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LEASES

12 Months Ended

Dec. 31, 2024

NOTE 3 — LEASES

Lessor Accounting

The Company owns rental properties which are leased to tenants under operating leases with current expirations ranging from 2025 to 2046, 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 lease, 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):


	Year Ended December 31,
	2024		2023		2022
Fixed lease revenues	$	74,193	$	75,935	$	74,101
Variable lease revenues		14,910		13,759		17,259	(a)
Lease revenues (b)	$	89,103	$	89,694	$	91,360

(a)	Includes, for 2022, $4,626 of additional rent accrued from a ground lease tenant – see Note 6.

(b)	Excludes $1,210, $952 and $831 of amortization related to lease intangible assets and liabilities for 2024, 2023 and 2022, 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 December 31, 2024, the Company has assessed the collectability of all recorded lease revenues as probable.

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).

NOTE 3 — LEASES (CONTINUED)

Minimum Future Rents

As of December 31, 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.


For the year ending December 31,
2025	$	72,245
2026		69,316
2027		60,088
2028		48,368
2029		37,303
Thereafter		100,037
Total	$	387,357

Lease Incentives

At December 31, 2024 and 2023, the Company’s unamortized lease incentives aggregating $975,000 and $1,095,000, respectively, are recorded in Escrow, deposits and other assets and receivables on the consolidated balance sheets. During 2024 and 2023, the Company amortized $119,000 and $121,000, respectively, of such incentives as a reduction to rental income. During 2023, the Company wrote-off $84,000 of a tenant’s unamortized lease incentive balance as the related property was sold during such year, which reduced the gain on sale reported on the consolidated statement of income. The lease incentives will be amortized against rental income over the terms of the leases during the next eight years.

Straight-Line Rent

At December 31, 2024 and 2023, the Company’s unbilled rent receivables aggregating $16,988,000 and $16,661,000, 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 17 years.

During 2024, 2023 and 2022, the Company wrote-off $1,045,000, $1,048,000 and $519,000, 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, 2024 and 2023, the Company’s unearned rental income aggregating $416,000 and $579,000, respectively, represent rent reported on a straight-line basis less than rental payments required under the respective leases. Such amounts are recorded in Accrued expenses and other liabilities on the consolidated balance sheets. The unearned rental income is to be recognized into revenue over the term of the lease during the next 17 years.

During 2023, the Company wrote-off $43,000 of a tenant’s unearned rental income as the related property was sold during such year, which increased the gain on sale reported on the consolidated statement of income. No such amounts were written off during 2024 or 2022.

On a quarterly basis, the Company assesses the collectability of straight-line rent balances by reviewing the tenant’s payment history and financial condition. The Company has assessed the collectability of all straight-line rent balances as probable as of December 31, 2024. During 2024 and 2023, the Company wrote-off, as a reduction to rental income, net, $50,000 and $133,000, respectively, of unbilled rent receivables due from two tenants as they filed for Chapter 11 bankruptcy protection.

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, 2030 and provides for up to three, five-year renewal options and one seven-month renewal option. At December 31, 2024 and 2023, the Company recorded a liability of $2,511,000 and $2,827,000, respectively, for the obligation to make payments under the lease and an asset of $1,953,000 and $2,246,000, respectively, for the right to use the underlying asset during the lease term. The liability is included in Accrued expenses and other liabilities and the asset is included in Escrow, deposits and other assets and receivables on the consolidated balance sheets. As of December 31, 2024, the remaining lease term is approximately five years. The Company applied a discount rate of 6.91%, 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, 2024, 2023 and 2022, the Company recognized $489,000, $544,000 and $599,000, respectively, of lease expense related to this ground lease 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 five-year renewal option. At December 31, 2024 and 2023, the Company recorded a liability of $511,000 and $536,000, respectively, for the obligation to make payments under the lease and an asset of $473,000 and $505,000, respectively, for the right to use the underlying asset during the lease term. The liability is included in Accrued expenses and other liabilities and the asset is included in Escrow, deposits and other assets and receivables on the consolidated balance sheets. 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, 2024, the remaining lease term, including the renewal option deemed exercised, is 12 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 each of the years ended December 31, 2024, 2023 and 2022, the Company recognized $56,000 of lease expense related to this office lease which is included in General and administrative expenses on the consolidated statements of income.

Minimum Future Lease Payments

As of December 31, 2024, the minimum future lease payments related to the operating ground and office leases are as follows (amounts in thousands):


For the year ending December 31,
2025	$	626
2026		627
2027		629
2028		630
2029		692
Thereafter		537
Total undiscounted cash flows	$	3,741
Present value discount		(719)
Lease liability	$	3,022