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 does 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.

(a)

Excludes $190 and $254 of amortization related to lease intangible assets and liabilities for the three months ended March 31, 2020 and 2019, respectively.

Note 3 – Leases (Continued)

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 did not record any write-offs of unbilled rent receivables during the three months ended March 31, 2020 and 2019. The Company has assessed the collectability of all lease payments as probable as of March 31, 2020.

Due to the impact of the COVID-19 pandemic, rent deferrals are currently being negotiated and executed with certain of the Company’s tenants. In accordance with recent guidance issued by the FASB, the Company will elect to (i) not evaluate whether such COVID-19 pandemic related rent-relief is a lease modification under ASC 842 and (ii) treat each tenant rent deferral as if it were contemplated as part of the existing lease contract.

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.

Minimum Future Rents

As of March 31, 2020, the minimum future contractual base rents to be received on non-cancellable operating leases are included in the table below (amounts in thousands). The minimum future contractual base rents do not include (i) straight-line rent or amortization of intangibles and (ii) variable lease revenues as described above.


From April 1 – December 31, 2020	$	54,108
For the year ended December 31,
2021		71,807
2022		63,372
2023		54,623
2024		46,012
2025		40,375
Thereafter		150,852
Total	$	481,149

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. As of March 31, 2020, the remaining lease term is 9.9 years. During each of the three months ended March 31, 2020 and 2019, the Company recognized $131,000 of lease expense related to this ground lease which is included in Real estate expenses on the consolidated statements of income.

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 of March 31, 2020, the remaining lease term is 16.8 years. During each of the three months ended March 31, 2020 and 2019, the Company recognized $14,000 of lease expense related to this office lease which is included in General and administrative expenses on the consolidated statements of income.

Note 3 – Leases (Continued)

Minimum Future Lease Payments

As of March 31, 2020, the minimum future lease payments related to the operating ground and office leases are as follows (amounts in thousands):


From April 1 – December 31, 2020	$	382
For the year ended December 31,
2021		511
2022		506
2023		507
2024		557
2025		626
Thereafter		3,115
Total undiscounted cash flows	$	6,204
Present value discount		(1,473)
Lease liability	$	4,731