Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.21.2
LEASES
 9 Months Ended
Sep. 30, 2021
Leases [Abstract]  
LEASES
Note 5. LEASES
The Company's commitments under lease arrangements are primarily ground leases, in the case of our Drive Shack brand, and commercial leases, in the case of our Puttery brand, 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. 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. The company has elected to combine lease and non-lease components for all lease contracts.
Lease related costs recognized in the Consolidated Statements of Operations for the three and nine months ended September 30, 2021, and September 30, 2020, are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Finance lease cost
Amortization of right-of-use assets $ 1,412  $ 1,480  $ 4,159  $ 4,496 
Interest on lease liabilities 279  217  901  803 
Total finance lease cost 1,691  1,697  5,060  5,299 
Operating lease cost
Operating lease cost 6,144  8,881  22,714  27,146 
Short-term lease cost 109  432  619  1,282 
Variable lease cost 7,005  5,044  16,635  9,375 
Total operating lease cost 13,258  14,357  39,968  37,803 
Total lease cost $ 14,949  $ 16,054  $ 45,028  $ 43,102 
Other information related to leases included on the Consolidated Balance Sheet as of and for the nine months ended September 30, 2021 are as follows:
Operating Leases Financing Leases
Right-of-use assets $ 186,220  $ 15,507 
Lease liabilities $ 191,070  $ 15,436 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows $ 22,375  $ 279 
Financing cash flows $ —  $ 4,620 
Right-of-use assets obtained in exchange for lease liabilities $ 9,862  $ 1,670 
Weighted average remaining lease term 14.4 years 1.5 years
Weighted average discount rate 8.2  % 6.2  %

Future minimum lease payments under non-cancellable leases as of September 30, 2021 are as follows:
Operating Leases Financing Leases
October 1, 2021 - December 31, 2021 $ 18,733  $ 1,732 
2022 31,078  5,871 
2023 31,019  4,877 
2024 23,945  2,713 
2025 21,578  1,510 
Thereafter 182,248  572 
Total minimum lease payments 308,601  17,275 
Less: imputed interest 117,531  1,839 
Total lease liabilities $ 191,070  $ 15,436 
Gain) Loss on Lease Terminations and ImpairmentThe following table summarizes the amounts the Company recorded in the Consolidated Statements of Operations:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Gain) Loss on lease terminations $ 3  $ 201  $ (652) $ (2,924)
Impairment on corporate office assets (held-for-use) —  —  3,303  — 
Impairment on traditional golf properties (held-for-use) —  —  —  792 
Other losses 321  101  321  101 
Total (Gain) Loss on lease terminations and impairment $ 324  $ 302  $ 2,972  $ (2,031)


(Gain) Loss on lease terminations -
During the nine months ended September 30, 2021, the Company recorded a gain of $0.7 million on the termination of one traditional golf course lease. The gain related to the derecognition of long-lived, intangible, and ROU assets and membership deposit liability balances.

During nine months ended September 30, 2020, the Company recorded a gain of $2.9 million on the termination of two traditional golf course leases. The gains related to the derecognition of long-lived, intangible, and ROU assets and membership deposit liability balances.

