Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.0.1
Leases
 12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases Leases
Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases encompass all, or a portion, of properties, with various expiration dates. 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 leases. The table below sets forth our composition of lease revenue recognized between fixed and variable lease revenue (in thousands):
For the Years Ended December 31,
Lease revenue (1) 2021 2020 2019
Fixed $ 436,768  $ 404,244  $ 392,341 
Variable 116,900  104,870  100,824 
$ 553,668  $ 509,114  $ 493,165 
(1)Excludes lease revenue from discontinued operations of which $22.3 million, $21.3 million and $20.0 million was fixed and $8.2 million, $5.7 million and $9.3 million was variable for 2021, 2020 and 2019, respectively.

A significant concentration of our lease revenue from continuing operations was earned from our largest tenant, the USG, including 36% in 2021 and 37% in 2020 and 2019 of our total lease revenue, and 26% in 2021 and 27% in 2020 and 2019 of our fixed lease revenue. Our lease revenue from the USG in 2021, 2020 and 2019 was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT (“NoVA Defense/IT”) reportable sub-segments (see Note 16).

Fixed contractual payments due under our property leases were as follows (in thousands):
As of December 31, 2021
Year Ending December 31, Operating leases Sales-type leases
2022 $ 430,910  $ 960 
2023 391,551  960 
2024 344,256  960 
2025 256,725  960 
2026 193,051  960 
Thereafter 939,463  3,556 
Total contractual payments $ 2,555,956  8,356 
Less: Amount representing interest (2,162)
Net investment in sales-type leases $ 6,194 
Lessee Arrangements

As of December 31, 2021, our balance sheet included $40.6 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating. The land leases have long durations with remaining terms ranging from 27 years to 79 years (excluding extension options). As of December 31, 2021, our right-of-use assets included:

•$10.9 million for land in a business park in Huntsville, Alabama under 16 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 41 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;
•$9.9 million for land underlying operating office properties in Washington, D.C. under two leases with remaining terms of approximately 78 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 27 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$6.1 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 61 to 72 years;
•$5.1 million for data center space in Phoenix, Arizona with a remaining term of three years and an option to renew for an additional five years that were not included in the term used in determining the asset balance; 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 46 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 38,361  $ 40,570 
Finance leases - Property (1) Property - finance right-of-use assets 2,238  40,425 
Total right-of-use assets $ 40,599  $ 80,995 
(1)On October 22, 2021, we acquired land leased in Washington, D.C., for which we had a $37.8 million right-of-use asset as of December 31, 2021, for a nominal amount under a bargain purchase option.

Property lease liabilities consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 29,342  $ 30,746 
Finance leases - Property Other liabilities —  28 
Total lease liabilities $ 29,342  $ 30,774 

As of December 31, 2021, our operating leases had a weighted average remaining lease term of 51 years and a weighted average discount rate of 7.16%. The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Years Ended December 31,
Lease cost 2021 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 4,011  $ 2,413  $ 1,664 
Property leases - variable Property operating expenses 45  127  4 
Finance lease cost
Amortization of property right-of-use assets Property operating expenses 31  34  30 
$ 4,087  $ 2,574  $ 1,698 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Years Ended December 31,
Supplemental cash flow information 2021 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 3,206  $ 1,694  $ 1,004 
Financing cash flows for financing leases $ 14  $ 674  $ 14 

Payments on property operating leases were due as follows (in thousands):
Year Ending December 31,
December 31, 2021
2022 $ 3,297 
2023 3,352 
2024 3,403 
2025 1,749 
2026 1,530 
Thereafter 122,448 
Total lease payments 135,779 
Less: Amount representing interest (106,437)
Lease liability $ 29,342 
Leases Leases
Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases encompass all, or a portion, of properties, with various expiration dates. 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 leases. The table below sets forth our composition of lease revenue recognized between fixed and variable lease revenue (in thousands):
For the Years Ended December 31,
Lease revenue (1) 2021 2020 2019
Fixed $ 436,768  $ 404,244  $ 392,341 
Variable 116,900  104,870  100,824 
$ 553,668  $ 509,114  $ 493,165 
(1)Excludes lease revenue from discontinued operations of which $22.3 million, $21.3 million and $20.0 million was fixed and $8.2 million, $5.7 million and $9.3 million was variable for 2021, 2020 and 2019, respectively.

A significant concentration of our lease revenue from continuing operations was earned from our largest tenant, the USG, including 36% in 2021 and 37% in 2020 and 2019 of our total lease revenue, and 26% in 2021 and 27% in 2020 and 2019 of our fixed lease revenue. Our lease revenue from the USG in 2021, 2020 and 2019 was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT (“NoVA Defense/IT”) reportable sub-segments (see Note 16).

