Leases
|
3 Months Ended |
Mar. 31, 2020 |
|---|
| 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 March 31, 2020, 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):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Lease revenue |
|
2020 |
|
2019 |
Fixed |
|
$ |
104,109 |
|
|
$ |
104,644 |
|
Variable |
|
26,903 |
|
|
26,259 |
|
|
|
$ |
131,012 |
|
|
$ |
130,903 |
|
Fixed contractual payments due under our property leases were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
March 31, 2020 |
|
December 31, 2019 |
2020 (1) |
|
$ |
301,914 |
|
|
$ |
388,310 |
|
2021 |
|
357,747 |
|
|
336,482 |
|
2022 |
|
319,239 |
|
|
299,356 |
|
2023 |
|
264,865 |
|
|
245,661 |
|
2024 |
|
214,797 |
|
|
195,246 |
|
Thereafter |
|
548,049 |
|
|
474,741 |
|
|
|
$ |
2,006,611 |
|
|
$ |
1,939,796 |
|
(1) As of March 31, 2020, represents the nine months ending December 31, 2020.
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 March 31, 2020, our balance sheet included $68.2 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 nine leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 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.
|
Our right-of-use assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
March 31, 2020 |
|
December 31, 2019 |
Right-of-use assets |
|
|
|
|
|
|
Operating leases - Property |
|
Property - operating right-of-use assets |
|
$ |
27,793 |
|
|
$ |
27,864 |
|
Finance leases - Property |
|
Property - finance right-of-use assets |
|
40,450 |
|
|
40,458 |
|
Total right-of-use assets |
|
|
|
$ |
68,243 |
|
|
$ |
68,322 |
|
Lease liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
March 31, 2020 |
|
December 31, 2019 |
Lease liabilities |
|
|
|
|
|
|
Operating leases - Property |
|
Property - operating lease liabilities |
|
$ |
17,365 |
|
|
$ |
17,317 |
|
Finance leases - Property |
|
Other liabilities |
|
702 |
|
|
702 |
|
Total lease liabilities |
|
|
|
$ |
18,067 |
|
|
$ |
18,019 |
|
The table below sets forth the weighted average terms and discount rates of our leases as of March 31, 2020:
|
|
|
|
|
Weighted average remaining lease term |
|
|
Operating leases |
|
68 years |
|
Finance leases |
|
< 1 year |
|
Weighted average discount rate |
|
|
Operating leases |
|
7.33 |
% |
Finance leases |
|
3.62 |
% |
The table below presents our total lease cost (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Lease cost |
|
Statement of Operations Location |
|
2020 |
|
2019 |
Operating lease cost |
|
|
|
|
|
|
Property leases |
|
Property operating expenses |
|
$ |
431 |
|
|
$ |
413 |
|
Finance lease cost |
|
|
|
|
|
|
Amortization of property right-of-use assets |
|
Property operating expenses |
|
9 |
|
|
— |
|
|
|
|
|
$ |
440 |
|
|
$ |
413 |
|
The table below presents the effect of lease payments on our consolidated statements of cash flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Supplemental cash flow information |
|
2020 |
|
2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
Operating cash flows for operating leases |
|
$ |
311 |
|
|
$ |
228 |
|
Financing cash flows for financing leases |
|
$ |
— |
|
|
$ |
52 |
|
Payments on leases as of March 31, 2020 and December 31, 2019 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2020 |
|
As of December 31, 2019 |
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
|
Operating leases |
|
Finance leases |
|
Total |
2020 (1) |
|
$ |
826 |
|
|
$ |
674 |
|
|
$ |
1,500 |
|
|
$ |
1,092 |
|
|
$ |
674 |
|
|
$ |
1,766 |
|
2021 |
|
1,138 |
|
|
14 |
|
|
1,152 |
|
|
1,138 |
|
|
14 |
|
|
1,152 |
|
2022 |
|
1,162 |
|
|
14 |
|
|
1,176 |
|
|
1,162 |
|
|
14 |
|
|
1,176 |
|
2023 |
|
1,167 |
|
|
— |
|
|
1,167 |
|
|
1,167 |
|
|
— |
|
|
1,167 |
|
2024 |
|
1,173 |
|
|
— |
|
|
1,173 |
|
|
1,173 |
|
|
— |
|
|
1,173 |
|
Thereafter |
|
100,609 |
|
|
— |
|
|
100,609 |
|
|
100,609 |
|
|
— |
|
|
100,609 |
|
Total lease payments |
|
106,075 |
|
|
702 |
|
|
106,777 |
|
|
106,341 |
|
|
702 |
|
|
107,043 |
|
Less: Amount representing interest |
|
(88,710 |
) |
|
— |
|
|
(88,710 |
) |
|
(89,024 |
) |
|
— |
|
|
(89,024 |
) |
Lease liability |
|
$ |
17,365 |
|
|
$ |
702 |
|
|
$ |
18,067 |
|
|
$ |
17,317 |
|
|
$ |
702 |
|
|
$ |
18,019 |
|
(1) As of March 31, 2020, represents the nine months ending December 31, 2020.
