Leases
|
12 Months Ended |
Dec. 31, 2019 |
|---|
| Leases [Abstract] |
|
| Leases |
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of December 31, 2019, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 15 years and averaging approximately five years.
Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):
|
|
|
|
|
|
Lease revenue |
|
For the Year Ended December 31, 2019 |
Fixed |
|
$ |
412,342 |
|
Variable |
|
110,130 |
|
|
|
$ |
522,472 |
|
A significant concentration of our lease revenue in 2019 was earned from our largest tenant, the USG, including 34% of our total lease revenue and 25% of our fixed lease revenue. Our lease revenue from the USG was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT reportable sub-segments (see Note 16).
Fixed contractual payments due under our property leases were as follows (in thousands):
|
|
|
|
|
|
Year Ending December 31, |
|
December 31, 2019 |
2020 |
|
$ |
388,310 |
|
2021 |
|
336,482 |
|
2022 |
|
299,356 |
|
2023 |
|
245,661 |
|
2024 |
|
195,246 |
|
Thereafter |
|
474,741 |
|
|
|
$ |
1,939,796 |
|
Lessee Arrangements
We lease land underlying certain properties that we are operating or developing from third parties. These ground leases have long durations with remaining terms ranging from 29 years (excluding extension options) to 96 years. As of December 31, 2019, our balance sheet included $68.3 million in right-of-use assets associated with ground leases that included:
|
|
• |
$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2020;
|
|
|
• |
$10.3 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;
|
|
|
• |
$6.5 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 29 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
|
|
|
• |
$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture all of the rent on which was previously paid. These leases had remaining terms ranging from 63 to 74 years;
|
|
|
• |
$4.8 million for land in a business park in Huntsville, Alabama under 10 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 51 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance; and
|
|
|
• |
$2.3 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years all of the rent on which was previously paid.
|
As of December 31, 2019, our balance sheet also included right-of-use lease assets totaling $1.2 million in connection with vehicles and office equipment that we lease from third parties.
Our right-of-use assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
December 31, 2019 |
Right-of-use assets |
|
|
|
|
Operating leases - Property |
|
Property - operating right-of-use assets |
|
$ |
27,864 |
|
Finance leases |
|
|
|
|
Property |
|
Property - finance right-of-use assets |
|
40,458 |
|
Vehicles and office equipment |
|
Prepaid expenses and other assets, net |
|
1,196 |
|
Total finance lease right-of-use assets |
|
|
|
41,654 |
|
|
|
|
|
|
Total right-of-use assets |
|
|
|
$ |
69,518 |
|
Lease liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
December 31, 2019 |
Lease liabilities |
|
|
|
|
Operating leases - Property |
|
Property - operating lease liabilities |
|
$ |
17,317 |
|
Finance leases |
|
Other liabilities |
|
1,116 |
|
|
|
|
|
|
Total lease liabilities |
|
|
|
$ |
18,433 |
|
The table below sets forth the weighted average terms and discount rates of our leases as of December 31, 2019:
|
|
|
|
|
Weighted average remaining lease term |
|
|
Operating leases |
|
68 years |
|
Finance leases |
|
1 year |
|
Weighted average discount rate |
|
|
Operating leases |
|
7.33 |
% |
Finance leases |
|
3.11 |
% |
The table below presents our total lease cost (in thousands):
|
|
|
|
|
|
|
|
Lease cost |
|
Statement of Operations Location |
|
For the Year Ended December 31, 2019 |
Operating lease cost |
|
|
|
|
Property leases |
|
Property operating expenses |
|
$ |
1,699 |
|
Vehicles and office equipment |
|
General, administrative and leasing expenses |
|
69 |
|
Finance lease cost |
|
|
|
|
Amortization of vehicles and office equipment right-of-use assets |
|
General, administrative and leasing expenses |
|
457 |
