Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.2
Leases
 9 Months Ended
Sep. 30, 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 September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 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 September 30, For the Nine Months Ended September 30,
Lease revenue 2020 2019 2020 2019
Fixed $ 106,743  $ 102,389  $ 314,845  $ 311,226 
Variable 27,132  27,072  82,189  80,553 
$ 133,875  $ 129,461  $ 397,034  $ 391,779 

Fixed contractual payments due under our property leases were as follows (in thousands):
Year Ending December 31, September 30, 2020 December 31, 2019
2020 (1) $ 107,972  $ 388,310 
2021 410,966  336,482 
2022 362,892  299,356 
2023 307,346  245,661 
2024 258,059  195,246 
Thereafter 773,582  474,741 
$ 2,220,817  $ 1,939,796 

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations
with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets 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 2021;
•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;
•$9.3 million for land in a business park in Huntsville, Alabama under 12 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;
•$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 62 to 74 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and
•$2.2 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 property right-of-use assets consisted of the following (in thousands):
Leases Balance Sheet Location September 30, 2020 December 31, 2019
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 36,442  $ 27,864 
Finance leases - Property Property - finance right-of-use assets 40,432  40,458 
Total right-of-use assets $ 76,874  $ 68,322 

Property lease liabilities consisted of the following (in thousands):
Leases Balance Sheet Location September 30, 2020 December 31, 2019
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 26,382  $ 17,317 
Finance leases - Property Other liabilities 28  702 
Total lease liabilities $ 26,410  $ 18,019 

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:
Weighted average remaining lease term
Operating leases 54 years
Finance leases
< 1 year
Weighted average discount rate
Operating leases 7.19  %
Finance leases 3.62  %

The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Three Months Ended September 30, For the Nine Months Ended September 30,
Lease cost 2020 2019 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 600  $ 413  $ 1,474  $ 1,239 
Property leases - variable Property operating expenses 105  —  107  — 
Finance lease cost
Amortization of property right-of-use assets
 Property operating expenses 9  9  27  21 
$ 714  $ 422  $ 1,608  $ 1,260 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Nine Months Ended September 30,
Supplemental cash flow information 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
 $ 987  $ 804 
Financing cash flows for financing leases
 $ 674  $ 14 

Payments on property leases were due as follows (in thousands):
As of September 30, 2020
As of December 31, 2019
Year Ending December 31,  Operating leases Finance leases Total  Operating leases Finance leases Total
2020 (1) $ 615  $ —  $ 615  $ 1,092  $ 674  $ 1,766 
2021 2,513  14  2,527  1,138  14  1,152 
2022 2,566  14  2,580  1,162  14  1,176 
2023 2,601  —  2,601  1,167  —  1,167 
2024 2,636  —  2,636  1,173  —  1,173 
Thereafter 118,295  —  118,295  100,609  —  100,609 
Total lease payments 129,226  28  129,254  106,341  702  107,043 
Less: Amount representing interest (102,844) —  (102,844) (89,024) —  (89,024)
Lease liability $ 26,382  $ 28  $ 26,410  $ 17,317  $ 702  $ 18,019 

(1)As of September 30, 2020, represents the three 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 September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 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 September 30, For the Nine Months Ended September 30,
Lease revenue 2020 2019 2020 2019
Fixed $ 106,743  $ 102,389  $ 314,845  $ 311,226 
Variable 27,132  27,072  82,189  80,553 
$ 133,875  $ 129,461  $ 397,034  $ 391,779 

Fixed contractual payments due under our property leases were as follows (in thousands):
Year Ending December 31, September 30, 2020 December 31, 2019
2020 (1) $ 107,972  $ 388,310 
2021 410,966  336,482 
2022 362,892  299,356 
2023 307,346  245,661 
2024 258,059  195,246 
Thereafter 773,582  474,741 
$ 2,220,817  $ 1,939,796 

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations
with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets 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 2021;
•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;
•$9.3 million for land in a business park in Huntsville, Alabama under 12 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;
•$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 62 to 74 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and
•$2.2 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 property right-of-use assets consisted of the following (in thousands):
Leases Balance Sheet Location September 30, 2020 December 31, 2019
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 36,442  $ 27,864 
Finance leases - Property Property - finance right-of-use assets 40,432  40,458 
Total right-of-use assets $ 76,874  $ 68,322 

Property lease liabilities consisted of the following (in thousands):
Leases Balance Sheet Location September 30, 2020 December 31, 2019
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 26,382  $ 17,317 
Finance leases - Property Other liabilities 28  702 
Total lease liabilities $ 26,410  $ 18,019 

