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Leases | 6 Months Ended
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Jun. 30, 2020
Leases |
Leases | Note 3 – Leases 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 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. Note 3 – Leases (Continued) The components of lease revenues are as follows (amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Six Months Ended
​ | ​ | June 30, | ​ | June 30,
​ |  | 2020 |  | 2019 |  | 2020 |  | 2019
Fixed lease revenues | ​ | $ | 17,914 | ​ | $ | 17,435 | ​ | $ | 35,981 | ​ | $ | 35,080
Variable lease revenues | ​ | ​ | 2,763 | ​ | ​ | 3,029 | ​ | ​ | 5,746 | ​ | ​ | 6,285
Lease revenues (a) | ​ | $ | 20,677 | ​ | $ | 20,464 | ​ | $ | 41,727 | ​ | $ | 41,365
(a) | Excludes $184, $255, $373 and $509 of amortization related to lease intangible assets and liabilities for the three months and six months ended June 30, 2020 and 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. Due to the impact of the COVID-19 pandemic, some rent concession agreements have been executed and others are being negotiated with certain of the Company’s tenants. In accordance with the FASB Staff Q&A, Topic 842 and 840 – Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, a lessor may make an accounting policy election 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 or forgiveness as if it were contemplated as part of the existing lease contract. The Company has elected to apply this accounting policy to those lease agreements, based on the type of concession provided to the tenant, where the revised cash flows are substantially the same or less than the original lease agreement. As a result, during the three months ended June 30, 2020, the Company deferred and accrued $3,145,000 of rent and permanently forgave $81,000 of lease payments during the three months ended June 30, 2020. For lease concessions that have been accounted for as lease modifications in accordance with ASC 842, the Company forgave $582,000 of lease payments. The Company has agreed, subject to the completion of definitive documentation, to also forgive $304,000 of lease payments in connection with lease concessions currently being negotiated. The Company has assessed the collectability of all other lease payments as probable as of June 30, 2020. 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 June 30, 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, (ii) variable lease revenues as described above and (iii) the minimum future contractual base rent of a property in Knoxville, Tennessee which the Company sold on July 1, 2020 (see Note 5). ​
​ | ​ | ​ | ​
From July 1 – December 31, 2020 | ​ | $ | 35,704
For the year ended December 31, | ​ | ​ | ​
2021 | ​ | ​ | 73,348
2022 | ​ | ​ | 62,754
2023 | ​ | ​ | 54,055
2024 | ​ | ​ | 45,432
2025 | ​ | ​ | 41,082
Thereafter | ​ | ​ | 158,782
Total | ​ | $ | 471,157
​ Note 3 – Leases (Continued) 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 June 30, 2020, the remaining lease term, including renewal options deemed exercised, is 9.7 years. The Company recognized lease expense related to this ground lease of $131,000 and $262,000 for both the three and six months ended June 30, 2020 and 2019, respectively, 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 June 30, 2020, the remaining lease term, including renewal options deemed exercised, is 16.5 years. The Company recognized lease expense related to this office lease of $14,000 and $28,000 for the three and six months ended June 30, 2020, respectively, and $12,000 and $26,000 for the three and six months ended June 30, 2019, respectively, which is included in General and administrative expenses on the consolidated statements of income. Minimum Future Lease Payments As of June 30, 2020, the minimum future lease payments related to the operating ground and office leases are as follows (amounts in thousands): ​
​ | ​ | ​ | ​
From July 1 – December 31, 2020 | ​ | $ | 255
For the year ended December 31, | ​ | ​ | ​
2021 | ​ | ​ | 511
2022 | ​ |  | 506
2023 | ​ |  | 507
2024 | ​ |  | 557
2025 | ​ |  | 626
Thereafter | ​ |  | 3,115
Total undiscounted cash flows | ​ | $ | 6,077
Present value discount | ​ |  | (1,418)
Lease liability | ​ | $ | 4,659
​ ​

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