LEASES |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | LEASES Leases as Lessor
The Retail Properties are leased pursuant to a single retail master lease (as amended, modified or supplemented from time to time, the “Retail Master Lease”) and the Warehouses were leased pursuant to a single distribution center master lease (as amended, modified or supplemented from time to time, the “DC Master Lease”; together with the Retail Master Lease, the “Master Leases” and individually, each a “Master Lease”). On the Effective Date, New JCP assigned all of its right, title and interest as lessor under the Master Leases to the applicable PropCo. Each of the Master Leases has an initial term of 20 years that commenced on December 7, 2020 and is classified as an operating lease. The Trust receives monthly base rent pursuant to the Master Leases, which was 50% abated during the first lease year for each of the Retail Properties. At the beginning of the third lease year, base rent under the Retail Master Lease increases based on changes in the consumer price index (subject to a maximum 2% increase per year) and the increase is not included in fixed lease payments or the future undiscounted lease payments schedule. Upon sale of the Warehouses, the Trust assigned all of its right, title and interest as lessor in the DC Master Lease to the purchaser.
The Master Lease requires direct payment of all operating expenses, real estate taxes, ground lease payments (where applicable), and common area maintenance costs by New JCP and allows for lessor reimbursement if amounts are not directly paid. Expenses paid directly by New JCP are not included in the accompanying consolidated statement of operations, except for ground lease payments made by New JCP, since recording cash payments made by New JCP is necessary to relieve amounts due to the ground lessor included in the ground lease liabilities. Ground lease payments made by New JCP of $3,717 from the Effective Date to December 31, 2021 were paid directly to the ground lessor by New JCP and were included in “Lease income” in the accompanying consolidated statement of operations.
In certain municipalities, the Trust is required to remit sales and use taxes to governmental authorities based upon the rental income received from Properties. These taxes are required to be reimbursed by New JCP to the Trust in
accordance with the terms of the applicable Master Lease, and are presented net of reimbursement from New JCP on the consolidated statement of operations. From the Effective Date to December 31, 2021, the Trust incurred sales and use taxes of $354 due to governmental authorities, of which $347 has been reimbursed by New JCP and $7 is recorded as a receivable from New JCP.
From time to time the Trust may have leasing activity with replacement tenants other than New JCP, but has had none to date.
Lease income related to the Trust’s operating leases, including the Retail Property classified as held for sale, is comprised of the following:
(a)Base rent consists of fixed lease payments, subject to a 50% rent abatement during the first lease year for each of the Retail Properties.
(b)Represents lease income related to the excess of straight-line rental income over fixed lease payments.
(c)Ground lease reimbursement income consists of lease payments due from the tenant for land leased under non-cancellable operating leases.
(d)Represents above and below market lease amortization recognized straight line over the lease term.
As of December 31, 2021, undiscounted lease payments to be received under operating leases for the next five years and thereafter are as follows, excluding the Retail Property classified as held for sale:
The weighted average remaining lease terms range was approximately 19.0 years as of December 31, 2021.
Leases as Lessee
The Trust leases land under operating ground leases at certain of its Properties, which expire in various years from 2038 to 2096, including any available option periods that are reasonably certain to be exercised. All options terms were considered to be reasonably certain of being exercised through the initial term of the Master Lease.
On the Effective Date, the Trust recorded lease liabilities and ROU assets of $38,075 for long-term ground leases, calculated by discounting future lease payments by the Trust’s incremental borrowing rate as of January 30, 2021. The incremental borrowing rate was determined through consideration of (i) the Trust’s entity-specific risk
premium, (ii) observable market interest rates and (iii) lease term. The weighted average incremental borrowing rate used to discount the future payments was 11.0% and the Trust’s operating leases had a weighted average remaining lease term of 46.5 years as of January 30, 2021. Also on the Effective Date, the Trust recorded ground lease intangible assets of $87,925 and ground lease intangible liability of $15,309, which are included in "Right-of-use lease assets" on the accompanying consolidated balance sheets.
Ground lease rent expense was $5,782 from Effective Date to December 31, 2021, which is included within “Operating expenses” in the accompanying consolidated statement of operations. From the Effective Date to December 31, 2021, ground lease rent expense includes interest expense of $3,810, amortization pertaining to right-of-use assets of $950, amortization pertaining to above market ground lease intangibles of $(587) and amortization pertaining to below market ground lease intangibles of $1,609 from the Effective Date to December 31, 2021. There were no cash payments for ground lease rent expense. Ground lease rent expense of $5,782 from the Effective Date to December 31, 2021 were included in “Operating expenses” in the accompanying consolidated statement of operations.
As of December 31, 2021, undiscounted future rental obligations to be paid under the long-term ground leases by New JCP under the terms of the Master Lease on behalf of the Trust, including fixed rental increases, for the next five years and thereafter, are as follows:
The Trust’s long-term ground leases had a weighted average remaining lease term of 45.4 years and a weighted average discount rate of 11.0% as of December 31, 2021.