|
Amortization of property right-of-use assets |
|
Property operating expenses |
|
30 |
|
Interest on lease liabilities |
|
Interest expense |
|
13 |
|
|
|
|
|
$ |
2,268 |
|
The table below presents the effect of lease payments on our consolidated statement of cash flows (in thousands):
|
|
|
|
|
|
Supplemental cash flow information |
|
For the Year Ended December 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
Operating cash flows for operating leases |
|
$ |
1,004 |
|
Operating cash flows for financing leases |
|
$ |
13 |
|
Financing cash flows for financing leases |
|
$ |
223 |
|
Payments on leases as of December 31, 2019 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
2020 |
|
$ |
1,140 |
|
|
$ |
862 |
|
|
$ |
2,002 |
|
2021 |
|
1,146 |
|
|
202 |
|
|
1,348 |
|
2022 |
|
1,164 |
|
|
64 |
|
|
1,228 |
|
2023 |
|
1,169 |
|
|
— |
|
|
1,169 |
|
2024 |
|
1,173 |
|
|
— |
|
|
1,173 |
|
Thereafter |
|
100,609 |
|
|
— |
|
|
100,609 |
|
Total lease payments |
|
106,401 |
|
|
1,128 |
|
|
107,529 |
|
Less: Amount representing interest |
|
(89,084 |
) |
|
(12 |
) |
|
(89,096 |
) |
Lease liability |
|
$ |
17,317 |
|
|
$ |
1,116 |
|
|
$ |
18,433 |
|
Future minimum rental payments on leases as of December 31, 2018 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
2019 |
|
$ |
1,101 |
|
|
$ |
219 |
|
|
$ |
1,320 |
|
2020 |
|
1,110 |
|
|
844 |
|
|
1,954 |
|
2021 |
|
1,094 |
|
|
184 |
|
|
1,278 |
|
2022 |
|
1,115 |
|
|
49 |
|
|
1,164 |
|
2023 |
|
1,119 |
|
|
— |
|
|
1,119 |
|
Thereafter |
|
83,373 |
|
|
— |
|
|
83,373 |
|
Total lease payments |
|
$ |
88,912 |
|
|
1,296 |
|
|
90,208 |
|
Less: Amount representing interest |
|
N/A |
|
|
(24 |
) |
|
(24 |
) |
Total |
|
N/A |
|
|
$ |
1,272 |
|
|
$ |
90,184 |
|
|
| Leases |
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of December 31, 2019, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 15 years and averaging approximately five years.
Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):
|
|
|
|
|
|
Lease revenue |
|
For the Year Ended December 31, 2019 |
Fixed |
|
$ |
412,342 |
|
Variable |
|
110,130 |
|
|
|
$ |
522,472 |
|
A significant concentration of our lease revenue in 2019 was earned from our largest tenant, the USG, including 34% of our total lease revenue and 25% of our fixed lease revenue. Our lease revenue from the USG was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT reportable sub-segments (see Note 16).
Fixed contractual payments due under our property leases were as follows (in thousands):
|
|
|
|
|
|
Year Ending December 31, |
|
December 31, 2019 |
2020 |
|
$ |
388,310 |
|
2021 |
|
336,482 |
|
2022 |
|
299,356 |
|
2023 |
|
245,661 |
|
2024 |
|
195,246 |
|
Thereafter |
|
474,741 |
|
|
|
$ |
1,939,796 |
|
Lessee Arrangements
We lease land underlying certain properties that we are operating or developing from third parties. These ground leases have long durations with remaining terms ranging from 29 years (excluding extension options) to 96 years. As of December 31, 2019, our balance sheet included $68.3 million in right-of-use assets associated with ground leases that included:
|
|
• |
$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2020;
|
|
|
• |
$10.3 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;
|
|
|
• |
$6.5 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 29 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
|
|
|
• |
$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture all of the rent on which was previously paid. These leases had remaining terms ranging from 63 to 74 years;
|
|
|
• |
$4.8 million for land in a business park in Huntsville, Alabama under 10 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 51 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance; and
|
|
|
• |
$2.3 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years all of the rent on which was previously paid.
|
As of December 31, 2019, our balance sheet also included right-of-use lease assets totaling $1.2 million in connection with vehicles and office equipment that we lease from third parties.
