LEASES |
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| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | LEASES Leases as Lessor
The 160 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 six Warehouses are 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 is 50% abated during the first lease year for each of the Retail Properties. At the beginning of the fourth lease year, base rent under the DC Master Lease increases by 2% per year and the increase is included in fixed lease payments and the future undiscounted lease payments schedule. 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.
The Master Leases require direct payment of all operating expenses, real estate taxes, ground lease payments (where applicable), and common area maintenance costs by New JCP and allow 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 $1,021 for the three months ended June 30, 2021, and $1,701 from the Effective Date to June 30, 2021, were included in “Lease income” in the accompanying consolidated statements of operations. Ground lease rent expense of $1,538 for the three months ended June 30, 2021, and $2,672 from the Effective Date to June 30, 2021, were included in “Operating expenses” 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 applicable Master Lease, and are presented net of reimbursement from New JCP on the consolidated statements of operations. For the three months ended June 30, 2021 and from the Effective Date to June 30, 2021, the Trust remitted sales and use taxes of $159 to governmental authorities, which was fully reimbursed by 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 Retail Properties 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 June 30, 2021, undiscounted lease payments to be received under operating leases for the next five years and thereafter are as follows, excluding Retail Properties classified as held for sale:
The weighted average remaining lease terms range was approximately 19.5 years as of June 30, 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.
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. The Trust’s ground lease intangible assets of $80,384 and ground lease intangible liability of $15,309 are presented net of the ROU assets.
Ground lease rent expense was $1,538 for the three months ended June 30, 2021 and $2,672 from Effective Date to June 30, 2021, which is included within “Operating expenses” in the accompanying consolidated statement of operations. Ground rent lease expense includes amortization pertaining to above market ground lease intangibles of $(225) for the three months ended June 30, 2021 and $(266) from the Effective Date to June 30, 2021 and amortization pertaining to below market ground lease intangibles of $456 for the three months ended June 30, 2021 and $760 from the Effective Date to June 30, 2021. There were no cash payments for ground rent lease expense since these amounts are paid directly to the ground lessor by New JCP and included in "Lease income" in the accompanying consolidated statements of operations.
As of June 30, 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, excluding obligations of Retail Properties classified as held for sale:
The Trust’s long-term ground leases had a weighted average remaining lease term of 46.1 years and a weighted average discount rate of 11.0% as of June 30, 2021.
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| LEASES | LEASES Leases as Lessor
The 160 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 six Warehouses are 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 is 50% abated during the first lease year for each of the Retail Properties. At the beginning of the fourth lease year, base rent under the DC Master Lease increases by 2% per year and the increase is included in fixed lease payments and the future undiscounted lease payments schedule. 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.
The Master Leases require direct payment of all operating expenses, real estate taxes, ground lease payments (where applicable), and common area maintenance costs by New JCP and allow 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 $1,021 for the three months ended June 30, 2021, and $1,701 from the Effective Date to June 30, 2021, were included in “Lease income” in the accompanying consolidated statements of operations. Ground lease rent expense of $1,538 for the three months ended June 30, 2021, and $2,672 from the Effective Date to June 30, 2021, were included in “Operating expenses” 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 applicable Master Lease, and are presented net of reimbursement from New JCP on the consolidated statements of operations. For the three months ended June 30, 2021 and from the Effective Date to June 30, 2021, the Trust remitted sales and use taxes of $159 to governmental authorities, which was fully reimbursed by 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 Retail Properties 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 June 30, 2021, undiscounted lease payments to be received under operating leases for the next five years and thereafter are as follows, excluding Retail Properties classified as held for sale:
The weighted average remaining lease terms range was approximately 19.5 years as of June 30, 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.
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. The Trust’s ground lease intangible assets of $80,384 and ground lease intangible liability of $15,309 are presented net of the ROU assets.
Ground lease rent expense was $1,538 for the three months ended June 30, 2021 and $2,672 from Effective Date to June 30, 2021, which is included within “Operating expenses” in the accompanying consolidated statement of operations. Ground rent lease expense includes amortization pertaining to above market ground lease intangibles of $(225) for the three months ended June 30, 2021 and $(266) from the Effective Date to June 30, 2021 and amortization pertaining to below market ground lease intangibles of $456 for the three months ended June 30, 2021 and $760 from the Effective Date to June 30, 2021. There were no cash payments for ground rent lease expense since these amounts are paid directly to the ground lessor by New JCP and included in "Lease income" in the accompanying consolidated statements of operations.
As of June 30, 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, excluding obligations of Retail Properties classified as held for sale:
The Trust’s long-term ground leases had a weighted average remaining lease term of 46.1 years and a weighted average discount rate of 11.0% as of June 30, 2021.
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