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Leases | 9 Months Ended
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Sep. 30, 2024
Leases [Abstract] |
Leases | Leases Lessor We are the lessor under certain agreements for gathering, transportation, storage, terminalling, and offloading with Delek Holdings. These agreements have remaining terms ranging from more than two years to more than 11 years with renewal options ranging from two years to 10 years, and some agreements have multiple renewal options. Revenue from these leases are recorded in affiliate revenue in the condensed consolidated statements of income and comprehensive income. We elected the practical expedient to carry forward historical lease classification conclusions until a modification of an existing agreement occurs. Once a modification occurs, the amended agreement is required to be assessed under ASC 842, to determine whether a reclassification of the lease is required. During the third quarter of 2024, we executed amendments to certain agreements between the Partnership and Delek Holdings. The amendments required the embedded leases within these agreements to be reassessed under ASC 842. As a result of these lease assessments, certain leases were reclassified from operating leases to sales-type leases. Accordingly, the underlying property, plant and equipment, net, and associated deferred revenue, if any, were derecognized and the present value of the future lease payments and the unguaranteed residual value of the assets were recorded as a net investment in sales-type lease. The net investment in sales-type leases is recorded utilizing the estimated fair value of the underlying leased assets at contract modification date and are nonrecurring fair value measurements. The leased assets were valued using a cost method valuation approach which utilizes Level 3 inputs. We recognized any billings in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues. Lease income included in the condensed consolidated statements of income and comprehensive income were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2024 |
Operating leases: |  |  |  |
Lease revenue | $ | 49,176 |  |  | $ | 212,202 |  |
Sales-type leases: |  |  |  |
Interest income (Sales-type rental revenue-fixed minimum) | 23,442 |  |  | 23,442 |  |
Lease revenue (Revenue from variable lease payments) | 4,349 |  |  | 4,349 |  |
Sales-type lease income | $ | 27,791 |  |  | $ | 27,791 |  |
We recorded $83.7 million and $228.7 million in operating lease revenue for the three and nine months ended September 30, 2023, respectively. We did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contracts allocated to the lease component based on relative standalone selling price. The following presents the condensed consolidated financial statement impact of sales-type leases on commencement or modification date. These transactions are non-cash transactions. The amount recognized on commencement date was recorded in contributions in the condensed consolidated statements of partners' equity, given the underlying agreements are between entities under common control. There were no amounts to report for the three and nine months ended September 30, 2023.
| Three And Nine Months Ended September 30, |
(in thousands) | 2024 |  |  |  |
Lease receivables | $ | 206,633 |  |  |  |  |
Unguaranteed residual assets | 9,111 |  |  |  |  |
Property, plant and equipment, net | (102,088) |  |  |  |  |
Amount recognized on commencement date | $ | 113,656 |  |  |  |  |
The following is a schedule of annual undiscounted minimum future lease cash receipts on the non-cancellable operating leases as of September 30, 2024 (in thousands):
2024 | $ | 28,034 |
2025 | 112,136 |
2026 | 109,718 |
2027 | 97,627 |
2028 | 67,067 |
2029 and thereafter | 82,853 |
Total minimum future lease revenue | $ | 497,435 |
Annual future minimum undiscounted lease receipts under our sales-type leases were as follows as of September 30, 2024 (in thousands):
2024 | $ | 28,971 |
2025 | 100,937 |
2026 | 80,541 |
2027 | 75,474 |
2028 | 75,474 |
2029 and thereafter | 333,162 |
Total minimum future lease revenue | 694,559 |
Less: Imputed interest | 494,094 |
Lease receivable (1) | $ | 200,465 |
Current lease receivables (2) | $ | 23,852 |
Long-term lease receivables (3) | $ | 176,613 |
Unguaranteed residual assets (3) | $ | 9,748 |
(1) This amount does not include the unguaranteed residual assets. (2) Presented in Lease receivable - affiliate, in the condensed consolidated balance sheets. (3) Presented in Net lease investment - affiliate in the condensed consolidated balance sheets. The following table summarized our investment in assets held under operating lease by major classes (in thousands):
| September 30,
| 2024 |  | 2023
Land | $ | 10,727 |  |  | $ | 12,306 |
Building and building improvements | 1,755 |  |  | 3,582 |
Pipelines, tanks and terminals | 431,488 |  |  | 623,961 |
Other equipment | 2,145 |  |  | 3,768 |
Property, plant and equipment | 446,115 |  |  | 643,617 |
Less: accumulated depreciation | 144,162 |  |  | 241,486 |
Property, plant and equipment, net | $ | 301,953 |  |  | $ | 402,131 |
Capital expenditures related to assets subject to sales-type lease arrangements were $0.4 million for the three and nine months ended September 30, 2024. There were no capital expenditures related to assets subject to sales-type lease arrangements for the three and nine months ended September 30, 2023. These amounts are reflected as additions to property, plant and equipment in the condensed consolidated statement of cash flows.

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- Definition The entire disclosure for lessor's operating leases. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 30 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-30/tableOfContent + Details
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