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Leases | 12 Months Ended
--- | ---
Dec. 31, 2023
Leases [Abstract] |
Leases | Leases Lessor Accounting Under ASC 842 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 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 years ended December 31, 2023 and 2022 was $1.3 billion and $907.5 million, respectively. Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2023 were as follows:
In thousands |
2024 | $ | 894,442 |
2025 | 801,973 |
2026 | 701,615 |
2027 | 582,028 |
2028 | 469,549 |
2029 and thereafter | 1,579,010 |
| $ | 5,028,617 |
Revenue Concentrations The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2023, 2022 and 2021. Purchase Option Provisions Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had investments of approximately $111.1 million in six real estate properties as of December 31, 2023 that were subject to purchase options that were exercisable. Lessee Accounting Under ASC 842 As of December 31, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. Contracts evaluated and treated as leases are those that convey the right to control the use of identified assets for a period of time in exchange for consideration. ASC 842 requires the recording of these leases based on the aggregate future cash flows, discounted utilizing the implicit rate in the lease, or, if not readily determinable, based upon the lessee's incremental borrowing rate, to which the Company utilizes market inputs that are both similar to the Company's credit profile and corresponding term of the leases. As of December 31, 2023, the Company had 232 properties totaling 16.9 million square feet that were held under ground leases. Some of the ground leases include fixed rent renewal terms and others have market rent renewal terms. The 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 the CPI. The Company had 75 prepaid ground leases as of December 31, 2023. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $1.3 million, $1.1 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company’s future lease payments (primarily for its 157 non-prepaid ground leases) as of December 31, 2023 were as follows:
In thousands | OPERATING | FINANCING
2024 | $ | 12,263 |  | $ | 2,182 |
2025 | 12,428 |  | 2,218 |
2026 | 12,516 |  | 2,254 |
2027 | 12,703 |  | 2,294 |
2028 | 12,822 |  | 2,326 |
2029 and thereafter | 698,905 |  | 394,072 |
Total undiscounted lease payments | $ | 761,637 |  | $ | 405,346 |
Discount | (531,923) |  | (330,843) |
Lease liabilities | $ | 229,714 |  | $ | 74,503 |
The following table provides details of the Company's total lease expense for the years ended December 31, 2023 and 2022:
In thousands |  | YEAR ENDED Dec. 31, 2023 | YEAR ENDED Dec. 31, 2022
Operating lease cost |  |  |
Operating lease expense |  | $ | 20,623 |  | $ | 12,699 |
Variable lease expense |  | 8,979 |  | 4,529 |
Finance lease cost |  |  |
Amortization of right-of-use assets |  | 1,564 |  | 1,288 |
Interest on lease liabilities |  | 3,718 |  | 2,876 |
Total lease expense |  | $ | 34,884 |  | $ | 21,392 |
Other information |  |  |
Operating cash flows outflows related to operating leases |  | $ | 19,222 | $ | 12,816
Operating cash flows outflows related to financing leases |  | $ | 2,122 | $ | 1,838
Financing cash flows outflows related to financing leases |  | $ | 17 | $ | —
Right-of-use assets obtained in exchange for new finance lease liabilities |  | $ | — | $ | 53,765
Right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 1,758 | $ | 216,047
Weighted-average remaining lease term (excluding renewal options) - operating leases |  | 45.8 | 47.5
Weighted-average remaining lease term (excluding renewal options) - finance leases |  | 57.9 | 58.9
Weighted-average discount rate - operating leases |  | 5.7 | % | 5.8 | %
Weighted-average discount rate - finance leases |  | 5.0 | % | 5.0 | %
Leases | Leases Lessor Accounting Under ASC 842 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 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 years ended December 31, 2023 and 2022 was $1.3 billion and $907.5 million, respectively. Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2023 were as follows:
In thousands |
2024 | $ | 894,442 |
2025 | 801,973 |
2026 | 701,615 |
2027 | 582,028 |
2028 | 469,549 |
2029 and thereafter | 1,579,010 |
| $ | 5,028,617 |
Revenue Concentrations The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2023, 2022 and 2021. Purchase Option Provisions Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had investments of approximately $111.1 million in six real estate properties as of December 31, 2023 that were subject to purchase options that were exercisable. Lessee Accounting Under ASC 842 As of December 31, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. Contracts evaluated and treated as leases are those that convey the right to control the use of identified assets for a period of time in exchange for consideration. ASC 842 requires the recording of these leases based on the aggregate future cash flows, discounted utilizing the implicit rate in the lease, or, if not readily determinable, based upon the lessee's incremental borrowing rate, to which the Company utilizes market inputs that are both similar to the Company's credit profile and corresponding term of the leases. As of December 31, 2023, the Company had 232 properties totaling 16.9 million square feet that were held under ground leases. Some of the ground leases include fixed rent renewal terms and others have market rent renewal terms. The 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 the CPI. The Company had 75 prepaid ground leases as of December 31, 2023. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $1.3 million, $1.1 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company’s future lease payments (primarily for its 157 non-prepaid ground leases) as of December 31, 2023 were as follows:
In thousands | OPERATING | FINANCING
2024 | $ | 12,263 |  | $ | 2,182 |
2025 | 12,428 |  | 2,218 |
2026 | 12,516 |  | 2,254 |
2027 | 12,703 |  | 2,294 |
2028 | 12,822 |  | 2,326 |
2029 and thereafter | 698,905 |  | 394,072 |
Total undiscounted lease payments | $ | 761,637 |  | $ | 405,346 |
Discount | (531,923) |  | (330,843) |
Lease liabilities | $ | 229,714 |  | $ | 74,503 |
The following table provides details of the Company's total lease expense for the years ended December 31, 2023 and 2022:
In thousands |  | YEAR ENDED Dec. 31, 2023 | YEAR ENDED Dec. 31, 2022
Operating lease cost |  |  |
Operating lease expense |  | $ | 20,623 |  | $ | 12,699 |
Variable lease expense |  | 8,979 |  | 4,529 |
Finance lease cost |  |  |
Amortization of right-of-use assets |  | 1,564 |  | 1,288 |
Interest on lease liabilities |  | 3,718 |  | 2,876 |
Total lease expense |  | $ | 34,884 |  | $ | 21,392 |
Other information |  |  |
Operating cash flows outflows related to operating leases |  | $ | 19,222 | $ | 12,816
Operating cash flows outflows related to financing leases |  | $ | 2,122 | $ | 1,838
Financing cash flows outflows related to financing leases |  | $ | 17 | $ | —
Right-of-use assets obtained in exchange for new finance lease liabilities |  | $ | — | $ | 53,765
Right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 1,758 | $ | 216,047
Weighted-average remaining lease term (excluding renewal options) - operating leases |  | 45.8 | 47.5
Weighted-average remaining lease term (excluding renewal options) - finance leases |  | 57.9 | 58.9
Weighted-average discount rate - operating leases |  | 5.7 | % | 5.8 | %
Weighted-average discount rate - finance leases |  | 5.0 | % | 5.0 | %

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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