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Leases
 6 Months Ended
Jun. 30, 2022
Leases [Abstract]  
Leases Leases
Lessor Accounting
The Company’s properties generally were leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2040. Some leases provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as the consumer price index ("CPI"). In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the three and six months ended June 30, 2022 was $140.6 million and $279.1 million, respectively.
On March 30, 2022, the Company executed a lease as a ground lessor for a 1.9 acre parcel of land in Texas previously recorded in land held for development. The lease is classified as a sales-type lease under Topic 842 as the present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset. The land value of $1.8 million was reclassified from Land held for development to Other assets.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements and the sale-type lease, as of June 30, 2022 were as follows:
Dollars in thousandsOPERATING
2022$214,083 
2023398,689 
2024326,597 
2025269,308 
2026217,068 
2027 and thereafter566,038 
$1,991,783 
Lessee Accounting
As of June 30, 2022, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of June 30, 2022, the Company had 108 properties totaling 8.9 million square feet that were held under ground leases. Some of the ground lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on CPI. The Company had 41 prepaid ground leases as of June 30, 2022. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.1
million and $0.2 million of the Company’s rental expense for the three months ended June 30, 2022 and 2021, respectively, and $0.3 million for the six months ended June 30, 2022 and 2021, respectively.
The Company’s future lease payments (primarily for its 67 non-prepaid ground leases) as of June 30, 2022 were as follows:
Dollars in thousandsOPERATINGFINANCING
2022$2,118 $735 
20235,071 1,654 
20245,130 1,692 
20255,174 1,723 
20265,201 1,749 
2027 and thereafter306,956 368,730 
Total undiscounted lease payments329,650 376,283 
Discount(234,902)(314,088)
Lease liabilities$94,748 $62,195 
The following table provides details of the Company's total lease expense for the three and six months ended June 30, 2022 and 2021:
THREE MONTHS ENDED
June 30,		SIX MONTHS ENDED
June 30,
Dollars in thousands2022202120222021
Operating lease cost
Operating lease expense$1,194 $1,182 $2,409 $2,360 
Variable lease expense1,038 972 2,062 1,868 
Finance lease cost
Amortization of right-of-use assets331 88 503 176 
Interest on lease liabilities765 247 1,052 493 
Total lease expense$3,328 $2,489 $6,026 $4,897 
Other information
Operating cash flows outflows related to operating leases$1,799$2,587 $4,596 $4,431 
Operating cash flows outflows related to financing leases$509$— $767 $— 
Financing cash flows outflows related to financing leases$—$321 $51 $683 
Right-of-use assets obtained in exchange for new finance lease liabilities$—$— $40,589 $— 
Weighted-average remaining lease term (excluding renewal options) - operating leases47.448.1
Weighted-average remaining lease term (excluding renewal options) - finance leases61.764.5
Weighted-average discount rate - operating leases5.6 %5.7 %
Weighted-average discount rate - finance leases5.0 %5.4 %
Leases Leases
Lessor Accounting
The Company’s properties generally were leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2040. Some leases provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as the consumer price index ("CPI"). In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the three and six months ended June 30, 2022 was $140.6 million and $279.1 million, respectively.
On March 30, 2022, the Company executed a lease as a ground lessor for a 1.9 acre parcel of land in Texas previously recorded in land held for development. The lease is classified as a sales-type lease under Topic 842 as the present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset. The land value of $1.8 million was reclassified from Land held for development to Other assets.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements and the sale-type lease, as of June 30, 2022 were as follows:
Dollars in thousandsOPERATING
2022$214,083 
2023398,689 
2024326,597 
2025269,308 
2026217,068 
2027 and thereafter566,038 
$1,991,783 
Lessee Accounting
As of June 30, 2022, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of June 30, 2022, the Company had 108 properties totaling 8.9 million square feet that were held under ground leases. Some of the ground lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on CPI. The Company had 41 prepaid ground leases as of June 30, 2022. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.1
million and $0.2 million of the Company’s rental expense for the three months ended June 30, 2022 and 2021, respectively, and $0.3 million for the six months ended June 30, 2022 and 2021, respectively.
The Company’s future lease payments (primarily for its 67 non-prepaid ground leases) as of June 30, 2022 were as follows:
Dollars in thousandsOPERATINGFINANCING
2022$2,118 $735 
20235,071 1,654 
20245,130 1,692 
20255,174 1,723 
20265,201 1,749 
2027 and thereafter306,956 368,730 
Total undiscounted lease payments329,650 376,283 
Discount(234,902)(314,088)
Lease liabilities$94,748 $62,195 
The following table provides details of the Company's total lease expense for the three and six months ended June 30, 2022 and 2021:
THREE MONTHS ENDED
June 30,		SIX MONTHS ENDED
June 30,
Dollars in thousands2022202120222021
Operating lease cost
Operating lease expense$1,194 $1,182 $2,409 $2,360 
Variable lease expense1,038 972 2,062 1,868 
Finance lease cost
Amortization of right-of-use assets331 88 503 176 
Interest on lease liabilities765 247 1,052 493 
Total lease expense$3,328 $2,489 $6,026 $4,897 
Other information
Operating cash flows outflows related to operating leases$1,799$2,587 $4,596 $4,431 
Operating cash flows outflows related to financing leases$509$— $767 $— 
Financing cash flows outflows related to financing leases$—$321 $51 $683 
Right-of-use assets obtained in exchange for new finance lease liabilities$—$— $40,589 $— 
Weighted-average remaining lease term (excluding renewal options) - operating leases47.448.1
Weighted-average remaining lease term (excluding renewal options) - finance leases61.764.5
Weighted-average discount rate - operating leases5.6 %5.7 %
Weighted-average discount rate - finance leases5.0 %5.4 %