Leases
Lessor
We lease various commercial spaces to tenants over terms ranging from one to 30 years. Certain leases have termination options for a fee and/or renewal options. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Tenant expense reimbursements are included as a component of rental revenue in our consolidated statements of operations.
Rental revenue includes fixed and variable payments. Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs. The components of rental revenue consisted of the following: | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (amounts in thousands) | 2025 | | 2024 | | 2023 |
| Fixed payments | $ | 544,776 | | | $ | 540,357 | | | $ | 529,965 | |
| Variable payments | 81,437 | | | 74,239 | | | 67,354 | |
| Total rental revenue | $ | 626,213 | | | $ | 614,596 | | | $ | 597,319 | |
As of December 31, 2025, we were entitled to the following future contractual minimum lease payments (excluding tenant expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2054 (amounts in thousands):
| | | | | |
| 2026 | $ | 506,444 | |
| 2027 | 497,821 | |
| 2028 | 464,585 | |
| 2029 | 406,792 | |
| 2030 | 350,890 | |
| Thereafter | 2,004,540 | |
| $ | 4,231,072 | |
The above future minimum lease payments exclude tenant recoveries and the net accretion of above-market leases and below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding table is prepared assuming such options are not exercised.
As of December 31, 2025, the future lease payments to be received for signed leases that have not yet commenced was approximately $647.6 million.
Lessee
We determine if an arrangement is a lease at inception. Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets and lease liabilities of $27.9 million as of December 31, 2025 and right-of-use assets and lease liabilities of $28.2 million as of December 31, 2024 in our consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.
The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), in determining the present value of lease payments. The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of December 31, 2025 was 4.5%. Rent expense for lease payments related to our operating leases is recognized on a straight-line basis over the non-cancellable term of the leases. The weighted average remaining lease term as of December 31, 2025 was 44.6 years.
As of December 31, 2025, the following table summarizes our future minimum lease payments discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (amounts in thousands):
| | | | | |
| 2026 | $ | 1,503 | |
| 2027 | 1,482 | |
| 2028 | 1,482 | |
| 2029 | 1,482 | |
| 2030 | 1,482 | |
| Thereafter | 57,801 | |
| Total undiscounted lease payments | 65,232 | |
| Present value discount | (37,288) | |
| Ground lease liabilities | $ | 27,944 | |