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LEASES | 12 Months Ended
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Dec. 31, 2021
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 2022 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. The components of lease revenues are as follows (amounts in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Year Ended December 31,
​ |  |  | 2021 |  | 2020 |  | 2019
Fixed lease revenues | ​ | ​ | $ | 70,387 | ​ | $ | 69,823 |  | $ | 70,788
Variable lease revenues | ​ | ​ |  | 11,008 | ​ |  | 11,285 | ​ |  | 12,084
Lease revenues (a) | ​ |  | $ | 81,395 | ​ | $ | 81,108 | ​ | $ | 82,872
(a) | Excludes $785, $780 and $914 of amortization related to lease intangible assets and liabilities for 2021, 2020 and 2019, 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. On a quarterly basis, the Company assesses the collectability of substantially all lease payments due by reviewing the tenant’s payment history or financial condition. Changes to collectability are recognized as a current period adjustment to rental revenue. The Company has assessed the collectability of all recorded lease revenues as probable as of December 31, 2021. During 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 (i) deferred and accrued $3,360,000 of rent payments and (ii) forgave $695,000 of rent payments, excluding amounts related to Regal Cinemas as described below. During 2020, 2021 and through February 2022, the Company collected $497,000, $2,679,000 and $28,000, respectively, of such deferred rents. The $145,000 balance of deferred rents is deemed collectible and $132,000 and $12,000 is expected to be collected during 2022 and 2023, respectively. ​ During 2020, the Company forgave $676,000 of rent payments from Regal Cinemas, a tenant at two properties, which was adversely affected by the pandemic. In February 2021, the Company executed lease amendments with this tenant pursuant to which (i) the Company agreed to defer an aggregate of $1,449,000 of rent which was originally payable from September 2020 through August 2021 (such amounts were not accrued as collections were deemed less than probable), (ii) the tenant agreed to pay an aggregate of $441,000 of rent from September 2020 through August 2021 and (iii) the parties extended the lease for one of these properties for two years. Through February 28, 2022, the tenant is current on all lease payments, including COVID-19 deferral repayments, in accordance with these lease amendments. NOTE 3—LEASES (Continued) ​ Minimum Future Rents As of December 31, 2021, 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, (iii) $1,449,000 of COVID-19 lease deferral repayments due from Regal Cinemas which were not accrued to rental income and (iv) variable lease payments as described above.
​ | ​ | ​ | ​
For the year ended December 31, |  | ​ | ​
2022 | ​ | $ | 68,365
2023 | ​ |  | 64,478
2024 | ​ |  | 55,868
2025 | ​ |  | 51,484
2026 | ​ |  | 47,306
Thereafter | ​ |  | 153,783
Total | ​ | $ | 441,284
​ Lease Termination Fees During 2021, the Company received an aggregate of $487,000 as lease termination fees from two retail tenants. During 2020, the Company received $88,000 as a lease termination fee from an industrial tenant, of which $73,000 and 15,000 was recognized in 2021 and 2020, respectively. During 2019, the Company received an aggregate of $950,000 as lease termination fees from two retail tenants and wrote-off $37,000 of unbilled rent receivable against rental income. ​ Unbilled Straight-Line Rent At December 31, 2021 and 2020, the Company’s unbilled rent receivables aggregating $14,330,000 and $15,438,000, 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 2021, 2020 and 2019, the Company wrote-off $1,438,000, $365,000 and $182,000, 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, 2021 and 2020, the Company’s unbilled rent payables aggregating $897,000 and $801,000, 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 20 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. The Company has assessed the collectability of all unbilled rent receivable balances as probable as of December 31, 2021. During 2020, the Company wrote-off, as a reduction to rental income, $1,094,000 of unbilled rent receivables due from Regal Cinemas, a tenant at two locations which was adversely affected by the pandemic, as the collection of such amounts was deemed less than probable. During 2019, 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 of unbilled rent receivables. 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. At December 31, 2021 and 2020, the Company recorded a liability of $6,634,000 and $6,895,000, respectively, for the obligation to make payments under the lease and an asset of $6,267,000 and $6,663,000, respectively, 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, 2021, the remaining lease term, including renewal options deemed exercised, is 13.2 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, 2021, 2020 and 2019, the Company recognized $599,000, $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. At December 31, 2021 and 2020, the Company recorded a liability of $578,000 and $602,000, respectively, for the obligation to make payments under the lease and an asset of $564,000 and $593,000, respectively, 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, 2021, the remaining lease term, including renewal options deemed exercised, is 15.0 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, 2021, 2020 and 2019, the Company recognized $55,000, $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, 2021, 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, |  | ​ | ​
2022 | ​ | $ | 506
2023 | ​ |  | 507
2024 | ​ |  | 557
2025 | ​ |  | 626
2026 | ​ |  | 627
Thereafter | ​ |  | 6,220
Total undiscounted cash flows | ​ | $ | 9,043
Present value discount | ​ |  | (1,831)
Lease liability | ​ | $ | 7,212
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