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LEASES | 9 Months Ended
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Sep. 30, 2022
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 2023 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):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended
​ | ​ | September 30, | ​ | September 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Fixed lease revenues | ​ | $ | 18,339 | ​ | $ | 17,602 | ​ | $ | 55,085 | ​ | $ | 52,502
Variable lease revenues | ​ | ​ | 2,914 | ​ | ​ | 2,581 | ​ | ​ | 8,774 | ​ | ​ | 8,230
Lease revenues (a) | ​ | $ | 21,253 | ​ | $ | 20,183 | ​ | $ | 63,859 | ​ | $ | 60,732
(a) | Excludes amortization related to lease intangible assets and liabilities of $220 and $617 for the three and nine months ended September 30, 2022, respectively, and $166 and $606 for the three and nine months ended September 30, 2021, 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 September 30, 2022. Impact of COVID-19 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 deferred and accrued $3,360,000 of rent payments, excluding amounts related to Regal Cinemas as described below. Through September 30, 2022, the Company collected an aggregate of $3,301,000, or 98.2%, of such deferred rents. The balance of deferred rents deemed collectible, or $48,000, is expected to be repaid during the remainder of 2022 through January 2023. In September 2022, Regal Cinemas’, a tenant at two properties (excluding a property owned by an unconsolidated joint venture) parent company, Cineworld Group plc., filed for Chapter 11 bankruptcy protection. As of September 30, 2022, Regal Cinemas did not pay their September (i) base rent of $158,000 and (ii) COVID-19 deferral repayments of $81,000. Of an aggregate of $1,449,000 of COVID-19-related deferred rent, the tenant still owes approximately $805,000 as of September 30, 2022. Such deferred rents were to be collected in equal monthly installments from September 2022 through June 2023. No base or deferred rents have been accrued as collections were deemed less than probable. In October 2022, the Company received the aggregate of $239,000 of rent and deferred rent due for October 2022. The Company prepared an impairment analysis on the properties tenanted by Regal Cinemas and determined no impairment charge was required as of September 30, 2022. NOTE 3 – LEASES (CONTINUED) Minimum Future Rents As of September 30, 2022, 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 include $23,399,000 of rent related to Regal Cinemas and does not include (i) straight-line rent or amortization of intangibles, (ii) COVID-19 lease deferral repayments accrued to rental income in 2020, (iii) $805,000 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. ​
​ | ​ | ​ | ​
From October 1 – December 31, 2022 | ​ | $ | 17,731
For the year ending December 31, | ​ | ​ | ​
2023 | ​ | ​ | 70,266
2024 | ​ | ​ | 62,228
2025 | ​ | ​ | 57,942
2026 | ​ | ​ | 53,644
2027 | ​ | ​ | 45,287
Thereafter | ​ | ​ | 160,427
Total | ​ | $ | 467,525
Lease Termination Fees In January 2022, the Company received $25,000 as a lease termination fee from a retail tenant which was recognized during the nine months ended September 30, 2022. In January 2021, the Company received $350,000 as a lease termination fee from a retail tenant, of which $87,000 and $262,000 were recognized during the three and nine months ended September 30, 2021, respectively. In December 2020, the Company received $88,000 as a lease termination fee from an industrial tenant, of which $74,000 was recognized during the nine months ended September 30, 2021. 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 September 30, 2022, the remaining lease term, including renewal options deemed exercised, is 12.4 years. The Company recognized lease expense related to this ground lease of $150,000 and $449,000 for both the three and nine months ended September 30, 2022 and 2021, 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 for a five-year renewal option. As of September 30, 2022, the remaining lease term, including the renewal option deemed exercised, is 14.3 years. The Company recognized lease expense related to this office lease of $14,000 and $42,000 for the three and nine months ended September 30, 2022, respectively, and $14,000 and $41,000 for the three and nine months ended September 30, 2021, respectively, which is included in General and administrative expenses on the consolidated statements of income. NOTE 3 – LEASES (CONTINUED) Minimum Future Lease Payments As of September 30, 2022, the minimum future lease payments related to the operating ground and office leases are as follows (amounts in thousands):
​ | ​ | ​ | ​
From October 1 – December 31, 2022 | ​ | $ | 126
For the year ending December 31, | ​ | ​ | ​
2023 | ​ | ​ | 507
2024 | ​ |  | 557
2025 | ​ |  | 626
2026 | ​ |  | 627
2027 | ​ |  | 629
Thereafter | ​ |  | 5,591
Total undiscounted cash flows | ​ | $ | 8,663
Present value discount | ​ |  | (1,667)
Lease liability | ​ | $ | 6,996
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