Quarterly report pursuant to Section 13 or 15(d)

VEREIT Office Assets, Leases

v3.21.2
VEREIT Office Assets, Leases - VEREIT Office Assets
 9 Months Ended
Sep. 30, 2021
Entity Information [Line Items]  
Leases
Note 5 – Leases
Lessor
As of September 30, 2021, VEREIT Office Assets is 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 and 0.2 years to 8.75 years as of December 31, 2020, respectively. 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). VEREIT Office Assets believes the residual value risk is 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 2020 2021 2020
Fixed:
Cash rent $ 32,431  $ 32,840  $ 96,855  $ 100,181 
Straight-line rent (165) (272) (1,624) (309)
Lease intangible amortization
 70  (31) (12) (35)
Property operating cost reimbursements
 1,004  996  2,925  2,848 
Total fixed
 33,340  33,533  98,144  102,685 
Variable (1)
7,154  8,837  23,245  25,898 
Total rental revenue $ 40,494  $ 42,370  $ 121,389  $ 128,583 
____________________________________
(1)Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent.
The following table presents future minimum operating lease payments due to VEREIT Office Assets over the next five years and thereafter as of September 30, 2021 (in thousands).
Future Minimum
Operating Lease Payments
October 1, 2021 - December 31, 2021 $ 24,188 
2022 109,604 
2023 92,259 
2024 69,414 
2025 35,956 
2026 26,847 
Thereafter 30,409 
Total $ 388,677 
Lessee
VEREIT Office Assets is the lessee under one ground lease arrangement, which meets the criteria of an operating lease. As of September 30, 2021, VEREIT Office Assets’ lease has a remaining lease term of 35.9 years, which includes options to extend. Under the ground lease arrangement, VEREIT Office Assets pays variable costs, including 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 does 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 each of three months ended September 30, 2021 and 2020 and for each of the nine months ended September 30, 2021 and 2020 was $0.1 million and $0.2 million, respectively. No cash paid for operating lease liabilities was capitalized.
The following table reflects the maturity analysis of payments due from VEREIT Office Assets over the next five years and thereafter for ground lease obligations as of September 30, 2021 (in thousands).
Future Minimum Lease Payments
October 1, 2021 - December 31, 2021 $ 82 
2022 329 
2023 329 
2024 329 
2025 329 
2026 329 
Thereafter 10,064 
Total 11,791 
Less: imputed interest 6,426 
Total $ 5,365 
Leases
Note 5 – Leases
Lessor
As of September 30, 2021, VEREIT Office Assets is 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 and 0.2 years to 8.75 years as of December 31, 2020, respectively. 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). VEREIT Office Assets believes the residual value risk is 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 2020 2021 2020
Fixed:
Cash rent $ 32,431  $ 32,840  $ 96,855  $ 100,181 
Straight-line rent (165) (272) (1,624) (309)
Lease intangible amortization
 70  (31) (12) (35)
Property operating cost reimbursements
 1,004  996  2,925  2,848 
Total fixed
 33,340  33,533  98,144  102,685 
Variable (1)
7,154  8,837  23,245  25,898 
Total rental revenue $ 40,494  $ 42,370  $ 121,389  $ 128,583 
____________________________________
(1)Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent.
The following table presents future minimum operating lease payments due to VEREIT Office Assets over the next five years and thereafter as of September 30, 2021 (in thousands).
Future Minimum
Operating Lease Payments
October 1, 2021 - December 31, 2021 $ 24,188 
2022 109,604 
2023 92,259 
2024 69,414 
2025 35,956 
2026 26,847 
Thereafter 30,409 
Total $ 388,677 
Lessee
VEREIT Office Assets is the lessee under one ground lease arrangement, which meets the criteria of an operating lease. As of September 30, 2021, VEREIT Office Assets’ lease has a remaining lease term of 35.9 years, which includes options to extend. Under the ground lease arrangement, VEREIT Office Assets pays variable costs, including 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 does 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 each of three months ended September 30, 2021 and 2020 and for each of the nine months ended September 30, 2021 and 2020 was $0.1 million and $0.2 million, respectively. No cash paid for operating lease liabilities was capitalized.
The following table reflects the maturity analysis of payments due from VEREIT Office Assets over the next five years and thereafter for ground lease obligations as of September 30, 2021 (in thousands).
Future Minimum Lease Payments
October 1, 2021 - December 31, 2021 $ 82 
2022 329 
2023 329 
2024 329 
2025 329 
2026 329 
Thereafter 10,064 
Total 11,791 
Less: imputed interest 6,426 
Total $ 5,365