The Company entered into a ground lease agreement in 2016 related to the acquisition of 1140 Avenue of the Americas under a leasehold interest arrangement and recorded an ROU asset and lease liability related to this lease upon adoption of ASU 2016-02 during the year ended December 31, 2019. The ground lease is considered an operating lease. In computing the lease liabilities, the Company discounts future lease payments at an estimated incremental borrowing rate at adoption or acquisition if later. The term of the Company’s ground lease is significantly longer than the term of borrowings available to the Company on a fully-collateralized basis. The Company’s estimate of the incremental borrowing rate required significant judgment.

As of March 31, 2025, the Company’s ground lease has a remaining lease term of 41.8 years and a discount rate of 8.6%. As of March 31, 2025, the Company’s balance sheet includes an ROU asset and liability of $54.5 million and $54.6 million, respectively, which are included in operating lease right-of-use asset and operating lease liability, respectively, on the consolidated balance sheet. For both the three months ended March 31, 2025, and 2024 the Company paid cash of $1.2 million for amounts included in the measurement of lease liabilities and recorded expense of $1.2 million on a straight-line basis in accordance with the standard.

The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss. The Company did not enter into any additional ground leases as lessee during the three months ended March 31, 2025 and 2024.

The following table reflects the ground lease rent payments due from the Company and a reconciliation to the net present value of those payments as of March 31, 2025:


(In thousands)	Future Base Rent Payments
2025 (remainder)	$	3,560
2026	4,746
2027	4,746
2028	4,746
2029	4,746

Thereafter	183,516
Total lease payments	206,060
Less: Effects of discounting	(151,488)
Total present value of lease payments	$	54,572

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or know to be contemplated against the Company as of March 31, 2025.

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of March 31, 2025, the Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.