolidated Balance Sheets.