Leases

12 Months Ended

Dec. 31, 2023

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