30 NOTES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Interest Expense and Amortization  of Deferred Debt Costs ( In thousands ) Year ended December 31, 2004 2003 2002 Interest incurred $ 29,320 $ 27,154 $ 25,661 Amortization of  deferred debt costs 929 801 725 Capitalized interest (3,227) (1,382) (548) Total $ 27,022 $ 26,573 $ 25,838 7. LONG-TERM LEASE OBLIGATIONS 6. LEASE AGREEMENTS In addition to the above, Flagship Center consists of two developed out parcels that are part of a larger adjacent community shopping center formerly owned by The Saul Organization and sold to an affiliate of a tenant in 1991. The Company has a 90-year ground leasehold interest which commenced in September 1991 with a minimum rent of one dollar per year. Countryside shopping center was acquired in February, 2004. Because of certain land use considerations, approximately 0.54 of the 16 acres acquired is held under a 99-year ground lease. The lease requires the Company to pay minimum rent of one dollar per year  as well as its pro-rata share of the real estate taxes. The Company’s corporate headquarters lease, which commenced in March 2002, is leased by a member of The Saul Organization. The 10-year lease provides for base rent escalated at 3% per year, with payment of a pro-rata share of operating expenses over a base year amount. The Company and The Saul Organization entered into a shared services agreement whereby each party pays an allocation of total rental payments on a percentage proportionate to the number of employees employed by each party. The Company’s rent payments for the years ended December 31, 2004, 2003 and 2002 were $621,000, $569,000 and $547,000, respectively. Expenses arising from the lease are included in general and administrative expense (see Note 9 – Related Party Transactions). The majority of the leases also provide for rental increases and expense recoveries based on fixed annual increases or increases in the Consumer Price Index and increases in operating expenses. The expense recoveries generally are payable in equal installments throughout the year based on estimates, with adjustments made in the succeeding year. Expense recoveries for the years ended December 31, 2004, 2003 and 2002 amounted to $16,712,000, $14,438,000 and $12,680,000, respectively. In addition, certain retail leases provide for percentage  rent based on sales in excess of the minimum specified in the tenant’s lease. Percentage rent amounted to $1,635,000, $1,695,000 and $1,850,000, for the  years ended December 31, 2004, 2003 and 2002, respectively. Lease income includes primarily base rent arising from noncancelable commercial leases. Base rent (including straight-lined rent) for the years ended December 31, 2004, 2003 and 2002, amounted to $91,125,000, $78,167,000 and $75,699,000, respectively. Future contractual payments under noncancelable leases for years ended December 31, are as follows: Ground Lease Rental Commitments ( In thousands ) Annually Total 2005-2009 Thereafter Beacon Center $ 53 $ 3,130 Olney 51 4,322 Southdale 60 3,485 Total $ 164 $ 10,937 Base Rent Future Contractual Payments ( In thousands ) 2005 $ 92,181 2006 85,272 2007 77,803 2008 67,674 2009 56,309 Thereafter 290,213 Total $ 669,452 Certain properties are subject to noncancelable long- term leases which apply to land underlying the Shopping Centers. Certain of the leases provide for periodic adjustments of the base annual rent and require the payment of real estate taxes on the underlying land. The leases will expire between 2058 and 2068. Reflected in the accompanying consolidated financial statements is minimum ground rent expense of $164,000 for each of the years ended December 31, 2004, 2003 and 2002, respectively. The future minimum rental commitments under these ground leases are as follows: