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Leases
 9 Months Ended
Sep. 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 nine months ended September 30, 2022 was $298.9 million and $578.1 million, respectively. Lease income for the Company's operating leases recognized for the three and nine months ended September 30, 2021 was $131.7 million and $388.6 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 September 30, 2022 were as follows:
Dollars in thousandsOPERATING
2022$243,946 
2023937,733 
2024816,000 
2025702,251 
2026605,417 
2027 and thereafter2,242,792 
$5,548,139 
Lessee Accounting
As of September 30, 2022, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of September 30, 2022, the Company had 243 properties totaling 17.8 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 75 prepaid ground leases as of September 30, 2022. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.5 million and $0.1 million of the Company’s rental expense for the three months ended September 30, 2022 and 2021, respectively, and $0.8 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively.
The Company’s future lease payments (primarily for its 168 non-prepaid ground leases) as of September 30, 2022 were as follows:
Dollars in thousandsOPERATINGFINANCING
2022$3,665 $503 
202315,606 2,139 
202415,193 2,182 
202514,715 2,218 
202614,735 2,255 
2027 and thereafter894,018 398,092 
Total undiscounted lease payments957,932 407,389 
Discount(689,092)(335,011)
Lease liabilities$268,840 $72,378 
The following table provides details of the Company's total lease expense for the three and nine months ended September 30, 2022 and 2021:
THREE MONTHS ENDED
September 30,		NINE MONTHS ENDED
September 30,
Dollars in thousands2022202120222021
Operating lease cost
Operating lease expense$4,204 $1,196 $6,613 $3,555 
Variable lease expense1,061 1,016 3,123 2,883 
Finance lease cost
Amortization of right-of-use assets381 90 884 267 
Interest on lease liabilities861 255 1,913 748 
Total lease expense$6,507 $2,557 $12,533 $7,453 
Other information
Operating cash flows outflows related to operating leases$3,847$1,424 $8,443 $5,855 
Operating cash flows outflows related to financing leases$476$151 $1,262 $678 
Financing cash flows outflows related to financing leases$3$6 $3 $162 
Right-of-use assets obtained in exchange for new finance lease liabilities$9,874$1,420 $50,463 $1,420 
Right-of-use assets obtained in exchange for new operating lease liabilities$198,261$8,298 $198,261 $8,298 
Weighted-average years remaining lease term (excluding renewal options) - operating leases50.247.8
Weighted-average years remaining lease term (excluding renewal options) - finance leases60.163.2
Weighted-average discount rate - operating leases5.7 %5.6 %
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 nine months ended September 30, 2022 was $298.9 million and $578.1 million, respectively. Lease income for the Company's operating leases recognized for the three and nine months ended September 30, 2021 was $131.7 million and $388.6 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 September 30, 2022 were as follows:
Dollars in thousandsOPERATING
2022$243,946 
2023937,733 
2024816,000 
2025702,251 
2026605,417 
2027 and thereafter2,242,792 
$5,548,139 
Lessee Accounting
As of September 30, 2022, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of September 30, 2022, the Company had 243 properties totaling 17.8 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 75 prepaid ground leases as of September 30, 2022. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.5 million and $0.1 million of the Company’s rental expense for the three months ended September 30, 2022 and 2021, respectively, and $0.8 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively.
The Company’s future lease payments (primarily for its 168 non-prepaid ground leases) as of September 30, 2022 were as follows:
Dollars in thousandsOPERATINGFINANCING
2022$3,665 $503 
202315,606 2,139 
202415,193 2,182 
202514,715 2,218 
202614,735 2,255 
2027 and thereafter894,018 398,092 
Total undiscounted lease payments957,932 407,389 
Discount(689,092)(335,011)
Lease liabilities$268,840 $72,378 
The following table provides details of the Company's total lease expense for the three and nine months ended September 30, 2022 and 2021:
THREE MONTHS ENDED
September 30,		NINE MONTHS ENDED
September 30,
Dollars in thousands2022202120222021
Operating lease cost
Operating lease expense$4,204 $1,196 $6,613 $3,555 
Variable lease expense1,061 1,016 3,123 2,883 
Finance lease cost
Amortization of right-of-use assets381 90 884 267 
Interest on lease liabilities861 255 1,913 748 
Total lease expense$6,507 $2,557 $12,533 $7,453 
Other information
Operating cash flows outflows related to operating leases$3,847$1,424 $8,443 $5,855 
Operating cash flows outflows related to financing leases$476$151 $1,262 $678 
Financing cash flows outflows related to financing leases$3$6 $3 $162 
Right-of-use assets obtained in exchange for new finance lease liabilities$9,874$1,420 $50,463 $1,420 
Right-of-use assets obtained in exchange for new operating lease liabilities$198,261$8,298 $198,261 $8,298 
Weighted-average years remaining lease term (excluding renewal options) - operating leases50.247.8
Weighted-average years remaining lease term (excluding renewal options) - finance leases60.163.2
Weighted-average discount rate - operating leases5.7 %5.6 %
Weighted-average discount rate - finance leases5.0 %5.4 %