Held-for-use impairment -
During the nine months ended September 30, 2021, the Company recorded impairment charges of $3.3 million related to right-of-use and other lease related assets of our former headquarters office in New York given the relocation of the Company’s headquarters to Dallas, TX. This includes impairment of leasehold improvements of $0.1 million, furniture fixtures, and equipment of $0.3 million, and ROU assets of $2.7 million. The Company evaluated the recoverability of the carrying value of these assets using the income approach based on future assumptions of cash flows. The development of discounted cash flow models used to estimate the fair value of the asset groups required the application of significant judgement in determining market participant assumptions, including the projected sublease income over the remaining lease terms, expected downtime prior to the commencement of future subleases, expected lease incentives offered to future tenants, and discount rates that reflected the level of risk associated with these future cash flows. As the fair value inputs utilized are unobservable, the Company determined that the significant inputs used to value these properties fall within Level 3 for fair value reporting.
LEASES
Note 5. LEASES
The Company's commitments under lease arrangements are primarily ground leases, in the case of our Drive Shack brand, and commercial leases, in the case of our Puttery brand, 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. 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. The company has elected to combine lease and non-lease components for all lease contracts.
Lease related costs recognized in the Consolidated Statements of Operations for the three and nine months ended September 30, 2021, and September 30, 2020, are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Finance lease cost
Amortization of right-of-use assets $ 1,412  $ 1,480  $ 4,159  $ 4,496 
Interest on lease liabilities 279  217  901  803 
Total finance lease cost 1,691  1,697  5,060  5,299 
Operating lease cost
Operating lease cost 6,144  8,881  22,714  27,146 
Short-term lease cost 109  432  619  1,282 
Variable lease cost 7,005  5,044  16,635  9,375 
Total operating lease cost 13,258  14,357  39,968  37,803 
Total lease cost $ 14,949  $ 16,054  $ 45,028  $ 43,102 
Other information related to leases included on the Consolidated Balance Sheet as of and for the nine months ended September 30, 2021 are as follows:
Operating Leases Financing Leases
Right-of-use assets $ 186,220  $ 15,507 
Lease liabilities $ 191,070  $ 15,436 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows $ 22,375  $ 279 
Financing cash flows $ —  $ 4,620 
Right-of-use assets obtained in exchange for lease liabilities $ 9,862  $ 1,670 
Weighted average remaining lease term 14.4 years 1.5 years
Weighted average discount rate 8.2  % 6.2  %

Future minimum lease payments under non-cancellable leases as of September 30, 2021 are as follows:
Operating Leases Financing Leases
October 1, 2021 - December 31, 2021 $ 18,733  $ 1,732 
2022 31,078  5,871 
2023 31,019  4,877 
2024 23,945  2,713 
2025 21,578  1,510 
Thereafter 182,248  572 
Total minimum lease payments 308,601  17,275 
Less: imputed interest 117,531  1,839 
Total lease liabilities $ 191,070  $ 15,436 
Gain) Loss on Lease Terminations and ImpairmentThe following table summarizes the amounts the Company recorded in the Consolidated Statements of Operations:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Gain) Loss on lease terminations $ 3  $ 201  $ (652) $ (2,924)
Impairment on corporate office assets (held-for-use) —  —  3,303  — 
Impairment on traditional golf properties (held-for-use) —  —  —  792 
Other losses 321  101  321  101 
Total (Gain) Loss on lease terminations and impairment $ 324  $ 302  $ 2,972  $ (2,031)


(Gain) Loss on lease terminations -
During the nine months ended September 30, 2021, the Company recorded a gain of $0.7 million on the termination of one traditional golf course lease. The gain related to the derecognition of long-lived, intangible, and ROU assets and membership deposit liability balances.

During nine months ended September 30, 2020, the Company recorded a gain of $2.9 million on the termination of two traditional golf course leases. The gains related to the derecognition of long-lived, intangible, and ROU assets and membership deposit liability balances.

Held-for-use impairment -
During the nine months ended September 30, 2021, the Company recorded impairment charges of $3.3 million related to right-of-use and other lease related assets of our former headquarters office in New York given the relocation of the Company’s headquarters to Dallas, TX. This includes impairment of leasehold improvements of $0.1 million, furniture fixtures, and equipment of $0.3 million, and ROU assets of $2.7 million. The Company evaluated the recoverability of the carrying value of these assets using the income approach based on future assumptions of cash flows. The development of discounted cash flow models used to estimate the fair value of the asset groups required the application of significant judgement in determining market participant assumptions, including the projected sublease income over the remaining lease terms, expected downtime prior to the commencement of future subleases, expected lease incentives offered to future tenants, and discount rates that reflected the level of risk associated with these future cash flows. As the fair value inputs utilized are unobservable, the Company determined that the significant inputs used to value these properties fall within Level 3 for fair value reporting.