Quarterly report pursuant to Section 13 or 15(d)

VEREIT Office Assets, Leases

v3.22.2.2
VEREIT Office Assets, Leases
 9 Months Ended
Sep. 30, 2022
Entity Information [Line Items]  
Leases
Note 11 – Leases
Lessor
As of September 30, 2022, the Company’s operating leases have non-cancelable lease terms ranging from 0.1 years to 15.5 years. Certain leases with tenants include options to extend or terminate the lease agreements or to purchase the underlying assets. Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index or LIBOR).
The following table presents future minimum base rent payments due to the Company over the next five years and thereafter as of September 30, 2022 (in thousands).
Future Minimum
Base Rent Payments
October 1, 2022 - December 31, 2022 $ 35,475 
2023 135,118 
2024 104,498 
2025 66,646 
2026 63,461 
2027 43,872 
Thereafter 160,315 
Total $ 609,385 
Lessee
The Company is the lessee under ground lease arrangements and corporate office leases, which meet the criteria under U.S. GAAP for an operating lease. As of September 30, 2022, the Company’s operating leases had remaining lease terms ranging from 0.1 years to 62.3 years, which includes options to extend. Under the operating leases, the Company pays rent and may also pay variable costs, including property operating expenses and common area maintenance. The weighted-average discount rate used to measure the lease liability for the Company’s operating leases was 3.21% as of September 30, 2022. As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the lease guidance adoption date or the Merger Effective Time, as applicable, in determining the present value of lease payments.
Operating lease costs were $0.3 million and $0.8 million for the three and nine months ended September 30, 2022, respectively, and less than $0.1 million for each of the three and nine months ended September 30, 2021. No cash paid for operating lease liabilities was capitalized for the three and nine months ended September 30, 2022 and 2021.
The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for ground and corporate office lease obligations as of September 30, 2022 (in thousands).
Future Minimum Lease Payments
October 1, 2022 - December 31, 2022 229 
2023 778 
2024 453 
2025 442 
2026 442 
2027 445 
Thereafter 12,939 
Total 15,728 
Less: imputed interest 6,018 
Total $ 9,710 
Leases
Note 11 – Leases
Lessor
As of September 30, 2022, the Company’s operating leases have non-cancelable lease terms ranging from 0.1 years to 15.5 years. Certain leases with tenants include options to extend or terminate the lease agreements or to purchase the underlying assets. Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index or LIBOR).
The following table presents future minimum base rent payments due to the Company over the next five years and thereafter as of September 30, 2022 (in thousands).
Future Minimum
Base Rent Payments
October 1, 2022 - December 31, 2022 $ 35,475 
2023 135,118 
2024 104,498 
2025 66,646 
2026 63,461 
2027 43,872 
Thereafter 160,315 
Total $ 609,385 
Lessee
The Company is the lessee under ground lease arrangements and corporate office leases, which meet the criteria under U.S. GAAP for an operating lease. As of September 30, 2022, the Company’s operating leases had remaining lease terms ranging from 0.1 years to 62.3 years, which includes options to extend. Under the operating leases, the Company pays rent and may also pay variable costs, including property operating expenses and common area maintenance. The weighted-average discount rate used to measure the lease liability for the Company’s operating leases was 3.21% as of September 30, 2022. As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the lease guidance adoption date or the Merger Effective Time, as applicable, in determining the present value of lease payments.
Operating lease costs were $0.3 million and $0.8 million for the three and nine months ended September 30, 2022, respectively, and less than $0.1 million for each of the three and nine months ended September 30, 2021. No cash paid for operating lease liabilities was capitalized for the three and nine months ended September 30, 2022 and 2021.
The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for ground and corporate office lease obligations as of September 30, 2022 (in thousands).
Future Minimum Lease Payments
October 1, 2022 - December 31, 2022 229 
2023 778 
2024 453 
2025 442 
2026 442 
2027 445 
Thereafter 12,939 
Total 15,728 
Less: imputed interest 6,018 
Total $ 9,710 
VEREIT Office Assets  
Entity Information [Line Items]  
Leases Leases
Lessor
As of September 30, 2021, VEREIT Office Assets was the lessor for its 52 office properties. VEREIT Office Assets’ operating leases have non-cancelable lease terms ranging from 0.08 years to 11.67 years as of September 30, 2021. Certain leases with tenants included options to extend or terminate the lease agreements or to purchase the underlying assets. Lease agreements may have also contained rent increases that were based on an index or rate (e.g., the consumer price index or LIBOR). VEREIT Office Assets believed the residual value risk was not a primary risk because of the long-lived nature of the assets.
The components of rental revenue from VEREIT Office Assets’ operating leases were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2021 2021
Fixed:
Cash rent $ 32,431  $ 96,855 
Straight-line rent (165) (1,624)
Lease intangible amortization
 70  (12)
Property operating cost reimbursements
 1,004  2,925 
Total fixed
 33,340  98,144 
Variable (1)
7,154  23,245 
Total rental revenue $ 40,494  $ 121,389 
____________________________________
(1)Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent.
Lessee
VEREIT Office Assets was the lessee under one ground lease arrangement, which met the criteria of an operating lease. As of September 30, 2021, VEREIT Office Assets’ lease had a remaining lease term of 35.9 years, which included options to extend. Under the ground lease arrangement, VEREIT Office Assets paid variable costs, which included property operating expenses and common area maintenance. The discount rate for VEREIT Office Assets’ operating lease was 5.17% as of September 30, 2021. As VEREIT Office Assets’ lease did not provide an implicit rate, VEREIT Office Assets used an estimated incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.
Operating lease costs for the three and nine months ended September 30, 2021 were $0.1 million and $0.2 million, respectively. No cash paid for operating lease liabilities was capitalized.
Leases Leases
Lessor
As of September 30, 2021, VEREIT Office Assets was the lessor for its 52 office properties. VEREIT Office Assets’ operating leases have non-cancelable lease terms ranging from 0.08 years to 11.67 years as of September 30, 2021. Certain leases with tenants included options to extend or terminate the lease agreements or to purchase the underlying assets. Lease agreements may have also contained rent increases that were based on an index or rate (e.g., the consumer price index or LIBOR). VEREIT Office Assets believed the residual value risk was not a primary risk because of the long-lived nature of the assets.
The components of rental revenue from VEREIT Office Assets’ operating leases were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2021 2021
Fixed:
Cash rent $ 32,431  $ 96,855 
Straight-line rent (165) (1,624)
Lease intangible amortization
 70  (12)
Property operating cost reimbursements
 1,004  2,925 
Total fixed
 33,340  98,144 
Variable (1)
7,154  23,245 
Total rental revenue $ 40,494  $ 121,389 
____________________________________
(1)Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent.
Lessee
VEREIT Office Assets was the lessee under one ground lease arrangement, which met the criteria of an operating lease. As of September 30, 2021, VEREIT Office Assets’ lease had a remaining lease term of 35.9 years, which included options to extend. Under the ground lease arrangement, VEREIT Office Assets paid variable costs, which included property operating expenses and common area maintenance. The discount rate for VEREIT Office Assets’ operating lease was 5.17% as of September 30, 2021. As VEREIT Office Assets’ lease did not provide an implicit rate, VEREIT Office Assets used an estimated incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.
Operating lease costs for the three and nine months ended September 30, 2021 were $0.1 million and $0.2 million, respectively. No cash paid for operating lease liabilities was capitalized.