The Company owns rental properties which are leased to tenants under operating leases with current expirations ranging from 2021 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 $780, $914 and $1,849 of amortization related to lease intangible assets and liabilities for 2020, 2019 and 2018, 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.

During the year ended December 31, 2020, in response to requests for rent relief from tenants impacted by the COVID-19 pandemic and the governmental and non-governmental responses thereto, the Company deferred and accrued $3,505,000 and forgave $184,000 of rent payments. For lease concessions that have been accounted for as lease modifications in accordance with ASC 842, the Company forgave $1,187,000 of rent payments during the year ended December 31, 2020. As of December 31, 2020 and through February 28, 2021, tenants repaid $497,000 and $529,000, respectively, of COVID-19 related deferred rent.

On a quarterly basis, the Company assesses the collectability of substantially all payments due under its leases by reviewing the tenant’s payment history and financial condition. Changes to collectability are recognized as a current period adjustment to rental revenue. As a result of this assessment, during the fourth quarter of 2020 the Company did not record approximately $928,000 of rent as collections were deemed less than probable. Such sum was due from Regal Cinemas, a tenant at two locations, which was adversely affected by the pandemic. The Company has assessed the collectability of all other lease payments as probable as of December 31, 2020.

NOTE 3—LEASES (Continued)

Minimum Future Rents

As of December 31, 2020, 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, (ii) COVID-19 lease deferral repayments accrued to rental income in 2020 and (iii) variable lease payments as described above.


For the year ended December 31,
2021	$	70,637
2022		62,167
2023		53,248
2024		44,469
2025		40,243
Thereafter		163,148
Total	$	433,912

Lease Termination Fees

During 2020, the Company received $88,000 as a lease termination fee from an industrial tenant in connection with the exercise of an early lease termination option, of which $15,000 was recognized in the year ended December 31, 2020 and the remainder will be amortized to revenues over the remaining lease term expiring May 31, 2021.

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.

Unbilled Straight-Line Rent

At December 31, 2020 and 2019, the Company’s unbilled rent receivables aggregating $15,438,000 and $15,037,000, 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 15 years.

During 2020, 2019 and 2018, the Company wrote-off $365,000, $182,000 and $45,000, 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, 2020 and 2019, the Company’s unbilled rent payables aggregating $801,000 and $662,000, 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 21 years.

On a quarterly basis, the Company assesses the collectability of unbilled rent receivable balances by reviewing the tenant’s payment history and financial condition. During 2020, the Company wrote-off, as a reduction to rental income, $1,094,000 of unbilled rent receivables as collections of such amounts were deemed less than probable. Such sum was due from Regal Cinemas, a tenant at two locations, which was adversely affected by the pandemic. During 2019 and 2018, due to uncertainty related to certain tenants with going concern or bankruptcy issues, the Company wrote-off, as a reduction to rental income, $548,000 and $1,440,000, respectively, of unbilled rent receivables. The Company has assessed the collectability of all other unbilled rent receivable balances as probable as of December 31, 2020.

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 December 31, 2020, the Company recorded a $6,895,000 liability for the obligation to make payments under the lease and a $6,663,000 asset for the right to use the underlying asset during the lease term which are 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. As of December 31, 2020, the remaining lease term, including renewal options deemed exercised, is 14.2 years. The Company applied a discount rate of 2.95%, based on its incremental borrowing rate given the term of the lease, as the rate implicit in the lease is not known. During the years ended December 31, 2020 and 2019, the Company recognized $533,000 and $525,000, respectively, of lease expense related to this ground lease which is included in Real estate expenses on the consolidated statement 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 December 31, 2020, the Company has recorded a $602,000 liability for the obligation to make payments under the lease and a $593,000 asset for the right to use the underlying asset during the lease term which are 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. As of December 31, 2020, the remaining lease term, including renewal options deemed exercised, is 16.0 years. 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. During the years ended December 31, 2020 and 2019, the Company recognized $57,000 and $54,000, respectively, 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, 2020, 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,
2021	$	511
2022		506
2023		507
2024		557
2025		626
Thereafter		6,847
Total undiscounted cash flows	$	9,554
Present value discount		(2,057)
Lease liability	$	7,497