XML 24 R14.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Net Investment in Sales-type Leases and Ground Lease Receivables | 3 Months Ended
--- | ---
Mar. 31, 2024
Leases [Abstract] |
Net Investment in Sales-type Leases and Ground Lease Receivables | Note 4—Net Investment in Sales-type Leases and Ground Lease Receivables The Company classifies certain of its Ground Leases as sales-type leases and records the leases within “Net investment in sales-type leases” on the Company’s consolidated balance sheets and records interest income in “Interest income from sales-type leases” in the Company’s consolidated statements of operations. In addition, the Company may enter into transactions whereby it acquires land and enters into Ground Leases directly with the seller. These Ground Leases qualify as sales-type leases and, as such, do not qualify for sale leaseback accounting and are accounted for as financing receivables in accordance with ASC 310 - Receivables and are included in “Ground Lease receivables” on the Company’s consolidated balance sheets. The Company records interest income from Ground Lease receivables in “Interest income from sales-type leases” in the Company’s consolidated statements of operations. In May 2023, the Company entered into a joint venture with a sovereign wealth fund, which is also an existing shareholder, focused on new acquisitions for certain Ground Lease investments. The Company committed approximately $275 million for a 55% controlling interest in the joint venture and the sovereign wealth fund committed approximately $225 million for a 45% noncontrolling interest in the joint venture. Each party’s commitment is discretionary. The joint venture is a voting interest entity and the Company consolidates the joint venture in its financial statements due to its controlling interest. The Company’s joint venture partners’ interest is recorded in “Noncontrolling interests” on the Company’s consolidated balance sheets. The Company receives a management fee, measured on an asset-by-asset basis, equal to 25 basis points on invested equity for such asset for the first five years following its acquisition, and 15 basis points on invested equity thereafter. The Company will also receive a promote of 15% over a 9% internal rate of return, subject to a 1.275x multiple on invested capital. The venture has first look rights on qualifying investments for 18 months. Since formation, the joint venture acquired three Ground Leases for an aggregate purchase price of $60.1 million, of which $36.2 million has been funded as of March 31, 2024. ​ In January 2024, the Company acquired a Ground Lease from the Ground Lease Plus Fund for $38.3 million, excluding $36.5 million funded by the Company pursuant to a leasehold improvement allowance (refer to Note 14). ​ The Company’s net investment in sales-type leases were comprised of the following ($ in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2024 |  | December 31, 2023
Total undiscounted cash flows(1) | ​ | $ | 31,878,760 | ​ | $ | 30,586,189
Unguaranteed estimated residual value(1) | ​ |  | 2,982,536 | ​ |  | 2,946,928
Present value discount | ​ |  | (31,518,731) | ​ |  | (30,277,457)
Allowance for credit losses | ​ | ​ | (907) | ​ | ​ | (465)
Net investment in sales-type leases(2) | ​ | $ | 3,341,658 | ​ | $ | 3,255,195
(1) | As of March 31, 2024, total discounted cash flows were approximately $3,312 million and the discounted unguaranteed estimated residual value was $30.8 million. As of December 31, 2023, total discounted cash flows were approximately $3,225 million and the discounted unguaranteed estimated residual value was $30.4 million.
(2) | As of March 31, 2024 and December 31, 2023, $16.5 million and $16.4 million, respectively, was attributable to noncontrolling interests.
​ The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the three months ended March 31, 2024 and 2023 ($ in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Net Investment in | ​ | Ground Lease | ​ | ​ | ​
​ |  | Sales-type Leases |  | Receivables |  | Total
Three Months Ended March 31, 2024 |  | ​ |  |  | ​ |  |  | ​ |
Beginning balance | ​ | $ | 3,255,195 | ​ | $ | 1,622,298 | ​ | $ | 4,877,493
Origination/acquisition/fundings(1) | ​ |  | 71,978 | ​ |  | 32,158 | ​ |  | 104,136
Accretion | ​ |  | 14,927 | ​ |  | 6,930 | ​ |  | 21,857
Provision for credit losses | ​ | ​ | (442) | ​ | ​ | (323) | ​ | ​ | (765)
Ending balance(2) | ​ | $ | 3,341,658 | ​ | $ | 1,661,063 | ​ | $ | 5,002,721
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Net Investment in | ​ | Ground Lease | ​ | ​ | ​
​ |  | Sales-type Leases |  | Receivables |  | Total
Three Months Ended March 31, 2023 |  | ​ |  |  | ​ |  |  | ​ |
Beginning balance | ​ | $ | 3,106,599 | ​ | $ | 1,374,716 | ​ | $ | 4,481,315
Impact from adoption of new accounting standard | ​ | ​ | (351) | ​ | ​ | (199) | ​ | ​ | (550)
Origination/acquisition/fundings(1) | ​ |  | 19,331 | ​ |  | 50,803 | ​ |  | 70,134
Accretion | ​ | ​ | 14,226 | ​ | ​ | 6,154 | ​ | ​ | 20,380
Recovery of credit losses | ​ |  | 26 | ​ |  | 4 | ​ |  | 30
Ending balance(2) | ​ | $ | 3,139,831 | ​ | $ | 1,431,478 | ​ | $ | 4,571,309
(1) | The net investment in sales-type leases is initially measured at the present value of the fixed and determinable lease payments, including any guaranteed or unguaranteed estimated residual value of the asset at the end of the lease, discounted at the rate implicit in the lease. For newly originated or acquired Ground Leases, the Company’s estimate of residual value equals the fair value of the land at lease commencement.
