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Leases | 6 Months Ended
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Jun. 30, 2025
Leases, Operating [Abstract] |
Leases | Leases Lessor Accounting As of June 30, 2025, the Company's properties were leased primarily to the USPS, with leases expiring at various dates through October 31, 2035. Certain leases had expired and were in holdover status as of June 30, 2025 as discussed below. Certain leases contain renewal, termination and/or purchase options exercisable at the lessee’s election. Therefore, such options are only recognized once they are deemed reasonably certain, typically at the time the option is exercised. All of the Company’s leases are operating leases with the exception of two that are direct financing leases. The Company's operating leases and direct financing leases are described below. Rental income related to the Company’s leases is recognized on a straight-line basis over the remaining lease term. The Company’s total revenue includes fixed base rental payments provided under the lease and variable payments which principally consist of tenant expense reimbursements for certain property operating expenses, including real estate taxes. The Company elected the practical expedient to account for its lease and non-lease components as a single combined operating lease component under Topic 842. As a result, rental income and tenant reimbursements were aggregated into a single line within rental income in the Consolidated Statements of Operations and Comprehensive Income. The following table represents rental revenue that the Company recognized related to its operating leases (in thousands):
| For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Fixed payments | $ | 20,055 |  |  | $ | 15,119 |  |  | $ | 38,716 |  |  | $ | 29,559 |
Variable payments | 2,675 |  |  | 2,245 |  |  | 5,494 |  |  | 4,410 |
| $ | 22,730 |  |  | $ | 17,364 |  |  | $ | 44,210 |  |  | $ | 33,969 |
Future minimum lease payments to be received as of June 30, 2025 (excluding base rental payments from properties classified as held for sale under non-cancellable operating leases for the next five years and thereafter are as follows (in thousands):
Year Ending December 31, |  | Amount (1)(2)
2025 - Remaining |  | $ | 37,160 |
2026 |  | 68,317 |
2027 |  | 53,537 |
2028 |  | 40,945 |
2029 |  | 30,463 |
Thereafter |  | 84,724 |
Total |  | $ | 315,146 |
Explanatory Notes: (1)The above minimum lease payments to be received do not include reimbursements from tenants for real estate taxes and other reimbursed expenses. (2)As of June 30, 2025, the leases at three of the Company's properties were expired and the USPS was occupying such properties as a holdover tenant. As such, the above minimum lease payments to be received do not include payments under these holdover leases. Holdover rent is typically paid as the greater of estimated market rent or the rent amount due under the expired lease. Purchase Option Provisions As of June 30, 2025, operating leases for 90 of the Company’s properties provided the USPS with the option to purchase the underlying property either at fair market value or at fixed prices(1), in each case as of dates set forth in the lease. As of June 30, 2025, 87 of these properties had an aggregate carrying value of approximately $66.0 million with an aggregate purchase option price of approximately $85.4 million and the remaining three properties had an aggregate carrying value of approximately $2.9 million with purchase options exercisable at fair market value. During the three and six months ended June 30, 2025, a tenant exercised a purchase option. Refer to Note 2, Assets Held for Sale for further discussion. Explanatory Notes: (1) Properties with more than one calculation method are categorized based on the lowest valuation method. Investment in Financing Leases, Net As of June 30, 2025 and December 31, 2024, financing leases for two of the Company's properties provide the USPS with the option to purchase the underlying property at fixed prices as of dates set forth in the lease agreement. The components of the Company’s net investment in financing leases as of June 30, 2025 and December 31, 2024 are summarized in the table below (in thousands):
| As of June 30, 2025 |  | As of December 31, 2024
Total minimum lease payment receivable | $ | 30,372 |  |  | $ | 30,940 |
Less: unearned income | (14,475) |  |  | (14,989) |
Investment in financing leases, net | $ | 15,897 |  |  | $ | 15,951 |
Revenue earned under direct financing leases for each of the three and six months ended June 30, 2025 and 2024 were $0.3 million and $0.5 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income. Future lease payments to be received under the Company’s direct financing leases as of June 30, 2025 for the next five years and thereafter are as follows (in thousands):
Year Ending December 31, |  | Amount
2025 – Remaining |  | $ | 569 |
2026 |  | 1,137 |
2027 |  | 1,137 |
2028 |  | 1,137 |
2029 |  | 1,137 |
Thereafter |  | 25,255 |
Total |  | $ | 30,372 |
Lessee Accounting As a lessee, the Company has ground and office leases which were classified as operating leases. As of June 30, 2025, these leases had remaining terms, including renewal options, of 0.1 years to 57.5 years and a weighted average remaining lease term of 18.5 years. Operating right-of-use ("ROU") assets and lease liabilities are included in “Prepaid expenses and other assets, net” and “Accounts payable, accrued expenses and other, net” on the Consolidated Balance Sheets as follows (in thousands):
| As of June 30, 2025 |  | As of December 31, 2024
ROU asset – operating leases | $ | 2,301 |  |  | $ | 2,188 |
Lease liability – operating leases | $ | 2,157 |  |  | $ | 2,165 |
The difference between the recorded ROU assets and lease liabilities is mainly due to the reclassification of the below market ground lease intangible asset which was included within the ROU assets recognized upon transition. Operating lease assets and liabilities are measured at the commencement date based on the present value of future lease payments. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company used a discount rate ranging from 4.25% to 7.35% based on the yield of its current borrowings in determining its lease liabilities. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Operating lease expense for the three and six months ended June 30, 2025 and 2024 was $0.09 million and $0.2 million, respectively, and $0.07 million and $0.1 million , respectively. See Note 9. Related Party Transactions for more details. Future minimum lease payments to be paid by the Company as a lessee for operating leases as of June 30, 2025 for the next five years and thereafter are as follows (in thousands):
2025 — Remaining | $ | 169 |
2026 | 338 |
2027 | 332 |
2028 | 333 |
2029 | 337 |
Thereafter | 2,011 |
Total future minimum lease payments | 3,520 |
Interest discount | (1,363) |
Total | $ | 2,157 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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