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Leases

6 Months Ended

Jun. 30, 2024

Note 3 – Leases

Lessor Accounting

We own rental properties which are leased to tenants under operating leases with current expirations ranging from 2024 to 2040, with options to extend or terminate the leases. Revenues from such leases are reported as Rental revenue in our consolidated statements of operations 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. We do 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.

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 following table summarizes the components of lease revenues (amounts in thousands):

	2024		2023		2024		2023
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Fixed lease revenues	$	261	$	266	$	502	$	532
Variable lease revenues ⁽¹⁾		137		67		261		148
Lease revenues ^{(2) (3)}	$	398	$	333	$	763	$	680

⁽¹⁾	Includes reimbursements for property taxes, insurance, and common area maintenance services.

⁽²⁾	Excludes lease intangible amortization of less than $0.1 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively, and $0.1 million and $0.6 million for the six months ended June 30, 2024 and 2023, respectively.

⁽³⁾	Excludes straight-line rent of less than $0.1 million and less than $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and $0.1 million and less than $0.1 million for the six months ended June 30, 2024 and 2023, respectively.

In certain of our 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.

We assess the collectability of substantially all lease payments due by reviewing a tenant’s payment history or financial condition. Changes to collectability are recognized as a current period adjustment to rental revenue. We have assessed the collectability of all recorded lease revenues as probable as of June 30, 2024.