Our right-of-use assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
December 31, 2019 |
Right-of-use assets |
|
|
|
|
Operating leases - Property |
|
Property - operating right-of-use assets |
|
$ |
27,864 |
|
Finance leases |
|
|
|
|
Property |
|
Property - finance right-of-use assets |
|
40,458 |
|
Vehicles and office equipment |
|
Prepaid expenses and other assets, net |
|
1,196 |
|
Total finance lease right-of-use assets |
|
|
|
41,654 |
|
|
|
|
|
|
Total right-of-use assets |
|
|
|
$ |
69,518 |
|
Lease liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
December 31, 2019 |
Lease liabilities |
|
|
|
|
Operating leases - Property |
|
Property - operating lease liabilities |
|
$ |
17,317 |
|
Finance leases |
|
Other liabilities |
|
1,116 |
|
|
|
|
|
|
Total lease liabilities |
|
|
|
$ |
18,433 |
|
The table below sets forth the weighted average terms and discount rates of our leases as of December 31, 2019:
|
|
|
|
|
Weighted average remaining lease term |
|
|
Operating leases |
|
68 years |
|
Finance leases |
|
1 year |
|
Weighted average discount rate |
|
|
Operating leases |
|
7.33 |
% |
Finance leases |
|
3.11 |
% |
The table below presents our total lease cost (in thousands):
|
|
|
|
|
|
|
|
Lease cost |
|
Statement of Operations Location |
|
For the Year Ended December 31, 2019 |
Operating lease cost |
|
|
|
|
Property leases |
|
Property operating expenses |
|
$ |
1,699 |
|
Vehicles and office equipment |
|
General, administrative and leasing expenses |
|
69 |
|
Finance lease cost |
|
|
|
|
Amortization of vehicles and office equipment right-of-use assets |
|
General, administrative and leasing expenses |
|
457 |
|
Amortization of property right-of-use assets |
|
Property operating expenses |
|
30 |
|
Interest on lease liabilities |
|
Interest expense |
|
13 |
|
|
|
|
|
$ |
2,268 |
|
The table below presents the effect of lease payments on our consolidated statement of cash flows (in thousands):
|
|
|
|
|
|
Supplemental cash flow information |
|
For the Year Ended December 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
Operating cash flows for operating leases |
|
$ |
1,004 |
|
Operating cash flows for financing leases |
|
$ |
13 |
|
Financing cash flows for financing leases |
|
$ |
223 |
|
Payments on leases as of December 31, 2019 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
2020 |
|
$ |
1,140 |
|
|
$ |
862 |
|
|
$ |
2,002 |
|
2021 |
|
1,146 |
|
|
202 |
|
|
1,348 |
|
2022 |
|
1,164 |
|
|
64 |
|
|
1,228 |
|
2023 |
|
1,169 |
|
|
— |
|
|
1,169 |
|
2024 |
|
1,173 |
|
|
— |
|
|
1,173 |
|
Thereafter |
|
100,609 |
|
|
— |
|
|
100,609 |
|
Total lease payments |
|
106,401 |
|
|
1,128 |
|
|
107,529 |
|
Less: Amount representing interest |
|
(89,084 |
) |
|
(12 |
) |
|
(89,096 |
) |
Lease liability |
|
$ |
17,317 |
|
|
$ |
1,116 |
|
|
$ |
18,433 |
|
Future minimum rental payments on leases as of December 31, 2018 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
2019 |
|
$ |
1,101 |
|
|
$ |
219 |
|
|
$ |
1,320 |
|
2020 |
|
1,110 |
|
|
844 |
|
|
1,954 |
|
2021 |
|
1,094 |
|
|
184 |
|
|
1,278 |
|
2022 |
|
1,115 |
|
|
49 |
|
|
1,164 |
|
2023 |
|
1,119 |
|
|
— |
|
|
1,119 |
|
Thereafter |
|
83,373 |
|
|
— |
|
|
83,373 |
|
Total lease payments |
|
$ |
88,912 |
|
|
1,296 |
|
|
90,208 |
|
Less: Amount representing interest |
|
N/A |
|
|
(24 |
) |
|
(24 |
) |
Total |
|
N/A |
|
|
$ |
1,272 |
|
|
$ |
90,184 |
|
|
| Leases |
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of December 31, 2019, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 15 years and averaging approximately five years.
Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):
|
|
|
|
|
|
Lease revenue |
|
For the Year Ended December 31, 2019 |
Fixed |
|
$ |
412,342 |
|
Variable |
|
110,130 |
|
|
|
$ |
522,472 |
|
A significant concentration of our lease revenue in 2019 was earned from our largest tenant, the USG, including 34% of our total lease revenue and 25% of our fixed lease revenue. Our lease revenue from the USG was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT reportable sub-segments (see Note 16).
Fixed contractual payments due under our property leases were as follows (in thousands):
|
|
|
|
|
|
Year Ending December 31, |
|
December 31, 2019 |
2020 |
|
$ |
388,310 |
|
2021 |
|
336,482 |
|
2022 |
|
299,356 |
|
2023 |
|
245,661 |
|
2024 |
|
195,246 |
|
Thereafter |
|
474,741 |
|
|
|
$ |
1,939,796 |
|
Lessee Arrangements
We lease land underlying certain properties that we are operating or developing from third parties. These ground leases have long durations with remaining terms ranging from 29 years (excluding extension options) to 96 years. As of December 31, 2019, our balance sheet included $68.3 million in right-of-use assets associated with ground leases that included:
|
|
• |
$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2020;
|
|
|
• |
$10.3 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;
|
|
|
• |
$6.5 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 29 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
|
|
|
• |
$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture all of the rent on which was previously paid. These leases had remaining terms ranging from 63 to 74 years;
|
|
|
• |
$4.8 million for land in a business park in Huntsville, Alabama under 10 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 51 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance; and
|
|
|
• |
$2.3 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years all of the rent on which was previously paid.
|
As of December 31, 2019, our balance sheet also included right-of-use lease assets totaling $1.2 million in connection with vehicles and office equipment that we lease from third parties.