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| LEASES | LEASES Leases as Lessor
The Retail Properties are leased pursuant to a single retail master lease (as amended, modified or supplemented from time to time, the “Retail Master Lease”) and the Warehouses were leased pursuant to a single distribution center master lease (as amended, modified or supplemented from time to time, the “DC Master Lease”; together with the Retail Master Lease, the “Master Leases” and individually, each a “Master Lease”). On the Effective Date, New JCP assigned all of its right, title and interest as lessor under the Master Leases to the applicable PropCo. Each of the Master Leases has an initial term of 20 years that commenced on December 7, 2020 and is classified as an operating lease. The Trust receives monthly base rent pursuant to the Master Leases, which was 50% abated during the first lease year for each of the Retail Properties. At the beginning of the third lease year, base rent under the Retail Master Lease increases based on changes in the consumer price index (subject to a maximum 2% increase per year) and the increase is not included in fixed lease payments or the future undiscounted lease payments schedule. Upon sale of the Warehouses, the Trust assigned all of its right, title and interest as lessor in the DC Master Lease to the purchaser.
The Master Lease requires direct payment of all operating expenses, real estate taxes, ground lease payments (where applicable), and common area maintenance costs by New JCP and allows for lessor reimbursement if amounts are not directly paid. Expenses paid directly by New JCP are not included in the accompanying consolidated statement of operations, except for ground lease payments made by New JCP, since recording cash payments made by New JCP is necessary to relieve amounts due to the ground lessor included in the ground lease liabilities. Ground lease payments made by New JCP of $3,717 from the Effective Date to December 31, 2021 were paid directly to the ground lessor by New JCP and were included in “Lease income” in the accompanying consolidated statement of operations.
In certain municipalities, the Trust is required to remit sales and use taxes to governmental authorities based upon the rental income received from Properties. These taxes are required to be reimbursed by New JCP to the Trust in
accordance with the terms of the applicable Master Lease, and are presented net of reimbursement from New JCP on the consolidated statement of operations. From the Effective Date to December 31, 2021, the Trust incurred sales and use taxes of $354 due to governmental authorities, of which $347 has been reimbursed by New JCP and $7 is recorded as a receivable from New JCP.
From time to time the Trust may have leasing activity with replacement tenants other than New JCP, but has had none to date.
Lease income related to the Trust’s operating leases, including the Retail Property classified as held for sale, is comprised of the following:
(a)Base rent consists of fixed lease payments, subject to a 50% rent abatement during the first lease year for each of the Retail Properties.
(b)Represents lease income related to the excess of straight-line rental income over fixed lease payments.
(c)Ground lease reimbursement income consists of lease payments due from the tenant for land leased under non-cancellable operating leases.
(d)Represents above and below market lease amortization recognized straight line over the lease term.
As of December 31, 2021, undiscounted lease payments to be received under operating leases for the next five years and thereafter are as follows, excluding the Retail Property classified as held for sale:
The weighted average remaining lease terms range was approximately 19.0 years as of December 31, 2021.
Leases as Lessee
The Trust leases land under operating ground leases at certain of its Properties, which expire in various years from 2038 to 2096, including any available option periods that are reasonably certain to be exercised. All options terms were considered to be reasonably certain of being exercised through the initial term of the Master Lease.
On the Effective Date, the Trust recorded lease liabilities and ROU assets of $38,075 for long-term ground leases, calculated by discounting future lease payments by the Trust’s incremental borrowing rate as of January 30, 2021. The incremental borrowing rate was determined through consideration of (i) the Trust’s entity-specific risk
premium, (ii) observable market interest rates and (iii) lease term. The weighted average incremental borrowing rate used to discount the future payments was 11.0% and the Trust’s operating leases had a weighted average remaining lease term of 46.5 years as of January 30, 2021. Also on the Effective Date, the Trust recorded ground lease intangible assets of $87,925 and ground lease intangible liability of $15,309, which are included in "Right-of-use lease assets" on the accompanying consolidated balance sheets.
Ground lease rent expense was $5,782 from Effective Date to December 31, 2021, which is included within “Operating expenses” in the accompanying consolidated statement of operations. From the Effective Date to December 31, 2021, ground lease rent expense includes interest expense of $3,810, amortization pertaining to right-of-use assets of $950, amortization pertaining to above market ground lease intangibles of $(587) and amortization pertaining to below market ground lease intangibles of $1,609 from the Effective Date to December 31, 2021. There were no cash payments for ground lease rent expense. Ground lease rent expense of $5,782 from the Effective Date to December 31, 2021 were included in “Operating expenses” in the accompanying consolidated statement of operations.
As of December 31, 2021, undiscounted future rental obligations to be paid under the long-term ground leases by New JCP under the terms of the Master Lease on behalf of the Trust, including fixed rental increases, for the next five years and thereafter, are as follows:
The Trust’s long-term ground leases had a weighted average remaining lease term of 45.4 years and a weighted average discount rate of 11.0% as of December 31, 2021.
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