Annual report pursuant to Section 13 and 15(d)

Lease Accounting

v3.19.3.a.u2
Lease Accounting
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Lease Accounting LEASE ACCOUNTING

Leasing as a Lessor

Future Minimum Rental Income

As of December 31, 2019, non-cancelable commercial operating leases provide for future minimum rental income from continuing operations as follows (in thousands):
2020
 
$
139,053

2021
 
133,907

2022
 
120,491

2023
 
102,877

2024
 
91,253

Thereafter
 
301,974

 
 
$
889,555



Apartment leases are not included as the terms are generally for one year or less. Rental income under most of these commercial leases increase in future years based on agreed-upon percentages or in some instances, changes in the Consumer Price Index.

Leasing as a Lessee

2000 M Street, an office property in Washington, DC, is subject to an operating ground lease with a remaining term of 51 years. Rental payments under this lease are subject to percentage rent variable payments, which are not included as part of our measurement of straight-line rental expense. We recognized straight-line rental expense of $0.3 million and variable rental payments of $0.9 million during each of the three years ended December 31, 2019.

Upon adoption of ASU 2016-02, we recognized a right-of-use asset (included in Income producing property) and lease liability (included in Accounts payable and other liabilities) of $4.2 million. We used a discount rate of approximately 5.9%, which was derived from our assessment of securitized rates for similar assets and credit quality. We recognized $0.3 million of right-of-use asset and lease liability amortization during 2019. In addition, as of January 1, 2019, we reclassified the associated below-market ground lease intangible asset of $10.0 million, net of accumulated amortization of $2.1 million, from Prepaid expenses and other assets to Income producing property on our consolidated balance sheets.

The following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments on our operating ground lease as of December 31, 2019 and a reconciliation of those cash flows to the operating lease liability as of December 31, 2019 (in thousands):
2020
 
$
260

2021
 
260

2022
 
260

2023
 
260

2024
 
260

Thereafter
 
11,895

 
 
13,195

Imputed interest
 
(9,225
)
Lease liability
 
$
3,970


Lease Accounting LEASE ACCOUNTING

Leasing as a Lessor

Future Minimum Rental Income

As of December 31, 2019, non-cancelable commercial operating leases provide for future minimum rental income from continuing operations as follows (in thousands):
2020
 
$
139,053

2021
 
133,907

2022
 
120,491

2023
 
102,877

2024
 
91,253

Thereafter
 
301,974

 
 
$
889,555



Apartment leases are not included as the terms are generally for one year or less. Rental income under most of these commercial leases increase in future years based on agreed-upon percentages or in some instances, changes in the Consumer Price Index.

Leasing as a Lessee

2000 M Street, an office property in Washington, DC, is subject to an operating ground lease with a remaining term of 51 years. Rental payments under this lease are subject to percentage rent variable payments, which are not included as part of our measurement of straight-line rental expense. We recognized straight-line rental expense of $0.3 million and variable rental payments of $0.9 million during each of the three years ended December 31, 2019.

Upon adoption of ASU 2016-02, we recognized a right-of-use asset (included in Income producing property) and lease liability (included in Accounts payable and other liabilities) of $4.2 million. We used a discount rate of approximately 5.9%, which was derived from our assessment of securitized rates for similar assets and credit quality. We recognized $0.3 million of right-of-use asset and lease liability amortization during 2019. In addition, as of January 1, 2019, we reclassified the associated below-market ground lease intangible asset of $10.0 million, net of accumulated amortization of $2.1 million, from Prepaid expenses and other assets to Income producing property on our consolidated balance sheets.

The following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments on our operating ground lease as of December 31, 2019 and a reconciliation of those cash flows to the operating lease liability as of December 31, 2019 (in thousands):
2020
 
$
260

2021
 
260

2022
 
260

2023
 
260

2024
 
260

Thereafter
 
11,895

 
 
13,195

Imputed interest
 
(9,225
)
Lease liability
 
$
3,970