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:
Weighted average remaining lease term
Operating leases 54 years
Finance leases
< 1 year
Weighted average discount rate
Operating leases 7.19  %
Finance leases 3.62  %

The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Three Months Ended September 30, For the Nine Months Ended September 30,
Lease cost 2020 2019 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 600  $ 413  $ 1,474  $ 1,239 
Property leases - variable Property operating expenses 105  —  107  — 
Finance lease cost
Amortization of property right-of-use assets
 Property operating expenses 9  9  27  21 
$ 714  $ 422  $ 1,608  $ 1,260 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Nine Months Ended September 30,
Supplemental cash flow information 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
 $ 987  $ 804 
Financing cash flows for financing leases
 $ 674  $ 14 

Payments on property leases were due as follows (in thousands):
As of September 30, 2020
As of December 31, 2019
Year Ending December 31,  Operating leases Finance leases Total  Operating leases Finance leases Total
2020 (1) $ 615  $ —  $ 615  $ 1,092  $ 674  $ 1,766 
2021 2,513  14  2,527  1,138  14  1,152 
2022 2,566  14  2,580  1,162  14  1,176 
2023 2,601  —  2,601  1,167  —  1,167 
2024 2,636  —  2,636  1,173  —  1,173 
Thereafter 118,295  —  118,295  100,609  —  100,609 
Total lease payments 129,226  28  129,254  106,341  702  107,043 
Less: Amount representing interest (102,844) —  (102,844) (89,024) —  (89,024)
Lease liability $ 26,382  $ 28  $ 26,410  $ 17,317  $ 702  $ 18,019 

(1)As of September 30, 2020, represents the three 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 September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 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 September 30, For the Nine Months Ended September 30,
Lease revenue 2020 2019 2020 2019
Fixed $ 106,743  $ 102,389  $ 314,845  $ 311,226 
Variable 27,132  27,072  82,189  80,553 
$ 133,875  $ 129,461  $ 397,034  $ 391,779 

Fixed contractual payments due under our property leases were as follows (in thousands):
Year Ending December 31, September 30, 2020 December 31, 2019
2020 (1) $ 107,972  $ 388,310 
2021 410,966  336,482 
2022 362,892  299,356 
2023 307,346  245,661 
2024 258,059  195,246 
Thereafter 773,582  474,741 
$ 2,220,817  $ 1,939,796 

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations
with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets 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 2021;
•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;
•$9.3 million for land in a business park in Huntsville, Alabama under 12 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;
•$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 62 to 74 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and
•$2.2 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 property right-of-use assets consisted of the following (in thousands):
Leases Balance Sheet Location September 30, 2020 December 31, 2019
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 36,442  $ 27,864 
Finance leases - Property Property - finance right-of-use assets 40,432  40,458 
Total right-of-use assets $ 76,874  $ 68,322 

Property lease liabilities consisted of the following (in thousands):
Leases Balance Sheet Location September 30, 2020 December 31, 2019
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 26,382  $ 17,317 
Finance leases - Property Other liabilities 28  702 
Total lease liabilities $ 26,410  $ 18,019 

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:
Weighted average remaining lease term
Operating leases 54 years
Finance leases
< 1 year
Weighted average discount rate
Operating leases 7.19  %
Finance leases 3.62  %

The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Three Months Ended September 30, For the Nine Months Ended September 30,
Lease cost 2020 2019 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 600  $ 413  $ 1,474  $ 1,239 
Property leases - variable Property operating expenses 105  —  107  — 
Finance lease cost
Amortization of property right-of-use assets
 Property operating expenses 9  9  27  21 
$ 714  $ 422  $ 1,608  $ 1,260 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Nine Months Ended September 30,
Supplemental cash flow information 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
 $ 987  $ 804 
Financing cash flows for financing leases
 $ 674  $ 14 

Payments on property leases were due as follows (in thousands):
As of September 30, 2020
As of December 31, 2019
Year Ending December 31,  Operating leases Finance leases Total  Operating leases Finance leases Total
2020 (1) $ 615  $ —  $ 615  $ 1,092  $ 674  $ 1,766 
2021 2,513  14  2,527  1,138  14  1,152 
2022 2,566  14  2,580  1,162  14  1,176 
2023 2,601  —  2,601  1,167  —  1,167 
2024 2,636  —  2,636  1,173  —  1,173 
Thereafter 118,295  —  118,295  100,609  —  100,609 
Total lease payments 129,226  28  129,254  106,341  702  107,043 
Less: Amount representing interest (102,844) —  (102,844) (89,024) —  (89,024)
Lease liability $ 26,382  $ 28  $ 26,410  $ 17,317  $ 702  $ 18,019 

(1)As of September 30, 2020, represents the three months ending December 31, 2020.