|
| Leases |
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of March 31, 2020, 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):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Lease revenue |
|
2020 |
|
2019 |
Fixed |
|
$ |
104,109 |
|
|
$ |
104,644 |
|
Variable |
|
26,903 |
|
|
26,259 |
|
|
|
$ |
131,012 |
|
|
$ |
130,903 |
|
Fixed contractual payments due under our property leases were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
March 31, 2020 |
|
December 31, 2019 |
2020 (1) |
|
$ |
301,914 |
|
|
$ |
388,310 |
|
2021 |
|
357,747 |
|
|
336,482 |
|
2022 |
|
319,239 |
|
|
299,356 |
|
2023 |
|
264,865 |
|
|
245,661 |
|
2024 |
|
214,797 |
|
|
195,246 |
|
Thereafter |
|
548,049 |
|
|
474,741 |
|
|
|
$ |
2,006,611 |
|
|
$ |
1,939,796 |
|
(1) As of March 31, 2020, represents the nine months ending December 31, 2020.
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 March 31, 2020, our balance sheet included $68.2 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 nine leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 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.
|
Our right-of-use assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
March 31, 2020 |
|
December 31, 2019 |
Right-of-use assets |
|
|
|
|
|
|
Operating leases - Property |
|
Property - operating right-of-use assets |
|
$ |
27,793 |
|
|
$ |
27,864 |
|
Finance leases - Property |
|
Property - finance right-of-use assets |
|
40,450 |
|
|
40,458 |
|
Total right-of-use assets |
|
|
|
$ |
68,243 |
|
|
$ |
68,322 |
|
Lease liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
March 31, 2020 |
|
December 31, 2019 |
Lease liabilities |
|
|
|
|
|
|
Operating leases - Property |
|
Property - operating lease liabilities |
|
$ |
17,365 |
|
|
$ |
17,317 |
|
Finance leases - Property |
|
Other liabilities |
|
702 |
|
|
702 |
|
Total lease liabilities |
|
|
|
$ |
18,067 |
|
|
$ |
18,019 |
|
The table below sets forth the weighted average terms and discount rates of our leases as of March 31, 2020:
|
|
|
|
|
Weighted average remaining lease term |
|
|
Operating leases |
|
68 years |
|
Finance leases |
|
< 1 year |
|
Weighted average discount rate |
|
|
Operating leases |
|
7.33 |
% |
Finance leases |
|
3.62 |
% |
The table below presents our total lease cost (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Lease cost |
|
Statement of Operations Location |
|
2020 |
|
2019 |
Operating lease cost |
|
|
|
|
|
|
Property leases |
|
Property operating expenses |
|
$ |
431 |
|
|
$ |
413 |
|
Finance lease cost |
|
|
|
|
|
|
Amortization of property right-of-use assets |
|
Property operating expenses |
|
9 |
|
|
— |
|
|
|
|
|
$ |
440 |
|
|
$ |
413 |
|
The table below presents the effect of lease payments on our consolidated statements of cash flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Supplemental cash flow information |
|
2020 |
|
2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
Operating cash flows for operating leases |
|
$ |
311 |
|
|
$ |
228 |
|
Financing cash flows for financing leases |
|
$ |
— |
|
|
$ |
52 |
|
Payments on leases as of March 31, 2020 and December 31, 2019 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2020 |
|
As of December 31, 2019 |
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
|
Operating leases |
|
Finance leases |
|
Total |
2020 (1) |
|
$ |
826 |
|
|
$ |
674 |
|
|
$ |
1,500 |
|
|
$ |
1,092 |
|
|
$ |
674 |
|
|
$ |
1,766 |
|
2021 |
|
1,138 |
|
|
14 |
|
|
1,152 |
|
|
1,138 |
|
|
14 |
|
|
1,152 |
|
2022 |
|
1,162 |
|
|
14 |
|
|
1,176 |
|
|
1,162 |
|
|
14 |
|
|
1,176 |
|
2023 |
|
1,167 |
|
|
— |
|
|
1,167 |
|
|
1,167 |
|
|
— |
|
|
1,167 |
|
2024 |
|
1,173 |
|
|
— |
|
|
1,173 |
|
|
1,173 |
|
|
— |
|
|
1,173 |
|
Thereafter |
|
100,609 |
|
|
— |
|
|
100,609 |
|
|
100,609 |
|
|
— |
|
|
100,609 |
|
Total lease payments |
|
106,075 |
|
|
702 |
|
|
106,777 |
|
|
106,341 |
|
|
702 |
|
|
107,043 |
|
Less: Amount representing interest |
|
(88,710 |
) |
|
— |
|
|
(88,710 |
) |
|
(89,024 |
) |
|
— |
|
|
(89,024 |
) |
Lease liability |
|
$ |
17,365 |
|
|
$ |
702 |
|
|
$ |
18,067 |
|
|
$ |
17,317 |
|
|
$ |
702 |
|
|
$ |
18,019 |
|
(1) As of March 31, 2020, represents the nine months ending December 31, 2020.
