Annual report pursuant to Section 13 and 15(d)

VEREIT Office Assets, Leases

v3.22.4
VEREIT Office Assets, Leases
 12 Months Ended
Dec. 31, 2022
Entity Information [Line Items]  
Leases
Note 11 – Leases
Lessor
As of December 31, 2022, the Company’s operating leases have non-cancelable lease terms ranging from 0.2 years to 15.3 years. Certain leases with tenants include tenant 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).
The following table presents future minimum base rent payments due to the Company over the next five years and thereafter as of December 31, 2022 (in thousands).
Future Minimum
Base Rent Payments
2023
 $ 137,833 
2024 110,559 
2025 72,868 
2026 69,771 
2027 50,342 
Thereafter 184,574 
Total $ 625,947 
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 December 31, 2022, the Company’s operating leases had remaining lease terms ranging from 0.9 years to 62.0 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 3.49% as of December 31, 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 commencement date, lease guidance adoption date or the Merger Effective Time, as applicable, in determining the present value of lease payments.
Operating lease costs were $1.0 million, $0.3 million, and $0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. No cash paid for operating lease liabilities was capitalized.
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 December 31, 2022 (in thousands).
Future Minimum Lease Payments
2023
 $ 1,134 
2024 883 
2025 892 
2026 478 
2027 445 
Thereafter 12,939 
Total 16,771 
Less: imputed interest 6,079 
Total $ 10,692 
Leases
Note 11 – Leases
Lessor
As of December 31, 2022, the Company’s operating leases have non-cancelable lease terms ranging from 0.2 years to 15.3 years. Certain leases with tenants include tenant 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).
The following table presents future minimum base rent payments due to the Company over the next five years and thereafter as of December 31, 2022 (in thousands).
Future Minimum
Base Rent Payments
2023
 $ 137,833 
2024 110,559 
2025 72,868 
2026 69,771 
2027 50,342 
Thereafter 184,574 
Total $ 625,947 
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 December 31, 2022, the Company’s operating leases had remaining lease terms ranging from 0.9 years to 62.0 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 3.49% as of December 31, 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 commencement date, lease guidance adoption date or the Merger Effective Time, as applicable, in determining the present value of lease payments.
Operating lease costs were $1.0 million, $0.3 million, and $0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. No cash paid for operating lease liabilities was capitalized.
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 December 31, 2022 (in thousands).
Future Minimum Lease Payments
2023
 $ 1,134 
2024 883 
2025 892 
2026 478 
2027 445 
Thereafter 12,939 
Total 16,771 
Less: imputed interest 6,079 
Total $ 10,692 
VEREIT Office Assets  
Entity Information [Line Items]  
Leases
Note 5 – Leases
Lessor
As of October 31, 2021, VEREIT Office Assets was the lessor for its 52 office properties. VEREIT Office Assets’ operating leases have non-cancelable lease terms ranging from 0.17 years to 11.59 years as of October 31, 2021. Certain leases with tenants included tenant 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). 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):
Ten Months Ended October 31, Year Ended December 31,
2021 2020
Fixed:
Cash rent $ 109,582  $ 132,402 
Straight-line rent (4,889) (869)
Lease intangible amortization
 (29) (67)
Property operating cost reimbursements
 3,270  3,794 
Total fixed
 107,934  135,260 
Variable (1)
26,806  35,044 
Total rental revenue $ 134,740  $ 170,304 
____________________________________
(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 October 31, 2021 (in thousands).
Future Minimum
Operating Lease Payments
November 1, 2021 - December 31, 2021 $ 15,683 
2022 110,872 
2023 95,130 
2024 72,361 
2025 38,980 
2026 29,951 
Thereafter 34,357 
Total $ 397,334 
Lessee
VEREIT Office Assets was the lessee under one ground lease arrangement, which met the criteria of an operating lease. As of October 31, 2021, VEREIT Office Assets’ lease had a remaining lease term of 35.8 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 October 31, 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 ten months ended October 31, 2021 and for the year ended December 31, 2020 were $0.2 million and $0.3 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 October 31, 2021 (in thousands).
Future Minimum Lease Payments
November 1, 2021 - December 31, 2021 $ 55 
2022 329 
2023 329 
2024 329 
2025 329 
2026 329 
Thereafter 10,062 
Total 11,762 
Less: imputed interest 6,403 
Total $ 5,359 
Leases
Note 5 – Leases
Lessor
As of October 31, 2021, VEREIT Office Assets was the lessor for its 52 office properties. VEREIT Office Assets’ operating leases have non-cancelable lease terms ranging from 0.17 years to 11.59 years as of October 31, 2021. Certain leases with tenants included tenant 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). 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):
Ten Months Ended October 31, Year Ended December 31,
2021 2020
Fixed:
Cash rent $ 109,582  $ 132,402 
Straight-line rent (4,889) (869)
Lease intangible amortization
 (29) (67)
Property operating cost reimbursements
 3,270  3,794 
Total fixed
 107,934  135,260 
Variable (1)
26,806  35,044 
Total rental revenue $ 134,740  $ 170,304 
____________________________________
(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 October 31, 2021 (in thousands).
Future Minimum
Operating Lease Payments
November 1, 2021 - December 31, 2021 $ 15,683 
2022 110,872 
2023 95,130 
2024 72,361 
2025 38,980 
2026 29,951 
Thereafter 34,357 
Total $ 397,334 
Lessee
VEREIT Office Assets was the lessee under one ground lease arrangement, which met the criteria of an operating lease. As of October 31, 2021, VEREIT Office Assets’ lease had a remaining lease term of 35.8 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 October 31, 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 ten months ended October 31, 2021 and for the year ended December 31, 2020 were $0.2 million and $0.3 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 October 31, 2021 (in thousands).
Future Minimum Lease Payments
November 1, 2021 - December 31, 2021 $ 55 
2022 329 
2023 329 
2024 329 
2025 329 
2026 329 
Thereafter 10,062 
Total 11,762 
Less: imputed interest 6,403 
Total $ 5,359