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Lease Information

12 Months Ended

Dec. 31, 2019

Rental Income

The Company receives rental income from the leasing of retail and office space. The leases generally provide for certain increases in base rent, reimbursement for certain operating expenses, and may require tenants to pay contingent rent to the extent their sales exceed a defined threshold. Certain tenants have the option in the lease agreement to extend their lease upon the expiration of their contractual term. Variable lease payments are based upon tenant sales information and are recognized once a tenant's sales volume exceeds a defined threshold. Variable lease payments for reimbursement of operating expenses are based upon the operating expense activity for the period.

From a lessor perspective, the new accounting guidance adopted in 2019 remained mostly similar to legacy GAAP as the Company elected the practical expedient to not separate non-lease components from lease components. This election resulted in a change on the Company's consolidated statements of operations as the Company no longer presents minimum rents and tenant reimbursements as separate amounts because the Company now accounts for these amounts as a single combined lease component, rental income, on the basis of the lease component being the predominant component of the contract. As such, non-lease components, including common area maintenance reimbursements that are of a fixed nature are recognized on a straight-line basis over the term of the lease. Further, bad debt, which has previously been recorded in property operating expenses, has now been classified as a contra-revenue account in rental income in the Company’s consolidated statements of operations and comprehensive income for the year ended December 31, 2019.

The Company recognized the following lease rental income for the year ended December 31, 2019:



($ in thousands)
	Year Ended December 31, 2019
Fixed Contractual Lease Payments - Operating Leases	$	244,666
Variable Lease Payments - Operating Leases	57,748
Straight-Line Rent Adjustment	2,209
Amortization of In-Place Lease Liabilities, net	3,776
Total	$	308,399

The weighted average remaining term of the lease agreements is approximately 4.5 years. During the years ended December 31, 2019, 2018, and 2017, the Company earned overage rent of $1.3 million, $1.2 million, and $1.1 million, respectively.

As of December 31, 2019, future minimum rentals to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding variable lease payments, are as follows:



($ in thousands)
2020	$	219,020
2021	203,858
2022	176,630
2023	144,709
2024	114,560
Thereafter	394,986
Total	$	1,253,763

Commitments under Ground Leases

As of December 31, 2019, we are obligated under nine ground leases for approximately 47 acres of land. Most of these ground leases require fixed annual rent payments. The expiration dates of the remaining initial terms of these ground leases range from 2023 to 2092 with a weighted-average remaining term of 52.2 years. Certain of these leases have five- to ten-year extension options ranging in total from 20 to 25 years.

Upon adoption of the Leases standard, the Company did not recognize value during the option period for the right-of-use assets and lease liabilities as it was not probable the extension options will be exercised. Upon adoption, the Company recorded a right of use asset of $27.0 million and corresponding liability of $27.3 million. The right of use asset is included in prepaid and other assets and the lease liability is included in deferred revenue and other liabilities. This value was determined utilizing an estimate of our incremental borrowing rate that was specific to each lease based upon the term and underlying asset. These rates ranged from 3.93% to 6.33% with a weighted-average incremental borrowing rate of 5.86%.

Ground lease expense incurred by the Company on these operating leases for the years ended December 31, 2019, 2018, and 2017 was $1.8 million, $1.7 million, and $1.7 million, respectively. The Company made payments of $1.7 million for the year ended December 31, 2019, of which the majority was included in operating cash flows.

Future minimum lease payments due under ground leases for the next five years ending December 31 and thereafter are as follows:



($ in thousands)
2020	$	1,777
2021	1,789
2022	1,815
2023	1,636
2024	1,600
Thereafter	70,554
Total	$	79,171

Lease Information

Rental Income

The Company recognized the following lease rental income for the year ended December 31, 2019:



($ in thousands)
	Year Ended December 31, 2019
Fixed Contractual Lease Payments - Operating Leases	$	244,666
Variable Lease Payments - Operating Leases	57,748
Straight-Line Rent Adjustment	2,209
Amortization of In-Place Lease Liabilities, net	3,776
Total	$	308,399

As of December 31, 2019, future minimum rentals to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding variable lease payments, are as follows:



($ in thousands)
2020	$	219,020
2021	203,858
2022	176,630
2023	144,709
2024	114,560
Thereafter	394,986
Total	$	1,253,763

Commitments under Ground Leases

Future minimum lease payments due under ground leases for the next five years ending December 31 and thereafter are as follows:



($ in thousands)
2020	$	1,777
2021	1,789
2022	1,815
2023	1,636
2024	1,600
Thereafter	70,554
Total	$	79,171