|
| Leases |
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of March 31, 2020, 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):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Lease revenue |
|
2020 |
|
2019 |
Fixed |
|
$ |
104,109 |
|
|
$ |
104,644 |
|
Variable |
|
26,903 |
|
|
26,259 |
|
|
|
$ |
131,012 |
|
|
$ |
130,903 |
|
Fixed contractual payments due under our property leases were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
March 31, 2020 |
|
December 31, 2019 |
2020 (1) |
|
$ |
301,914 |
|
|
$ |
388,310 |
|
2021 |
|
357,747 |
|
|
336,482 |
|
2022 |
|
319,239 |
|
|
299,356 |
|
2023 |
|
264,865 |
|
|
245,661 |
|
2024 |
|
214,797 |
|
|
195,246 |
|
Thereafter |
|
548,049 |
|
|
474,741 |
|
|
|
$ |
2,006,611 |
|
|
$ |
1,939,796 |
|
(1) As of March 31, 2020, represents the nine months ending December 31, 2020.
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 March 31, 2020, our balance sheet included $68.2 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 nine leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 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.
|
Our right-of-use assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
March 31, 2020 |
|
December 31, 2019 |
Right-of-use assets |
|
|
|
|
|
|
Operating leases - Property |
|
Property - operating right-of-use assets |
|
$ |
27,793 |
|
|
$ |
27,864 |
|
Finance leases - Property |
|
Property - finance right-of-use assets |
|
40,450 |
|
|
40,458 |
|
Total right-of-use assets |
|
|
|
$ |
68,243 |
|
|
$ |
68,322 |
|
Lease liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Leases |
|
Balance Sheet Location |
|
March 31, 2020 |
|
December 31, 2019 |
Lease liabilities |
|
|
|
|
|
|
Operating leases - Property |
|
Property - operating lease liabilities |
|
$ |
17,365 |
|
|
$ |
17,317 |
|
Finance leases - Property |
|
Other liabilities |
|
702 |
|
|
702 |
|
Total lease liabilities |
|
|
|
$ |
18,067 |
|
|
$ |
18,019 |
|
The table below sets forth the weighted average terms and discount rates of our leases as of March 31, 2020:
|
|
|
|
|
Weighted average remaining lease term |
|
|
Operating leases |
|
68 years |
|
Finance leases |
|
< 1 year |
|
Weighted average discount rate |
|
|
Operating leases |
|
7.33 |
% |
Finance leases |
|
3.62 |
% |
The table below presents our total lease cost (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Lease cost |
|
Statement of Operations Location |
|
2020 |
|
2019 |
Operating lease cost |
|
|
|
|
|
|
Property leases |
|
Property operating expenses |
|
$ |
431 |
|
|
$ |
413 |
|
Finance lease cost |
|
|
|
|
|
|
Amortization of property right-of-use assets |
|
Property operating expenses |
|
9 |
|
|
— |
|
|
|
|
|
$ |
440 |
|
|
$ |
413 |
|
The table below presents the effect of lease payments on our consolidated statements of cash flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
Supplemental cash flow information |
|
2020 |
|
2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
Operating cash flows for operating leases |
|
$ |
311 |
|
|
$ |
228 |
|
Financing cash flows for financing leases |
|
$ |
— |
|
|
$ |
52 |
|
Payments on leases as of March 31, 2020 and December 31, 2019 were due as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2020 |
|
As of December 31, 2019 |
Year Ending December 31, |
|
Operating leases |
|
Finance leases |
|
Total |
|
Operating leases |
|
Finance leases |
|
Total |
2020 (1) |
|
$ |
826 |
|
|
$ |
674 |
|
|
$ |
1,500 |
|
|
$ |
1,092 |
|
|
$ |
674 |
|
|
$ |
1,766 |
|
2021 |
|
1,138 |
|
|
14 |
|
|
1,152 |
|
|
1,138 |
|
|
14 |
|
|
1,152 |
|
2022 |
|
1,162 |
|
|
14 |
|
|
1,176 |
|
|
1,162 |
|
|
14 |
|
|
1,176 |
|
2023 |
|
1,167 |
|
|
— |
|
|
1,167 |
|
|
1,167 |
|
|
— |
|
|
1,167 |
|
2024 |
|
1,173 |
|
|
— |
|
|
1,173 |
|
|
1,173 |
|
|
— |
|
|
1,173 |
|
Thereafter |
|
100,609 |
|
|
— |
|
|
100,609 |
|
|
100,609 |
|
|
— |
|
|
100,609 |
|
Total lease payments |
|
106,075 |
|
|
702 |
|
|
106,777 |
|
|
106,341 |
|
|
702 |
|
|
107,043 |
|
Less: Amount representing interest |
|
(88,710 |
) |
|
— |
|
|
(88,710 |
) |
|
(89,024 |
) |
|
— |
|
|
(89,024 |
) |
Lease liability |
|
$ |
17,365 |
|
|
$ |
702 |
|
|
$ |
18,067 |
|
|
$ |
17,317 |
|
|
$ |
702 |
|
|
$ |
18,019 |
|
(1) As of March 31, 2020, represents the nine months ending December 31, 2020.
|