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 through December 31, 2021 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 the sale of the Warehouses in December 2021, 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), capital expenditures 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 $1,004 for the three months and $3,011 for the nine months ended September 30, 2022 and $1,004 for the three months ended September 30, 2021 and $2,705 from the Effective Date to September 30, 2021 were paid directly to the ground lessor by New JCP and were included in “Lease income” in the accompanying consolidated statements 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 Master Lease, and are presented net of reimbursement from New JCP on the consolidated statements of operations. From the Effective Date to September 30, 2021, the Trust incurred sales and use taxes of $260, which was fully reimbursed by JCP as of September 30,2021. For the nine months ended September 30, 2022, the Trust incurred sales and use taxes of $560, which was fully reimbursed by New JCP as of September 30, 2022.
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 two Retail Properties classified as held for sale, is comprised of the following:
(a)Base rent consists of contractual lease payments less the impact of straight-line rent related to a 50% rent abatement provided through December 31, 2021 for each of the Retail Properties. 50%
(b)Represents lease income related to the excess (deficit) 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 September 30, 2022, undiscounted lease payments to be received under operating leases, excluding the two Retail Properties classified as held for sale, for the next five years and thereafter are as follows:
The weighted average remaining lease terms range was approximately 18.3 years as of September 30, 2022.
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.
Ground lease rent expense was $1,555 for the three months ended September 30, 2022 and $1,555 from three months ended September 30, 2021, which is included within “Operating expenses” in the accompanying consolidated statements of operations. For the three months ended September 30, 2022, ground lease rent expense includes interest expense of $1,034, amortization pertaining to right-of-use assets of $256, amortization pertaining to above market ground lease intangibles of $(160) and amortization pertaining to below market ground lease intangibles of $425. For the three months ended September 30, 2021, ground lease rent expense includes interest expense of $1,031, amortization pertaining to right-of-use assets of $259, amortization pertaining to above market
ground lease intangibles of $(160) and amortization pertaining to below market ground lease intangibles of $425. There were no cash payments for ground lease rent expense as these payments are made by the tenant.
Ground lease rent expense was $4,665 for the nine months ended September 30, 2022 and $4,227 from Effective Date to September 30, 2021, which is included within “Operating expenses” in the accompanying consolidated statements of operations. For the nine months ended September 30, 2022, ground lease rent expense includes interest expense of $3,101, amortization pertaining to right-of-use assets of $770, amortization pertaining to above market ground lease intangibles of $(480) and amortization pertaining to below market ground lease intangibles of $1,274. For the period January 30, 2021 to September 30, 2021, ground lease rent expense includes interest expense of $2,777, amortization pertaining to right-of-use assets of $692, amortization pertaining to above market ground lease intangibles of $(427) and amortization pertaining to below market ground lease intangibles of $1,185. There were no cash payments for ground lease rent expense as these payments are made by the tenant.
As of September 30, 2022, 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, excluding the two Retail Properties classified as held for sale, 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 44.6 years and a weighted average discount rate of 11.0% as of September 30, 2022.
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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 through December 31, 2021 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 the sale of the Warehouses in December 2021, 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), capital expenditures 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 $1,004 for the three months and $3,011 for the nine months ended September 30, 2022 and $1,004 for the three months ended September 30, 2021 and $2,705 from the Effective Date to September 30, 2021 were paid directly to the ground lessor by New JCP and were included in “Lease income” in the accompanying consolidated statements 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 Master Lease, and are presented net of reimbursement from New JCP on the consolidated statements of operations. From the Effective Date to September 30, 2021, the Trust incurred sales and use taxes of $260, which was fully reimbursed by JCP as of September 30,2021. For the nine months ended September 30, 2022, the Trust incurred sales and use taxes of $560, which was fully reimbursed by New JCP as of September 30, 2022.
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 two Retail Properties classified as held for sale, is comprised of the following:
(a)Base rent consists of contractual lease payments less the impact of straight-line rent related to a 50% rent abatement provided through December 31, 2021 for each of the Retail Properties. 50%
(b)Represents lease income related to the excess (deficit) 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 September 30, 2022, undiscounted lease payments to be received under operating leases, excluding the two Retail Properties classified as held for sale, for the next five years and thereafter are as follows:
The weighted average remaining lease terms range was approximately 18.3 years as of September 30, 2022.
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.
Ground lease rent expense was $1,555 for the three months ended September 30, 2022 and $1,555 from three months ended September 30, 2021, which is included within “Operating expenses” in the accompanying consolidated statements of operations. For the three months ended September 30, 2022, ground lease rent expense includes interest expense of $1,034, amortization pertaining to right-of-use assets of $256, amortization pertaining to above market ground lease intangibles of $(160) and amortization pertaining to below market ground lease intangibles of $425. For the three months ended September 30, 2021, ground lease rent expense includes interest expense of $1,031, amortization pertaining to right-of-use assets of $259, amortization pertaining to above market
ground lease intangibles of $(160) and amortization pertaining to below market ground lease intangibles of $425. There were no cash payments for ground lease rent expense as these payments are made by the tenant.
Ground lease rent expense was $4,665 for the nine months ended September 30, 2022 and $4,227 from Effective Date to September 30, 2021, which is included within “Operating expenses” in the accompanying consolidated statements of operations. For the nine months ended September 30, 2022, ground lease rent expense includes interest expense of $3,101, amortization pertaining to right-of-use assets of $770, amortization pertaining to above market ground lease intangibles of $(480) and amortization pertaining to below market ground lease intangibles of $1,274. For the period January 30, 2021 to September 30, 2021, ground lease rent expense includes interest expense of $2,777, amortization pertaining to right-of-use assets of $692, amortization pertaining to above market ground lease intangibles of $(427) and amortization pertaining to below market ground lease intangibles of $1,185. There were no cash payments for ground lease rent expense as these payments are made by the tenant.
As of September 30, 2022, 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, excluding the two Retail Properties classified as held for sale, 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 44.6 years and a weighted average discount rate of 11.0% as of September 30, 2022.
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