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Leases
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Leases Leases
Lessor Accounting
The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have 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, 2023 was $333.3 million and $987.1 million, respectively. 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.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sale-type lease, as of September 30, 2023 were as follows:
Dollars in thousandsOPERATING
2023$231,698 
2024874,750 
2025770,520 
2026666,294 
2027552,111 
2028 and thereafter1,918,689 
$5,014,062 
Lessee Accounting
As of September 30, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of September 30, 2023, the Company had 240 properties totaling 17.4 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, 2023. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.3 million and $0.1 million of the Company’s rental expense for the three months ended September 30, 2023 and 2022, respectively, and $1.0 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively.
The Company’s future lease payments (primarily for its 165 non-prepaid ground leases) as of September 30, 2023 were as follows:
Dollars in thousandsOPERATINGFINANCING
2023$3,288 $513 
202414,062 2,182 
202514,253 2,218 
202614,392 2,255 
202714,630 2,294 
2028 and thereafter922,019 396,397 
Total undiscounted lease payments982,644 405,859 
Discount(709,325)(331,772)
Lease liabilities$273,319 $74,087 
The following table provides details of the Company's total lease expense for the three and nine months ended September 30, 2023 and 2022:
THREE MONTHS ENDED
September 30,		NINE MONTHS ENDED
September 30,
Dollars in thousands2023202220232022
Operating lease cost
Operating lease expense$5,312 $4,204 $15,748 $6,613 
Variable lease expense2,417 1,061 6,788 3,123 
Finance lease cost
Amortization of right-of-use assets387 381 1,161 884 
Interest on lease liabilities928 861 2,770 1,913 
Total lease expense$9,044 $6,507 $26,467 $12,533 
Other information
Operating cash flows outflows related to operating leases$5,281 $3,847 $16,475 $8,443 
Operating cash flows outflows related to financing leases$524 $476 $1,592 $1,262 
Financing cash flows outflows related to financing leases$7 $3 $12 $3 
Right-of-use assets obtained in exchange for new finance lease liabilities$— $9,874 $— $50,463 
Right-of-use assets obtained in exchange for new operating lease liabilities$— $198,261 $— $198,261 
Weighted-average years remaining lease term (excluding renewal options) - operating leases47.550.2
Weighted-average years remaining lease term (excluding renewal options) - finance leases58.260.1
Weighted-average discount rate - operating leases5.8 %5.7 %
Weighted-average discount rate - finance leases5.0 %5.0 %
Leases Leases
Lessor Accounting
The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have 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, 2023 was $333.3 million and $987.1 million, respectively. 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.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sale-type lease, as of September 30, 2023 were as follows:
Dollars in thousandsOPERATING
2023$231,698 
2024874,750 
2025770,520 
2026666,294 
2027552,111 
2028 and thereafter1,918,689 
$5,014,062 
Lessee Accounting
As of September 30, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of September 30, 2023, the Company had 240 properties totaling 17.4 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, 2023. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.3 million and $0.1 million of the Company’s rental expense for the three months ended September 30, 2023 and 2022, respectively, and $1.0 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively.
The Company’s future lease payments (primarily for its 165 non-prepaid ground leases) as of September 30, 2023 were as follows:
Dollars in thousandsOPERATINGFINANCING
2023$3,288 $513 
202414,062 2,182 
202514,253 2,218 
202614,392 2,255 
202714,630 2,294 
2028 and thereafter922,019 396,397 
Total undiscounted lease payments982,644 405,859 
Discount(709,325)(331,772)
Lease liabilities$273,319 $74,087 
The following table provides details of the Company's total lease expense for the three and nine months ended September 30, 2023 and 2022:
THREE MONTHS ENDED
September 30,		NINE MONTHS ENDED
September 30,
Dollars in thousands2023202220232022
Operating lease cost
Operating lease expense$5,312 $4,204 $15,748 $6,613 
Variable lease expense2,417 1,061 6,788 3,123 
Finance lease cost
Amortization of right-of-use assets387 381 1,161 884 
Interest on lease liabilities928 861 2,770 1,913 
Total lease expense$9,044 $6,507 $26,467 $12,533 
Other information
Operating cash flows outflows related to operating leases$5,281 $3,847 $16,475 $8,443 
Operating cash flows outflows related to financing leases$524 $476 $1,592 $1,262 
Financing cash flows outflows related to financing leases$7 $3 $12 $3 
Right-of-use assets obtained in exchange for new finance lease liabilities$— $9,874 $— $50,463 
Right-of-use assets obtained in exchange for new operating lease liabilities$— $198,261 $— $198,261 
Weighted-average years remaining lease term (excluding renewal options) - operating leases47.550.2
Weighted-average years remaining lease term (excluding renewal options) - finance leases58.260.1
Weighted-average discount rate - operating leases5.8 %5.7 %
Weighted-average discount rate - finance leases5.0 %5.0 %