Operating Leases

6 Months Ended

Jun. 30, 2019

Lessor

The Company leases commercial and industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum lease payments are recognized in rental income on a straight-line basis over the term of the related lease and estimated reimbursements from tenants for real estate taxes, insurance, common area maintenance and other recoverable operating expenses are recognized in rental income in the period that the expenses are incurred.

The Company recognized $71.6 million and $132.5 million of lease income related to operating lease payments for the three and six months ended June 30, 2019, respectively.

The following table sets forth the undiscounted cash flows for future minimum base rents to be received under operating leases as of June 30, 2019. The Company's current leases have expirations ranging from 2019 to 2044.



	As of June 30, 2019
Remaining 2019	$	147,009
2020	289,732
2021	290,512
2022	289,797
2023	281,587
Thereafter	1,301,633
Total	$	2,600,270

The future minimum base rents in the table above excludes tenant reimbursements of operating expenses, amortization of adjustments for deferred rent receivables and the amortization of above/below-market lease intangibles.

Lessee

As of June 30, 2019, the Company leased two parcels of land located in Arizona under long-term ground leases with expiration dates of September 2102 and December 2095 and no options to renew. The Company leases office space as part of conducting day-to-day business in Chicago. The Company's office space lease has a remaining lease term of approximately six years and no option to renew.

On January 1, 2019, the Company recognized ROU assets and lease liabilities for these leases on the Company's consolidated balance sheets, and on a go-forward basis, lease expense will be recognized on a straight-line basis over the remaining term of the lease. On January 1, 2019, the Company recorded a ROU asset of $28.4 million and a corresponding liability relating to the Company's existing ground lease arrangements and wrote off approximately $2.4 million in deferred rent, included in "Other (loss) income, net" in the consolidated statements of operations. These operating leases were recognized based on the present value of the future minimum lease payments over the lease term. As these leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available in determining the present value of future payments. The discount rates used to determine the present value of these operating leases’ future payments were 3.94% and 5.36%. The Company incurred operating lease costs of approximately $0.6 million, and $1.3 million for the three and six months ended June 30, 2019, respectively, which are included in "Property Operating Expense" in the accompanying consolidated statement of operations. Total cash paid for amounts included in the measurement of operating lease liabilities was $0.3 million and $0.5 million for the three and six months ended June 30, 2019, respectively.

Maturities of lease liabilities as of June 30, 2019 were as follows:



	June 30, 2019
Remaining 2019	$	569
2020	1,150
2021	1,153
2022	1,197
2023	1,263
Thereafter	197,290
Total undiscounted lease payments	202,622
Less imputed interest	(174,767		)
Total lease liabilities	$	27,855

As the Company elected to apply the provisions of ASC 842 on a prospective basis, the following comparative period disclosure is being presented in accordance with ASC 840. The future minimum commitments under the Company's ground leases as of December 31, 2018, were as follows:



	December 31, 2018
Remaining 2019	$	1,032
2020	1,032
2021	1,032
2022	1,072
2023	1,422
Thereafter	199,024
Total	$	204,614

Operating Leases

Lessor

The Company recognized $71.6 million and $132.5 million of lease income related to operating lease payments for the three and six months ended June 30, 2019, respectively.



	As of June 30, 2019
Remaining 2019	$	147,009
2020	289,732
2021	290,512
2022	289,797
2023	281,587
Thereafter	1,301,633
Total	$	2,600,270

Lessee

Maturities of lease liabilities as of June 30, 2019 were as follows:



	June 30, 2019
Remaining 2019	$	569
2020	1,150
2021	1,153
2022	1,197
2023	1,263
Thereafter	197,290
Total undiscounted lease payments	202,622
Less imputed interest	(174,767		)
Total lease liabilities	$	27,855



	December 31, 2018
Remaining 2019	$	1,032
2020	1,032
2021	1,032
2022	1,072
2023	1,422
Thereafter	199,024
Total	$	204,614