Fixed contractual payments due under our property leases were as follows (in thousands):
As of December 31, 2021
Year Ending December 31, Operating leases Sales-type leases
2022 $ 430,910  $ 960 
2023 391,551  960 
2024 344,256  960 
2025 256,725  960 
2026 193,051  960 
Thereafter 939,463  3,556 
Total contractual payments $ 2,555,956  8,356 
Less: Amount representing interest (2,162)
Net investment in sales-type leases $ 6,194 
Lessee Arrangements

As of December 31, 2021, our balance sheet included $40.6 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating. The land leases have long durations with remaining terms ranging from 27 years to 79 years (excluding extension options). As of December 31, 2021, our right-of-use assets included:

•$10.9 million for land in a business park in Huntsville, Alabama under 16 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 41 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;
•$9.9 million for land underlying operating office properties in Washington, D.C. under two leases with remaining terms of approximately 78 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 27 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$6.1 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 61 to 72 years;
•$5.1 million for data center space in Phoenix, Arizona with a remaining term of three years and an option to renew for an additional five years that were not included in the term used in determining the asset balance; 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 46 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 38,361  $ 40,570 
Finance leases - Property (1) Property - finance right-of-use assets 2,238  40,425 
Total right-of-use assets $ 40,599  $ 80,995 
(1)On October 22, 2021, we acquired land leased in Washington, D.C., for which we had a $37.8 million right-of-use asset as of December 31, 2021, for a nominal amount under a bargain purchase option.

Property lease liabilities consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 29,342  $ 30,746 
Finance leases - Property Other liabilities —  28 
Total lease liabilities $ 29,342  $ 30,774 

As of December 31, 2021, our operating leases had a weighted average remaining lease term of 51 years and a weighted average discount rate of 7.16%. The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Years Ended December 31,
Lease cost 2021 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 4,011  $ 2,413  $ 1,664 
Property leases - variable Property operating expenses 45  127  4 
Finance lease cost
Amortization of property right-of-use assets Property operating expenses 31  34  30 
$ 4,087  $ 2,574  $ 1,698 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Years Ended December 31,
Supplemental cash flow information 2021 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 3,206  $ 1,694  $ 1,004 
Financing cash flows for financing leases $ 14  $ 674  $ 14 

Payments on property operating leases were due as follows (in thousands):
Year Ending December 31,
December 31, 2021
2022 $ 3,297 
2023 3,352 
2024 3,403 
2025 1,749 
2026 1,530 
Thereafter 122,448 
Total lease payments 135,779 
Less: Amount representing interest (106,437)
Lease liability $ 29,342 
Leases Leases
Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases encompass all, or a portion, of properties, with various expiration dates. 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 leases. The table below sets forth our composition of lease revenue recognized between fixed and variable lease revenue (in thousands):
For the Years Ended December 31,
Lease revenue (1) 2021 2020 2019
Fixed $ 436,768  $ 404,244  $ 392,341 
Variable 116,900  104,870  100,824 
$ 553,668  $ 509,114  $ 493,165 
(1)Excludes lease revenue from discontinued operations of which $22.3 million, $21.3 million and $20.0 million was fixed and $8.2 million, $5.7 million and $9.3 million was variable for 2021, 2020 and 2019, respectively.

A significant concentration of our lease revenue from continuing operations was earned from our largest tenant, the USG, including 36% in 2021 and 37% in 2020 and 2019 of our total lease revenue, and 26% in 2021 and 27% in 2020 and 2019 of our fixed lease revenue. Our lease revenue from the USG in 2021, 2020 and 2019 was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT (“NoVA Defense/IT”) reportable sub-segments (see Note 16).

Fixed contractual payments due under our property leases were as follows (in thousands):
As of December 31, 2021
Year Ending December 31, Operating leases Sales-type leases
2022 $ 430,910  $ 960 
2023 391,551  960 
2024 344,256  960 
2025 256,725  960 
2026 193,051  960 
Thereafter 939,463  3,556 
Total contractual payments $ 2,555,956  8,356 
Less: Amount representing interest (2,162)
Net investment in sales-type leases $ 6,194 
Lessee Arrangements

As of December 31, 2021, our balance sheet included $40.6 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating. The land leases have long durations with remaining terms ranging from 27 years to 79 years (excluding extension options). As of December 31, 2021, our right-of-use assets included:

•$10.9 million for land in a business park in Huntsville, Alabama under 16 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 41 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;
•$9.9 million for land underlying operating office properties in Washington, D.C. under two leases with remaining terms of approximately 78 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 27 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$6.1 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 61 to 72 years;
•$5.1 million for data center space in Phoenix, Arizona with a remaining term of three years and an option to renew for an additional five years that were not included in the term used in determining the asset balance; 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 46 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 38,361  $ 40,570 
Finance leases - Property (1) Property - finance right-of-use assets 2,238  40,425 
Total right-of-use assets $ 40,599  $ 80,995 
(1)On October 22, 2021, we acquired land leased in Washington, D.C., for which we had a $37.8 million right-of-use asset as of December 31, 2021, for a nominal amount under a bargain purchase option.