(2) | As of March 31, 2024 and December 31, 2023, all of the Company’s net investment in sales-type leases and Ground Lease receivables were current in their payment status. As of March 31, 2024, the Company’s weighted average accrual rate for its net investment in sales-type leases and Ground Lease receivables was 5.2% and 5.4%, respectively. As of March 31, 2024, the weighted average remaining life of the Company’s 34 Ground Lease receivables was 97.9 years.
​ Allowance for Credit Losses—Changes in the Company’s allowance for credit losses on net investment in sales-type leases and Ground Lease receivables for the three months ended March 31, 2024 and 2023 were as follows ($ in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Net investment in sales-type leases
​ | ​ | Stabilized | ​ | Development | ​ | Unfunded | ​ | ​
Three Months Ended March 31, 2024 | ​ | Properties | ​ | Properties | ​ | Commitments | ​ | Total
Allowance for credit losses at beginning of period | ​ | $ | 387 | ​ | $ | 78 | ​ | $ | — | ​ | $ | 465
Provision for credit losses(1) | ​ | ​ | 325 | ​ |  | 117 | ​ |  | 11 | ​ |  | 453
Allowance for credit losses at end of period(2) | ​ | $ | 712 | ​ | $ | 195 | ​ | $ | 11 | ​ | $ | 918
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Ground Lease receivables
​ | ​ | Stabilized | ​ | Development | ​ | Unfunded | ​ | ​
Three Months Ended March 31, 2024 | ​ | Properties | ​ | Properties | ​ | Commitments | ​ | Total
Allowance for credit losses at beginning of period | ​ | $ | 123 | ​ | $ | 246 | ​ | $ | 37 | ​ | $ | 406
Provision for credit losses(1) | ​ | ​ | 111 | ​ |  | 212 | ​ |  | 1 | ​ |  | 324
Allowance for credit losses at end of period(2) | ​ | $ | 234 | ​ | $ | 458 | ​ | $ | 38 | ​ | $ | 730
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Net investment in sales-type leases
​ | ​ | Stabilized | ​ | Development | ​ | Unfunded | ​ | ​
Three Months Ended March 31, 2023 | ​ | Properties | ​ | Properties | ​ | Commitments | ​ | Total
Allowance for credit losses at beginning of period | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | —
Impact from adoption of new accounting standard(3) | ​ | ​ | 280 | ​ | ​ | 71 | ​ | ​ | 6 | ​ | ​ | 357
Recovery of credit losses(1) | ​ | ​ | (25) | ​ |  | (1) | ​ |  | (5) | ​ |  | (31)
Allowance for credit losses at end of period(2) | ​ | $ | 255 | ​ | $ | 70 | ​ | $ | 1 | ​ | $ | 326
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Ground Lease receivables
​ | ​ | Stabilized | ​ | Development | ​ | Unfunded | ​ | ​
Three Months Ended March 31, 2023 | ​ | Properties | ​ | Properties | ​ | Commitments | ​ | Total
Allowance for credit losses at beginning of period | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | —
Impact from adoption of new accounting standard(3) | ​ | ​ | 102 | ​ | ​ | 97 | ​ | ​ | 84 | ​ | ​ | 283
Provision for (recovery of) credit losses(1) | ​ | ​ | (9) | ​ |  | 5 | ​ |  | (21) | ​ |  | (25)
Allowance for credit losses at end of period(2) | ​ | $ | 93 | ​ | $ | 102 | ​ | $ | 63 | ​ | $ | 258
(1) | During the three months ended March 31, 2024, the Company recorded a provision for credit losses on net investment in sales-type leases and Ground Lease receivables of $0.5 million and $0.3 million, respectively. The provision for credit losses was due primarily to current market conditions, including an increase in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since December 31, 2023. During the three months ended March 31, 2023, the Company recorded a recovery of credit losses on net investment in sales-type leases and Ground Lease receivables of $31 thousand and $25 thousand, respectively. The recovery of credit losses on net investment in sales-type leases and Ground Lease receivables was due primarily to an improving macroeconomic forecast since December 31, 2023.
(2) | Allowance for credit losses on unfunded commitments is recorded in “Accounts payable and accrued expenses” on the Company’s consolidated balance sheets.
