Drive Shack Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

LEASES LEASES

LEASES LEASES

12 Months Ended

Dec. 31, 2019

On January 1, 2019, the Company adopted ASU 2016-02 using a modified retrospective approach, resulting in the recognition of operating lease right-of-use assets and operating lease liabilities of $225.6 million and $205.9 million, respectively, with the difference primarily due to reclassifications of leasehold intangibles and an adjustment to accumulated deficit.

The Company's commitments under lease arrangements are primarily ground leases for Entertainment Golf venues and Traditional Golf properties and related facilities, office leases and leases for golf carts and equipment. The majority of lease terms for our Entertainment Golf venues and Traditional Golf properties and related facilities initially range from 10 to 20 years, and include up to eight 5-year renewal options. In addition to minimum payments, certain leases require payment of the excess of various percentages of gross revenue or net operating income over the minimum rental payments. The leases generally require the payment of taxes assessed against the leased property and the cost of insurance and maintenance. Certain leases include scheduled increases or decreases in minimum rental payments at various times during the term of the lease.

Equipment and golf cart leases initially range between 24 to 66 months and typically contain renewal options which may be on a month-to-month basis.

An option to renew a lease is included in the determination of the ROU asset and lease liability when it is reasonably certain that the renewal option will be exercised.

Lease related costs recognized in the Consolidated Statements of Operations for the year ended December 31, 2019 are as follows:



	Year Ended December 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	6,305
Interest on lease liabilities	1,313
Total finance lease cost	7,618

Operating lease cost
Operating lease cost	36,236
Short-term lease cost	2,288
Variable lease cost	16,667
Total operating lease cost	55,191
Total lease cost	$	62,809

Other information related to leases included on the Consolidated Balance Sheet as of and for the year ended December 31, 2019 are as follows:



	Operating Leases			Financing Leases
Right-of-use assets	$	215,308		$	20,119
Lease liabilities	$	204,597		$	19,079
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	30,309		$	1,313
Financing cash flows	N/A			$	7,440
Right-of-use assets obtained in exchange for lease liabilities	$	10,813		$	12,776
Weighted average remaining lease term	12.7 years			3.5 years
Weighted average discount rate	8.8		%	7.3		%

Future minimum lease payments under non-cancellable leases as of December 31, 2019 are as follows:



	Operating Leases		Financing Leases
2020	$	33,151	$	7,222
2021	32,515		5,881
2022	31,133		4,290
2023	30,962		3,263
2024	24,864		1,039
Thereafter	205,108		33
Total minimum lease payments	357,733		21,728
Less: imputed interest	153,136		2,649
Total lease liabilities	$	204,597	$	19,079

LEASES

Equipment and golf cart leases initially range between 24 to 66 months and typically contain renewal options which may be on a month-to-month basis.

An option to renew a lease is included in the determination of the ROU asset and lease liability when it is reasonably certain that the renewal option will be exercised.

Lease related costs recognized in the Consolidated Statements of Operations for the year ended December 31, 2019 are as follows:



	Year Ended December 31, 2019
Finance lease cost
Amortization of right-of-use assets	$	6,305
Interest on lease liabilities	1,313
Total finance lease cost	7,618

Operating lease cost
Operating lease cost	36,236
Short-term lease cost	2,288
Variable lease cost	16,667
Total operating lease cost	55,191
Total lease cost	$	62,809

Other information related to leases included on the Consolidated Balance Sheet as of and for the year ended December 31, 2019 are as follows:



	Operating Leases			Financing Leases
Right-of-use assets	$	215,308		$	20,119
Lease liabilities	$	204,597		$	19,079
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	30,309		$	1,313
Financing cash flows	N/A			$	7,440
Right-of-use assets obtained in exchange for lease liabilities	$	10,813		$	12,776
Weighted average remaining lease term	12.7 years			3.5 years
Weighted average discount rate	8.8		%	7.3		%

Future minimum lease payments under non-cancellable leases as of December 31, 2019 are as follows:



	Operating Leases		Financing Leases
2020	$	33,151	$	7,222
2021	32,515		5,881
2022	31,133		4,290
2023	30,962		3,263
2024	24,864		1,039
Thereafter	205,108		33
Total minimum lease payments	357,733		21,728
Less: imputed interest	153,136		2,649
Total lease liabilities	$	204,597	$	19,079