Property lease liabilities consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 29,342  $ 30,746 
Finance leases - Property Other liabilities —  28 
Total lease liabilities $ 29,342  $ 30,774 

As of December 31, 2021, our operating leases had a weighted average remaining lease term of 51 years and a weighted average discount rate of 7.16%. The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Years Ended December 31,
Lease cost 2021 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 4,011  $ 2,413  $ 1,664 
Property leases - variable Property operating expenses 45  127  4 
Finance lease cost
Amortization of property right-of-use assets Property operating expenses 31  34  30 
$ 4,087  $ 2,574  $ 1,698 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Years Ended December 31,
Supplemental cash flow information 2021 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 3,206  $ 1,694  $ 1,004 
Financing cash flows for financing leases $ 14  $ 674  $ 14 

Payments on property operating leases were due as follows (in thousands):
Year Ending December 31,
December 31, 2021
2022 $ 3,297 
2023 3,352 
2024 3,403 
2025 1,749 
2026 1,530 
Thereafter 122,448 
Total lease payments 135,779 
Less: Amount representing interest (106,437)
Lease liability $ 29,342 
Leases Leases
Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases encompass all, or a portion, of properties, with various expiration dates. 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 leases. The table below sets forth our composition of lease revenue recognized between fixed and variable lease revenue (in thousands):
For the Years Ended December 31,
Lease revenue (1) 2021 2020 2019
Fixed $ 436,768  $ 404,244  $ 392,341 
Variable 116,900  104,870  100,824 
$ 553,668  $ 509,114  $ 493,165 
(1)Excludes lease revenue from discontinued operations of which $22.3 million, $21.3 million and $20.0 million was fixed and $8.2 million, $5.7 million and $9.3 million was variable for 2021, 2020 and 2019, respectively.

A significant concentration of our lease revenue from continuing operations was earned from our largest tenant, the USG, including 36% in 2021 and 37% in 2020 and 2019 of our total lease revenue, and 26% in 2021 and 27% in 2020 and 2019 of our fixed lease revenue. Our lease revenue from the USG in 2021, 2020 and 2019 was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force Base and Northern Virginia Defense/IT (“NoVA Defense/IT”) reportable sub-segments (see Note 16).

Fixed contractual payments due under our property leases were as follows (in thousands):
As of December 31, 2021
Year Ending December 31, Operating leases Sales-type leases
2022 $ 430,910  $ 960 
2023 391,551  960 
2024 344,256  960 
2025 256,725  960 
2026 193,051  960 
Thereafter 939,463  3,556 
Total contractual payments $ 2,555,956  8,356 
Less: Amount representing interest (2,162)
Net investment in sales-type leases $ 6,194 
Lessee Arrangements

As of December 31, 2021, our balance sheet included $40.6 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating. The land leases have long durations with remaining terms ranging from 27 years to 79 years (excluding extension options). As of December 31, 2021, our right-of-use assets included:

•$10.9 million for land in a business park in Huntsville, Alabama under 16 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 41 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;
•$9.9 million for land underlying operating office properties in Washington, D.C. under two leases with remaining terms of approximately 78 years;
•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 27 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$6.1 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 61 to 72 years;
•$5.1 million for data center space in Phoenix, Arizona with a remaining term of three years and an option to renew for an additional five years that were not included in the term used in determining the asset balance; 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 46 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Right-of-use assets
Operating leases - Property Property - operating right-of-use assets $ 38,361  $ 40,570 
Finance leases - Property (1) Property - finance right-of-use assets 2,238  40,425 
Total right-of-use assets $ 40,599  $ 80,995 
(1)On October 22, 2021, we acquired land leased in Washington, D.C., for which we had a $37.8 million right-of-use asset as of December 31, 2021, for a nominal amount under a bargain purchase option.

Property lease liabilities consisted of the following (in thousands):
As of December 31,
Leases Balance Sheet Location 2021 2020
Lease liabilities
Operating leases - Property Property - operating lease liabilities $ 29,342  $ 30,746 
Finance leases - Property Other liabilities —  28 
Total lease liabilities $ 29,342  $ 30,774 

As of December 31, 2021, our operating leases had a weighted average remaining lease term of 51 years and a weighted average discount rate of 7.16%. The table below presents our total property lease cost (in thousands):
Statement of Operations Location For the Years Ended December 31,
Lease cost 2021 2020 2019
Operating lease cost
Property leases - fixed Property operating expenses $ 4,011  $ 2,413  $ 1,664 
Property leases - variable Property operating expenses 45  127  4 
Finance lease cost
Amortization of property right-of-use assets Property operating expenses 31  34  30 
$ 4,087  $ 2,574  $ 1,698 
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
For the Years Ended December 31,
Supplemental cash flow information 2021 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 3,206  $ 1,694  $ 1,004 
Financing cash flows for financing leases $ 14  $ 674  $ 14 

Payments on property operating leases were due as follows (in thousands):
Year Ending December 31,
December 31, 2021
2022 $ 3,297 
2023 3,352 
2024 3,403 
2025 1,749 
2026 1,530 
Thereafter 122,448 
Total lease payments 135,779 
Less: Amount representing interest (106,437)
Lease liability $ 29,342