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LEASES

6 Months Ended

Jun. 30, 2024

NOTE 3 – LEASES

Lessor Accounting

The Company owns rental properties which are leased to tenants under operating leases with current expirations ranging from 2024 to 2042, 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 its respective leases, and any lease incentives paid or payable to the lessee, reported on a straight-line basis over the non-cancelable term of the lease. Variable lease revenues typically 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 and (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				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Fixed lease revenues	$	18,319	$	18,929	$	36,591	$	38,287
Variable lease revenues		3,194		3,248		6,990		6,618
Lease revenues (a)	$	21,513	$	22,177	$	43,581	$	44,905

(a)	Excludes amortization related to lease intangible assets and liabilities of $287 and $665 for the three and six months ended June 30, 2024, respectively, and $230 and $454 for the three and six months ended June 30, 2023, 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 the Company’s 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. As of June 30, 2024, the Company has assessed the collectability of all recorded lease revenues as probable.

Minimum Future Rents

As of June 30, 2024, 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 lease intangibles or incentives and (ii) variable lease payments as described above.


From July 1 – December 31, 2024	$	35,547
For the year ending December 31,
2025		69,639
2026		65,547
2027		55,773
2028		44,821
2029		34,506
Thereafter		114,006
Total	$	419,839

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, five-year renewal options and one seven-month renewal option. As of June 30, 2024, the remaining lease term, including a five-year renewal option deemed exercised, is 5.7 years. The Company recognized lease expense related to this ground lease of $122,000 and $244,000 for the three and six months ended June 30, 2024, respectively, and $150,000 and $300,000 for the three and six months ended June 30, 2023, 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 June 30, 2024, the remaining lease term, including the renewal option deemed exercised, is 12.5 years. The Company recognized lease expense related to this office lease of $14,000 and $28,000 for both the three and six months ended June 30, 2024 and 2023, respectively, which is included in General and administrative expenses on the consolidated statements of income.

Minimum Future Lease Payments

As of June 30, 2024, the minimum future lease payments related to these operating leases are as follows (amounts in thousands):


From July 1 – December 31, 2024	$	303
For the year ending December 31,
2025		626
2026		627
2027		629
2028		630
2029		692
Thereafter		537
Total undiscounted cash flows	$	4,044
Present value discount		(851)
Lease liability	$	3,193

The lease liability is included in Accrued expenses and other liabilities on the consolidated balance sheet.

Lease termination fee

In March 2024, a consolidated joint venture in Lakewood, Colorado, in which the Company holds a 90% interest, recognized a lease termination fee of $250,000 from a tenant due to the early termination of its lease in connection with the sale of the related restaurant parcel (see Note 5).