Leases

12 Months Ended

Dec. 31, 2020

Leases of Lessor Disclosure [Text Block]

4. Leases

The Company must make estimates as to the collectability of its accrued rent and accounts receivable related to lease revenue. Management analyzes accrued rent and accounts receivable by considering tenant creditworthiness, current economic trends, including the impact of COVID-19 on tenants’ businesses, and changes in tenants’ payment patterns when evaluating the collectability of the tenant’s receivable balance, including the accrued rent receivable, on a lease-by-lease basis. As a result of this analysis, during the year ended December 31, 2020, the Company wrote off approximately $67.7 million, related to accrued rent balances and approximately $22.6 million, related to accounts receivable balances. The write-offs were for tenants, primarily in the retail, entertainment and co-working sectors, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection.

In April 2020, the FASB staff issued a question and answer document (“Lease Modification Q & A”) related to the application of lease accounting guidance for lease concessions, in accordance with ASC 842, as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q & A allows the Company, if certain criteria have been met, to assume that a lease concession was included within the enforceable rights and obligations of the existing lease agreement and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company did not utilize the guidance provided in the Lease Modification Q & A and instead elected to continue to account for the COVID-19 lease concessions on a lease-by-lease basis in accordance with the existing lease modification accounting framework.

Lessee

The Company has four non-cancelable ground lease obligations, as lessee, which were classified as operating leases, with various initial term expiration dates through 2114. The Company recognizes ground rent expense on a straight-line basis over the term of the respective ground lease agreements. None of the amounts disclosed below for these ground leases contain variable payments, extension options or residual value guarantees. One of the ground leases does have an extension option. However, lease payments, for the extension option, for this ground lease are based on fair market value and as such have not been included in the analysis below.

The Company has four finance lease obligations with various initial term expiration dates through 2094.

The following table provides lease cost information for the Company’s operating and finance leases for the year ended (in thousands):


Lease costs	December 31, 2020		December 31, 2019
Operating lease costs	$	13,948	$	14,573
Finance lease costs
Amortization of right of use asset (1)	$	56	$	29
Interest on lease liabilities (2)	$	583	$	47

_______________

(1)The finance leases relate to either land, buildings or assets that remain in development. For land leases classified as finance leases because of a purchase option that the Company views as an economic incentive, the Company follows its existing policy and does not depreciate land because it is assumed to have an indefinite life. For all other finance leases, the Company would amortize the right of use asset over the shorter of the useful life of the asset or the lease term. If the finance lease relates to a property under development, the amortization of the right of use asset may be eligible for capitalization. For assets under development, depreciation may commence once the asset is placed in-service and depreciation would be recognized in accordance with the Company’s policy.

(2)Three of the finance leases relate to assets under development for all or a portion of the years ended December 31, 2020 and December 31, 2019, respectively, and as such, a portion of the interest amount was capitalized.

The following table provides other quantitative information for the Company’s operating and finance leases as of December 31, 2020 and December 31, 2019:


	December 31, 2020		December 31, 2019
Other information
Weighted-average remaining lease term (in years)
Operating leases	51		51
Finance leases	70		71
Weighted-average discount rate
Operating leases	5.7	%	5.7	%
Finance leases	6.2	%	6.2	%

The following table provides a maturity analysis for the Company’s lease liabilities related to its operating and finance leases as of December 31, 2020 (in thousands):


	Operating		Finance
2021	$	25,092	$	5,896
2022	18,020		10,206
2023	10,262		9,701
2024 (1)	9,277		48,518
2025	9,476		9,971
Thereafter	548,478		1,373,177
Total lease payments	620,605		1,457,469
Less: Interest portion	(418,892)		(1,220,977)
Present value of lease payments	$	201,713	$	236,492

_______________

(1)Finance lease payments in 2024 include approximately $38.7 million related to a purchase option that the Company is reasonably certain it will exercise.

Lessor

The following table summarizes the components of lease revenue recognized during the years ended December 31, 2020 and 2019 included within the Company's Consolidated Statements of Operations (in thousands):


	Year ended December 31,
Lease Revenue		2020		2019
Fixed contractual payments		$	2,211,915	$	2,261,260
Variable lease payments		434,346		496,754
		$	2,646,261	$	2,758,014