Our right-of-use assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
December 31, 2019 |
Right-of-use assets |
|
|
|
|
Operating leases - Property |
|
Property - operating right-of-use assets |
|
$ |
27,864 |
|
Finance leases |
|
|
|
|
Property |
|
Property - finance right-of-use assets |
|
40,458 |
|
Vehicles and office equipment |
|
Prepaid expenses and other assets, net |
|
1,196 |
|
Total finance lease right-of-use assets |
|
|
|
41,654 |
|
|
|
|
|
|
Total right-of-use assets |
|
|
|
$ |
69,518 |
|
Lease liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
December 31, 2019 |
Lease liabilities |
|
|
|
|
Operating leases - Property |
|
Property - operating lease liabilities |
|
$ |
17,317 |
|
Finance leases |
|
Other liabilities |
|
1,116 |
|
|
|
|
|
|
Total lease liabilities |
|
|
|
$ |
18,433 |
|
The table below sets forth the weighted average terms and discount rates of our leases as of December 31, 2019:
|
|
|
|
|
Weighted average remaining lease term |
|
|
Operating leases |
|
68 years |
|
Finance leases |
|
1 year |
|
Weighted average discount rate |
|
|
Operating leases |
|
7.33 |
% |
Finance leases |
|
3.11 |
% |
The table below presents our total lease cost (in thousands):
|
|
|
|
|
|
|
|
Lease cost |
|
Statement of Operations Location |
|
For the Year Ended December 31, 2019 |
Operating lease cost |
|
|
|
|
Property leases |
|
Property operating expenses |
|
$ |
1,699 |
|
Vehicles and office equipment |
|
General, administrative and leasing expenses |
|
69 |
|
Finance lease cost |
|
|
|
|
Amortization of vehicles and office equipment right-of-use assets |
|
General, administrative and leasing expenses |
|
457 |
|
Amortization of property right-of-use assets |
|
Property operating expenses |
|
30 |
|
Interest on lease liabilities |
|
Interest expense |
|
13 |
|
|
|
|
|
$ |
2,268 |
|
The table below presents the effect of lease payments on our consolidated statement of cash flows (in thousands):
|
|
|
|
|
|
Supplemental cash flow information |
|
For the Year Ended December 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
Operating cash flows for operating leases |
|
$ |
1,004 |
|
Operating cash flows for financing leases |
|
$ |
13 |
|
Financing cash flows for financing leases |
|
$ |
223 |
|
Payments on leases as of December 31, 2019 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
2020 |
|
$ |
1,140 |
|
|
$ |
862 |
|
|
$ |
2,002 |
|
2021 |
|
1,146 |
|
|
202 |
|
|
1,348 |
|
2022 |
|
1,164 |
|
|
64 |
|
|
1,228 |
|
2023 |
|
1,169 |
|
|
— |
|
|
1,169 |
|
2024 |
|
1,173 |
|
|
— |
|
|
1,173 |
|
Thereafter |
|
100,609 |
|
|
— |
|
|
100,609 |
|
Total lease payments |
|
106,401 |
|
|
1,128 |
|
|
107,529 |
|
Less: Amount representing interest |
|
(89,084 |
) |
|
(12 |
) |
|
(89,096 |
) |
Lease liability |
|
$ |
17,317 |
|
|
$ |
1,116 |
|
|
$ |
18,433 |
|
Future minimum rental payments on leases as of December 31, 2018 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
2019 |
|
$ |
1,101 |
|
|
$ |
219 |
|
|
$ |
1,320 |
|
2020 |
|
1,110 |
|
|
844 |
|
|
1,954 |
|
2021 |
|
1,094 |
|
|
184 |
|
|
1,278 |
|
2022 |
|
1,115 |
|
|
49 |
|
|
1,164 |
|
2023 |
|
1,119 |
|
|
— |
|
|
1,119 |
|
Thereafter |
|
83,373 |
|
|
— |
|
|
83,373 |
|
Total lease payments |
|
$ |
88,912 |
|
|
1,296 |
|
|
90,208 |
|
Less: Amount representing interest |
|
N/A |
|
|
(24 |
) |
|
(24 |
) |
Total |
|
N/A |
|
|
$ |
1,272 |
|
|
$ |
90,184 |
|
|