v3.20.2

Investment in Rental Property and Lease Arrangements | 6 Months Ended
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Jun. 30, 2020
Leases [Abstract] |
Investment in Rental Property and Lease Arrangements | 7. 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 June 30, 2020, the Company had 615 real estate properties which were leased under leases that have been classified as operating leases and 11 that have been classified as direct financing leases. Of the 11 leases classified as direct financing leases, three 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. Investment in Rental Property – Accounted for Using the Operating Method Rental property subject to non-cancelable operating leases with tenants was as follows:
(in thousands) |  | June 30, 2020 |  |  | December 31, 2019 |
Land |  | $ | 545,984 |  |  | $ | 548,911 |
Land improvements |  |  | 276,542 |  |  |  | 275,470 |
Buildings and improvements |  |  | 2,825,327 |  |  |  | 2,850,571 |
Equipment |  |  | 11,873 |  |  |  | 11,492 |
|  |  | 3,659,726 |  |  |  | 3,686,444 |
Less accumulated depreciation |  |  | (312,934 | ) |  |  | (271,044 | )
|  | $ | 3,346,792 |  |  | $ | 3,415,400 |
Depreciation expense on investment in rental property was as follows:
|  | For the three months ended June 30, |  |  | For the six months ended June 30, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Depreciation |  | $ | 23,560 |  |  | $ | 19,532 |  |  | $ | 47,075 |  |  | $ | 38,285 |
Estimated lease payments to be received under non-cancelable operating leases with tenants at June 30, 2020 are as follows:
(in thousands) |  |  |  |
Remainder of 2020 |  | $ | 142,216 |
2021 |  |  | 289,046 |
2022 |  |  | 291,422 |
2023 |  |  | 294,357 |
2024 |  |  | 290,202 |
Thereafter |  |  | 2,229,760 |
|  | $ | 3,537,003 |
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 was comprised of the following:
(in thousands) |  | June 30, 2020 |  |  | December 31, 2019 |
Undiscounted estimated lease payments to be received |  | $ | 49,524 |  |  | $ | 72,753 |
Estimated unguaranteed residual values |  |  | 16,049 |  |  |  | 20,358 |
Unearned income |  |  | (34,424 | ) |  |  | (51,221 | )
Reserve for credit losses |  |  | (196 | ) |  |  | — |
Net investment in direct financing leases |  | $ | 30,953 |  |  | $ | 41,890 |
Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at June 30, 2020 are as follows:
(in thousands) |  |  |  |
Remainder of 2020 |  | $ | 1,622 |
2021 |  |  | 3,304 |
2022 |  |  | 3,368 |
2023 |  |  | 3,433 |
2024 |  |  | 3,493 |
Thereafter |  |  | 34,304 |
|  | $ | 49,524 |
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, net on the Condensed Consolidated Statements of Income and Comprehensive Income (Loss):
|  | For the three months ended June 30, |  |  | For the six months ended June 30, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Contractual rental amounts billed for operating leases |  | $ | 67,342 |  |  | $ | 60,294 |  |  | $ | 140,170 |  |  | $ | 118,713 |
Adjustment to recognize contractual operating lease billings on a straight-line basis |  |  | 8,276 |  |  |  | 5,269 |  |  |  | 9,941 |  |  |  | 10,440 |
Variable rental amounts earned |  |  | 51 |  |  |  | — |  |  |  | 74 |  |  |  | — |
Adjustment to revenue recognized for uncollectible rental amounts billed |  |  | (1,190 | ) |  |  | — |  |  |  | (2,223 | ) |  |  | (440 | )
Total operating lease rental revenues |  |  | 74,479 |  |  |  | 65,563 |  |  |  | 147,962 |  |  |  | 128,713 |
Earned income from direct financing leases |  |  | 855 |  |  |  | 1,004 |  |  |  | 1,842 |  |  |  | 2,009 |
Operating expenses billed to tenants |  |  | 4,335 |  |  |  | 2,486 |  |  |  | 8,067 |  |  |  | 6,761 |
Other income from real estate transactions |  |  | 702 |  |  |  | — |  |  |  | 731 |  |  |  | — |
Total Lease revenues, net |  | $ | 80,371 |  |  | $ | 69,053 |  |  | $ | 158,602 |  |  | $ | 137,483 |

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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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