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LEASES | 12 Months Ended
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Dec. 31, 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. Lessor Accounting The Company owns rental properties which are leased to tenants under operating leases with current expirations ranging from 2020 to 2055, with options to extend or terminate the lease. 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. NOTE 3—LEASES (Continued) The components of lease revenues are as follows (amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
​ |  | 2019 |  | 2018 |  | 2017
Fixed lease revenues | ​ | $ | 70,788 | ​ | $ | 65,042 |  | $ | 63,425
Variable lease revenues | ​ |  | 12,084 | ​ |  | 11,863 | ​ |  | 11,594
Lease revenues (a) |  | $ | 82,872 | ​ | $ | 76,905 | ​ | $ | 75,019
| (a) | Excludes $914, $1,849 and $897 of amortization related to lease intangible assets and liabilities for 2019, 2018, and 2017, respectively.
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 added $10,443,000, $8,456,000, and $7,672,000 from its Tenant reimbursements line item to Rental income, net, on its consolidated statements of income for the years ended December 31, 2019, 2018 and 2017, respectively. Minimum Future Rents As of December 31, 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. ​
​ | ​ | ​ | ​
For the year ended December 31, |  | ​ | ​
2020 |  | $ | 70,252
2021 |  | ​ | 69,586
2022 |  | ​ | 60,988
2023 |  | ​ | 52,217
2024 |  | ​ | 43,585
Thereafter |  | ​ | 176,622
Total | ​ | $ | 473,250
​ 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
​ NOTE 3—LEASES (Continued) Unbilled Straight-Line Rent At December 31, 2019 and 2018, the Company’s unbilled rent receivables aggregating $15,037,000 and $13,722,000, respectively, represent rent reported on a straight-line basis in excess of rental payments required under the respective leases. The unbilled rent receivable is to be billed and received pursuant to the lease terms during the next 16 years. During 2019, 2018 and 2017, the Company wrote off $182,000, $45,000 and $105,000, respectively, of unbilled straight-line rent receivable related to the properties sold during such years, which reduced the gain on sale reported on the consolidated statements of income. At December 31, 2019 and 2018, the Company’s unbilled rent payables aggregating $662,000 and $0, respectively, represent rent reported on a straight-line basis less than rental payments required under the respective leases. The unbilled rent payable is to be billed and received pursuant to the lease terms during the next 22 years. 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. During 2019, 2018 and 2017, due to uncertainty with respect to the collection of unbilled rent receivables related to certain tenants with going concern or bankruptcy issues, the Company wrote off, as a reduction to rent income, $548,000, $1,440,000 and $362,000, respectively, of unbilled rent receivables. The Company has assessed the collectability of all other lease payments as probable as of December 31, 2019. Lease Termination Fees During 2019, the Company received an aggregate of $950,000 as lease termination fees from two retail tenants in lease buy-out transactions. In connection with one of these transactions, the Company wrote-off $37,000 of unbilled rent receivable against rental income. During 2018, the Company received $372,000 as a lease termination fee from a retail tenant in a lease buy-out transaction. In connection with this transaction, the Company recorded $804,000 as rental income, representing the write-off of the $878,000 balance of the unamortized intangible lease liability, offset in part by the write-off of the $74,000 balance of the unbilled rent receivable. Lessee Accounting Ground Lease The Company is a lessee under a ground lease in Greensboro, North Carolina, which is classified as an operating lease. The ground lease expires March 3, 2025 and provides for up to four, 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 December 31, 2019, the remaining lease term is 10.2 years. During the year ended December 31, 2019, the Company recognized $525,000 of lease expense related to this ground lease which is included in Real estate expenses on the consolidated statement of income. NOTE 3—LEASES (Continued) Office Lease The Company is a lessee under a corporate office lease in Great Neck, New York, which is classified as an operating lease. The lease expires on December 31, 2031 and provides a 5-year renewal option. As a result of the adoption of ASC 842, the Company recorded a $646,000 liability for the obligation to make payments under the lease and a $646,000 asset for the right to use the underlying asset during the lease term which were included in other liability and other assets, respectively, on the consolidated balance sheet. Lease payments associated with the renewal option period, which was determined to be 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 3.81%, based on its incremental borrowing rate given the term of the lease, as the rate implicit in the lease is not known. As of December 31, 2019, the remaining lease term is 17.0 years. During the year ended December 31, 2019, the Company recognized $54,000 of lease expense related to this office lease which is included in General and administrative expenses on the consolidated statement of income. Minimum Future Lease Payments As of December 31, 2019, under ASC 842, the minimum future lease payments related to the operating ground and office leases are as follows (amounts in thousands): ​
​ | ​ | ​ | ​
For the year ended December 31, |  | ​ | ​
2020 | ​ | $ | 510
2021 | ​ |  | 511
2022 | ​ |  | 506
2023 | ​ |  | 507
2024 | ​ |  | 557
Thereafter | ​ |  | 3,741
Total undiscounted cash flows | ​ |  | 6,332
Present value discount | ​ |  | (1,529)
Lease liability | ​ | $ | 4,803
​ As of December 31, 2018, under ASC 840, the minimum future lease payments related to the operating ground and office leases were as follows (amounts in thousands): ​
​ | ​ | ​ | ​
For the year ended December 31, |  | ​ | ​
2019 | ​ | $ | 454
2020 | ​ |  | 127
2021 | ​ |  | 47
2022 | ​ |  | —
2023 | ​ |  | —
Thereafter | ​ |  | —
Total | ​ | $ | 628
​

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