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Leases | 6 Months Ended
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Jun. 30, 2019
Leases |
Leases | Note 3 – Leases As of January 1, 2019, the Company adopted ASU No. 2016-02, Leases, ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, and ASU No. 2018-10, Codification Improvements to Topic 842, Leases, using the modified retrospective approach and elected the package of practical expedients that allows an entity to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases. Upon adoption, there was no cumulative-effect adjustment to retained earnings as of January 1, 2019. As Lessor The Company owns rental properties which are leased to tenants under operating leases with current expirations ranging from 2019 to 2055, with options to extend or terminate the lease or purchase the property exercisable at the option of our tenants. Revenues from such leases are reported as Rental income, net and are comprised of (i) lease components, which includes fixed and variable lease payments and (ii) non-lease components which includes reimbursements of property level operating expenses. The Company adopted the practical expedient offered in ASU No. 2018-11 which allows lessors to not separate non-lease components from the related lease components, as the timing and pattern of transfer are the same, and account for the combined component in accordance with ASC 842. Fixed lease revenues represent the base rent that each tenant is required to pay in accordance with the terms of their respective leases reported on a straight-line basis over the non-cancelable term of the lease. Variable lease revenues include payments based on (i) tenant reimbursements, (ii) changes in the index or market-based indices after the inception of the lease, (iii) percentage rents or (iv) the operating performance of the property. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred. The components of lease revenues are as follows (amounts in thousands):
|  | Three Months |  | Six Months
|  | Ended |  | Ended
|  | June 30, 2019
Fixed lease revenues |  | $ | 17,435 |  | $ | 35,080
Variable lease revenues |  |  | 3,029 |  |  | 6,285
Lease revenues (a) |  | $ | 20,464 |  | $ | 41,365
| (a) |  | Excludes $255 and $509 of amortization related to lease intangible assets and liabilities for the three and six months ended June 30, 2019, respectively.
On a quarterly basis, the Company assesses the collectability of substantially all lease payments due under its leases, including unbilled rent receivable balances, by reviewing the tenant's payment history and financial condition. Changes to such collectability is recognized as a current period adjustment to rental revenue. The Company has assessed the collectability of all lease payments as probable as of June 30, 2019. In many of the Company's leases, the tenant is obligated to pay the real estate taxes, insurance, and certain other expenses directly to the vendor. These obligations, which have been assumed by the tenants, are not reflected in our consolidated financial statements. To the extent any such tenant defaults on its lease or if it is deemed probable that the tenant will fail to pay for such obligations, a liability for such obligations would be recorded. As a lessor, the adoption of ASU No. 2016-02, and the related accounting guidance, did not have a material impact on the consolidated financial statements. As a result of the adoption, the Company combined $2,034,000 and $3,978,000 from its Tenant reimbursements line item into Rental income, net, on its consolidated statements of income for the three and six months ended June 30, 2018, respectively. Minimum Future Rents As of June 30, 2019, under ASC 842, the minimum future contractual rents to be received on non-cancellable operating leases are included in the table below (amounts in thousands). The minimum future contractual rents do not include (i) straight-line rent or amortization of intangibles and (ii) variable lease payments as described above.
From July 1 – December 31, 2019 |  | $ | 34,397
For the year ended December 31, |  |  |
2020 |  |  | 69,303
2021 |  |  | 67,852
2022 |  |  | 59,260
2023 |  |  | 50,456
2024 |  |  | 41,992
Thereafter |  |  | 172,261
Total |  | $ | 495,521
As of December 31, 2018, under ASC 840, the minimum future contractual rents to be received on non-cancellable operating leases were as follows (amounts in thousands):
For the year ended December 31, |  |  |
2019 |  | $ | 66,959
2020 |  |  | 66,691
2021 |  |  | 65,130
2022 |  |  | 56,444
2023 |  |  | 47,644
Thereafter |  |  | 208,923
Total |  | $ | 511,791
As Lessee The Company is a lessee under a ground lease in Greensboro, North Carolina, which is classified as an operating lease. The lease expires March 3, 2020 and provides for up to five, 5-year renewal options and one seven-month renewal option. On January 1, 2019, upon adoption of ASC 842, the Company recorded a $4,381,000 liability for the obligation to make payments under the lease and a $4,381,000 asset for the right to use the underlying asset during the lease term which were included in other liabilities and other assets, respectively, on the consolidated balance sheet. Lease payments associated with renewal option periods that the Company determined were reasonably certain to be exercised are included in the measurement of the lease liability and right of use asset. The Company applied a discount rate of 4.75%, based on its incremental borrowing rate given the term of the lease, as the rate implicit in the lease is not known. As of June 30, 2019, the remaining lease term is 10.7 years. During the three and six months ended June 30, 2019, the Company recognized $131,000 and $262,000, respectively, of lease expense related to this ground lease which is included in Real estate expenses on the consolidated statements of income. Minimum Future Lease Payments As of June 30, 2019, under ASC 842, the minimum future lease payments related to this operating ground lease are as follows (amounts in thousands):
From July 1 – December 31, 2019 |  | $ | 224
For the year ended December 31, |  |  |
2020 |  |  | 464
2021 |  |  | 464
2022 |  |  | 464
2023 |  |  | 464
2024 |  |  | 512
Thereafter |  |  | 3,086
Total undiscounted cash flows |  | $ | 5,678
Present value discount |  |  | (1,398)
Lease liability |  | $ | 4,280
As of December 31, 2018, under ASC 840, the minimum future lease payments related to this operating ground lease were $371,000 through July 2019 and $464,000 through March 3, 2020.

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