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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies General As of September 30, 2024, we had commitments of approximately $196.1 million, excluding our ground lease commitments, for contracts and executed leases directly related to our operating, development, and redevelopment properties. Ground Leases The following table summarizes our properties that are held subject to long-term noncancellable ground lease obligations as of September 30, 2024 and the respective contractual expiration dates:
Property | Contractual Expiration Date
701, 801, and 837 N. 34th Street, Seattle, WA (1) | December 2041
1701 Page Mill Road and 3150 Porter Drive, Palo Alto, CA | December 2067
Kilroy Airport Center Phases I, II, and III, Long Beach, CA (2) | July 2084
3243 S. La Cienega Boulevard, Los Angeles, CA | October 2106
200 W. 6th Street, Austin, TX | December 2112
____________________ (1) The Company has three 10-year and one 45-year extension options for this Seattle ground lease, which if exercised would extend the expiration date to December 2116. These extension options are not assumed to be exercised in our calculation of the present value of the future minimum lease payments for this lease. The Company also has a purchase option for this ground lease. (2) Assumes the impact of all extension options held by the Company. To determine the discount rates used to calculate the present value of the minimum future lease payments for our ground leases, we used a hypothetical curve derived from unsecured corporate borrowing rates over the lease term. The weighted average discount rate used to determine the present value of our minimum lease payments was 4.67%. As of September 30, 2024, the weighted average remaining lease term of our ground leases is 63 years. For the three months ended September 30, 2024 and 2023, variable lease costs totaling $1.2 million and $1.0 million, respectively, were recorded to ground leases expense on our consolidated statements of operations. For the nine months ended September 30, 2024 and 2023, variable lease costs totaling $3.5 million and $3.0 million, respectively, were recorded to ground leases expense on our consolidated statements of operations. The minimum commitment under our ground leases, as of September 30, 2024, for future periods is as follows:
Year Ending | (in thousands)
Remaining 2024 | $ | 1,684 |
2025 | 6,772 |
2026 | 6,809 |
2027 | 6,850 |
2028 | 6,869 |
2029 | 6,869 |
Thereafter | 367,744 |
Total undiscounted cash flows (1)(2)(3)(4)(5)(6) | $ | 403,597 |
Present value discount | (274,991) |
Ground lease liabilities | $ | 128,606 |
________________________ (1)Excludes contingent future rent payments based on gross income or adjusted gross income and reflects the minimum obligations under the ground leases including any extension options (but excludes the Seattle ground lease extension options). (2) One of our ground lease obligations is subject to a fair market value adjustment every five years. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at September 30, 2024 for the remainder of the lease term, as we cannot predict future adjustments. (3) One of our ground lease obligations is subject to a fair market value adjustment every five years based on a combination of CPI adjustments and third-party appraisals limited to maximum increases annually. The contractual obligations for that lease included above assume the contractual minimum annual rent prior to the consideration of any variable rental payments in effect at September 30, 2024 for the remainder of the lease term, as we cannot predict future adjustments. (4) One of our ground lease obligations includes a component that is based on the percentage of adjusted gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every 10 years by an amount equal to 60% of the average annual percentage rent for the previous three years. The contractual obligations for this lease included above assume the current annual ground lease obligation in effect at September 30, 2024 for the remainder of the lease term, as we cannot predict future adjustments. (5) One of our ground lease obligations is subject to fixed 5% ground rent increases every five years, with the next increase occurring on November 1, 2027. (6) One of our ground lease obligations is subject to fixed 2% ground rent increases every year, with ground rent resets occurring every ten years based on CPI. The contractual obligations for that lease included above assume increases for the remaining current ten-year period based on the contractual minimum annual rent prior to the consideration of any variable rental payments in effect at September 30, 2024. Environmental Matters As of September 30, 2024, we had accrued environmental remediation liabilities of approximately $72.1 million in connection with certain of our in-process and future development projects.

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