Whitestone REITWSR

Whitestone REIT Leases Disclosure

10-KFiled Mar 11, 20222 min read
LEASES
 
    As a Lessor. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the consolidated statements of operations and comprehensive income (loss).
    
A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842) under noncancelable operating leases in existence as of December 31, 2021 is as follows (in thousands):
Years Ended December 31,
Minimum Future Rents(1)
2022$91,846 
202381,451 
202467,717 
202551,413 
202636,719 
Thereafter112,922 
Total$442,068 

(1) These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed.

    As a Lessee. We have office space, automobile, and office machine leases, which qualify as operating leases, with remaining lease terms of approximately one to five years.

The following table summarizes the fixed, future minimum rental payments, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liabilities for our operating leases in existence as of December 31, 2021 in which we are the lessee (in thousands):
Years Ended December 31,Minimum Future Rents
2022$110 
202365 
202443 
202531 
20261 
Total undiscounted rental payments250 
Less imputed interest19 
Total lease liabilities$231 

For the year ended December 31, 2021, the total lease costs were $1,036,000. The weighted average remaining lease term for our operating leases was 2.9 years at December 31, 2021. We do not include renewal options in the lease term for calculating the lease liability unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. The weighted average incremental borrowing rate was 4.5% at December 31, 2021.

For the year ended December 31, 2020, the total lease costs were $1,077,000. The weighted average remaining lease term for our operating leases was 2.1 years at December 31, 2020. We do not include renewal options in the lease term for
calculating the lease liability unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. The weighted average incremental borrowing rate was 4.5% at December 31, 2020.
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Historical Timeline

Fiscal YearFiled
2021Mar 11, 2022Showing above
2020Mar 8, 2021
2019Mar 2, 2020
2018Mar 15, 2019
2016Mar 3, 2017
2015Feb 29, 2016

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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