v3.19.3.a.u2

Investment in Rental Property and Lease Arrangements | 12 Months Ended
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Dec. 31, 2019
Leases [Abstract] |
Investment in Rental Property and Lease Arrangements | 6. Investment in Rental Property and Lease Arrangements The Company generally leases its investment rental property to established tenants in the industrial, healthcare, restaurant, office, retail, and other industries. At December 31, 2019, the Company had 626 real estate properties which were leased under leases that have been classified as operating leases and 16 that have been classified as direct financing leases. Of the 16 leases classified as direct financing leases, four include land portions which are accounted for as operating leases (see Revenue Recognition within Note 2). Substantially all leases have initial terms of 10 to 20 years. The Company’s leases generally provide for limited increases in rent as a result of fixed increases, increases in the CPI, or increases in the tenant’s sales volume. Generally, tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple year renewal options, at the election of the tenant, and are subject to generally the same terms and conditions as the initial lease. The Company’s leases do not include residual value guarantees. To protect the residual value of its assets under lease, the Company requires tenants to maintain certain levels of property insurance, and in some cases will purchase supplemental policies directly. Management physically inspects each property on a regular basis to ensure the tenant is maintaining the property so that it will be in a condition at the end of the lease term that is suitable for the Company to lease to a new tenant without the need for significant additional investment. For assets other than land, at lease inception the Company estimates the residual value taking into consideration the original fair value of the asset, less anticipated depreciation over the lease term. In general, at lease inception the Company assumes the value ascribed to land will be fully recoverable at the end of the lease term. Investment in Rental Property – Accounted for Using the Operating Method Rental property subject to non-cancelable operating leases with tenants are as follows:
|  | December 31, |
(in thousands) |  | 2019 |  |  | 2018 |
Land |  | $ | 548,911 |  |  | $ | 411,043 |
Land improvements |  |  | 275,470 |  |  |  | 239,701 |
Buildings and improvements |  |  | 2,850,571 |  |  |  | 2,186,499 |
Equipment |  |  | 11,492 |  |  |  | 11,492 |
|  |  | 3,686,444 |  |  |  | 2,848,735 |
Less accumulated depreciation |  |  | (271,044 | ) |  |  | (206,989 | )
|  | $ | 3,415,400 |  |  | $ | 2,641,746 |
Depreciation expense on investment in rental property was as follows:
|  | For the years ended December 31, |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Depreciation |  | $ | 83,797 |  |  | $ | 66,055 |  |  | $ | 50,360 |
Estimated lease payments to be received under non-cancelable operating leases with tenants at December 31, 2019 are as follows:
(in thousands) |  |  |  |
2020 |  | $ | 290,974 |
2021 |  |  | 295,713 |
2022 |  |  | 298,938 |
2023 |  |  | 302,017 |
2024 |  |  | 297,121 |
Thereafter |  |  | 2,280,973 |
|  | $ | 3,765,736 |
Estimated minimum future rental receipts required under non-cancelable operating leases with tenants at December 31, 2018 are as follows:
(in thousands) |  |  |  |
2019 |  | $ | 231,725 |
2020 |  |  | 235,426 |
2021 |  |  | 238,223 |
2022 |  |  | 240,083 |
2023 |  |  | 241,498 |
Thereafter |  |  | 2,007,118 |
|  | $ | 3,194,073 |
Since lease renewal periods are exercisable at the option of the tenant, the above amounts only include future lease payments due during the initial lease terms. In addition, such amounts exclude any potential variable rent increases that are based on changes in the CPI or future variable rents which may be received under the leases based on a percentage of the tenant’s gross sales. Investment in Rental Property – Direct Financing Leases The Company’s net investment in direct financing leases is comprised of the following:
|  | December 31, |
(in thousands) |  | 2019 |  |  | 2018 |
Undiscounted estimated lease payments to be received |  | $ | 72,753 |  |  | $ | 76,829 |
Estimated unguaranteed residual values |  |  | 20,358 |  |  |  | 20,358 |
Unearned revenue |  |  | (51,221 | ) |  |  | (55,187 | )
Net investment in direct financing leases |  | $ | 41,890 |  |  | $ | 42,000 |
Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at December 31, 2019 are as follows:
(in thousands) |  |  |  |
2020 |  | $ | 4,194 |
2021 |  |  | 4,283 |
2022 |  |  | 4,369 |
2023 |  |  | 4,456 |
2024 |  |  | 4,539 |
Thereafter |  |  | 50,912 |
|  | $ | 72,753 |
Minimum future rental receipts required under non-cancelable direct financing leases with tenants at December 31, 2018 are as follows:
(in thousands) |  |  |  |
2019 |  | $ | 4,076 |
2020 |  |  | 4,194 |
2021 |  |  | 4,283 |
2022 |  |  | 4,369 |
2023 |  |  | 4,456 |
Thereafter |  |  | 55,451 |
|  | $ | 76,829 |
The above rental receipts do not include future lease payments for renewal periods, potential variable CPI rent increases, or variable percentage rent payments that may become due in future periods. The following table summarizes amounts reported as Lease revenues on the Consolidated Statements of Income and Comprehensive Income:
|  | For the year ended |
(in thousands) |  | December 31, 2019 |
Contractual rental amounts billed for operating leases |  | $ | 257,695 |
Adjustment to recognize contractual operating lease billings on a straight-line basis |  |  | 22,109 |
Percentage rent income |  |  | 152 |
Adjustment to revenue recognized for uncollectible rental amounts billed |  |  | (441 | )
Total operating lease rental revenues |  |  | 279,515 |
Earned income from direct financing leases |  |  | 4,018 |
Operating expenses billed to tenants |  |  | 14,614 |
Other income from real estate transactions |  |  | 668 |
Total lease revenues |  | $ | 298,815 |

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- Definition The entire disclosure for lessor entity's leasing arrangements for operating, capital and leveraged leases. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 + Details
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