(3) | On January 1, 2023, the Company recorded an allowance for credit losses on net investment in sales-type leases of $0.4 million and an allowance for credit losses on Ground Lease receivables of $0.2 million upon the adoption of ASU 2016-13, of which an aggregate of $0.1 million related to expected credit losses for unfunded commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."
​ The Company’s amortized cost basis in Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of March 31, 2024 ($ in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Year of Origination |  |  | ​
​ |  | 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | Prior to 2020 |  | Total
Ground Lease receivables | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Stabilized properties | ​ | $ | — | ​ | $ | 19,209 | ​ | $ | 153,704 | ​ | $ | 198,044 | ​ | $ | 181,567 | ​ | $ | 452,303 | ​ | $ | 1,004,827
Development properties | ​ |  | — | ​ |  | 142 | ​ |  | 579,251 | ​ |  | 77,535 | ​ |  | — | ​ |  | — | ​ |  | 656,928
Total | ​ | $ | — | ​ | $ | 19,351 | ​ | $ | 732,955 | ​ | $ | 275,579 | ​ | $ | 181,567 | ​ | $ | 452,303 | ​ | $ | 1,661,755
​ The Company’s amortized cost basis in Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of December 31, 2023 ($ in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Year of Origination |  |  | ​
​ |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior to 2019 |  | Total
Ground Lease receivables | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Stabilized properties | ​ | $ | 19,106 | ​ | $ | 152,966 | ​ | $ | 171,664 | ​ | $ | 180,739 | ​ | $ | 450,123 | ​ | $ | — | ​ | $ | 974,598
Development properties | ​ |  | 139 | ​ |  | 545,509 | ​ |  | 102,421 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 648,069
Total | ​ | $ | 19,245 | ​ | $ | 698,475 | ​ | $ | 274,085 | ​ | $ | 180,739 | ​ | $ | 450,123 | ​ | $ | — | ​ | $ | 1,622,667
​ Future Minimum Lease Payments under Sales-type Leases—Future minimum lease payments to be collected under sales-type leases accounted for under ASC 842 - Leases, excluding lease payments that are not fixed and determinable, in effect as of March 31, 2024, are as follows by year ($ in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ |  | ​ | ​ |  | Fixed Bumps |  | ​ | ​
​ | ​ | Fixed Bumps | ​ | ​ | ​ | ​ | with | ​ | ​ | ​
​ | ​ | with Inflation | ​ | Fixed | ​ | Percentage | ​ | ​ | ​
​ |  | Adjustments |  | Bumps |  | Rent |  | Total
2024 (remaining nine months) | ​ | $ | 86,556 | ​ | $ | 2,955 | ​ | $ | 440 | ​ | $ | 89,951
2025 | ​ |  | 108,927 | ​ |  | 4,001 | ​ |  | 586 | ​ |  | 113,514
2026 | ​ |  | 111,308 | ​ |  | 4,067 | ​ |  | 586 | ​ |  | 115,961
2027 | ​ |  | 113,331 | ​ |  | 4,135 | ​ |  | 586 | ​ |  | 118,052
2028 | ​ | ​ | 115,355 | ​ | ​ | 4,294 | ​ | ​ | 637 | ​ | ​ | 120,286
Thereafter | ​ |  | 30,059,026 | ​ |  | 1,162,938 | ​ |  | 99,032 | ​ |  | 31,320,996
Total undiscounted cash flows | ​ | $ | 30,594,503 | ​ | $ | 1,182,390 | ​ | $ | 101,867 | ​ | $ | 31,878,760
​ During the three months ended March 31, 2024 and 2023, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Net Investment | ​ | Ground | ​ | ​ | ​
​ | ​ | in Sales-type | ​ | Lease | ​ | ​ | ​
Three Months Ended March 31, 2024 |  | Leases |  | Receivables |  | Total
Cash | ​ | $ | 27,270 | ​ | $ | 14,091 | ​ | $ | 41,361
Non-cash | ​ |  | 14,927 | ​ |  | 6,930 | ​ |  | 21,857
Total interest income from sales-type leases | ​ | $ | 42,197 | ​ | $ | 21,021 | ​ | $ | 63,218
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Net Investment |  | Ground |  | ​ | ​
​ | ​ | in Sales-type | ​ | Lease | ​ | ​ | ​
Three Months Ended March 31, 2023 | ​ | Leases | ​ | Receivables | ​ | Total
Cash | ​ | $ | 24,882 | ​ | $ | 11,804 | ​ | $ | 36,686
Non-cash | ​ |  | 14,222 | ​ |  | 6,154 | ​ |  | 20,376
Total interest income from sales-type leases | ​ | $ | 39,104 | ​ | $ | 17,958 | ​ | $ | 57,062
​ ​ ​

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of lessor's sales-type 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
Name: | us-gaap_LessorSalesTypeLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration