Leases

Lessee

We lease office buildings, equipment and pipeline capacity (primarily to facilitate movements on our Longhorn pipeline and Little Rock pipeline extension) and have entered into storage contracts to conduct our business operations. We have also entered into land leases and easement and right-of-way contracts, several of which have cancellation penalties. Several of our agreements provide for negotiated renewal options, and management expects that we will generally renew our expiring leases. Leases are evaluated at inception or at any subsequent material modification and, depending on the lease terms, are classified as either capital or operating leases, as appropriate under ASC 840, Leases. We recognize rent expense on a straight-line basis over the life of the lease. Total rent expense was $30.2 million, $34.8 million and $42.1 million for the years ended December 31, 2016, 2017 and 2018, respectively. Future minimum annual rentals under non-cancellable operating leases and storage contracts with initial or remaining terms greater than one year as of December 31, 2018, were as follows (in millions):



2019	$	33.8
2020	32.3
2021	30.2
2022	27.4
2023	26.7
Thereafter	132.2
Total	$	282.6

The table above includes future minimum annual rentals under our lease with Seabrook for storage capacity at its terminal in Seabrook, Texas. Future minimum payments under this lease are: $11.0 million in 2019; $11.0 million in 2020; $9.4 million in 2021; $6.6 million in 2022; $6.6 million in 2023; and $37.5 million thereafter. Storage and ancillary fees from Seabrook, which was included with rent expense, was $10.6 million. See Note 5 – Investments in Non-Controlled Entities for further details about this lease.

Lessor

We have entered into capacity leases and storage contracts with our customers with remaining terms from one to approximately 10 years that are accounted for as operating-type leases. All of the agreements provide for negotiated extensions. Future minimum payments receivable under these arrangements that fall under the guidance of ASC 606, Revenues from Contracts with Customers are included in our Unfulfilled Performance Obligations in Note 3 - Revenue. Future minimum payments receivable under these arrangements that fall under the guidance of ASC 840 as of December 31, 2018 are as follows (in millions):



2019	$	39.2
2020	32.8
2021	31.7
2022	22.9
2023	7.2
Thereafter	15.0
Total	$	148.8

During 2017 and 2018, we recognized contingent rental income from our condensate splitter at our Corpus Christi, Texas terminal in the amount of $24.9 million and $51.8 million, respectively.

Direct Financing Lease

We entered into a long-term throughput and deficiency agreement with a customer on a 40-mile pipeline we constructed in Texas and New Mexico, which contains minimum volume/payment commitments. This agreement is being accounted for as a direct financing lease. The net investment under direct financing leasing arrangements as of December 31, 2017 and 2018 was as follows (in millions):



	December 31, 2017		December 31, 2018
Total minimum lease payments receivable	$	19.2	$	17.5
Less: Unearned income	4.1		3.5
Recorded net investment in direct financing lease	$	15.1	$	14.0

The net investment in direct financing leases was classified in the consolidated balance sheets as follows (in millions):



	December 31, 2017		December 31, 2018
Other accounts receivable	$	1.1	$	1.1
Long-term receivables	14.0		12.9
Total	$	15.1	$	14.0

Future minimum payments receivable under this direct financing lease for the next five years are $1.7 million each year.