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Leases

12 Months Ended

Dec. 31, 2024

11.

Leases

Lessee Arrangements

The Company determines whether an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets, net, and Operating lease obligations on the Consolidated and Combined Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an estimate of the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The Operating lease right-of-use asset also includes any lease payments made, less any lease incentives and initial direct costs incurred. The Company does not have any finance leases. The Company elected the practical expedient to not separate lease components from non-lease components of its lease agreements for all classes of underlying assets. Certain of the Company’s lease agreements include non-lease components such as fixed common area maintenance charges. The Company applies Leases (Topic 842) to the single combined lease component.

The Company’s lessee agreements consist of operating leases primarily for ground leases and other real estate. The majority of the Company’s leases have remaining lease terms ranging from less than two years to approximately 50 years, excluding extension options. The Company considers its strategic plan and the life of associated agreements in determining when options to extend or terminate lease terms are reasonably certain of being exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain of the Company’s lease agreements include variable lease payments based on a percentage of income generated through subleases, changes in price indices and market rates, and other costs arising from operating, maintenance, and taxes. The Company’s lease agreements do not contain residual value guarantees or restrictive covenants. The Company leases various buildings and office space constructed on its ground leases to third parties.

The Company’s leased assets and liabilities are as follows:


	December 31,		December 31,
in thousands	2024		2023
Assets
Operating lease right-of-use assets, net	$	38,682	$	40,884
Liabilities
Operating lease obligations	$	47,470	$	48,153

The components of lease expense are as follows:



	Year Ended December 31,
in thousands	2024		2023		2022
Operating lease cost	$	6,126	$	6,189	$	6,043
Variable lease cost		478		478		452
Total lease cost	$	6,604	$	6,667	$	6,495

Future minimum lease payments as of December 31, 2024, are as follows:


in thousands	Operating Leases
2025	$	4,386
2026		3,427
2027		2,760
2028		2,819
2029		2,880
Thereafter		222,847
Total lease payments		239,119
Less: imputed interest		(191,649)
Present value of lease liabilities	$	47,470

Other information related to the Company’s lessee agreements is as follows:


Supplemental Combined Statements of Cash Flows Information	Year ended December 31,
in thousands	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	4,327	$	4,266	$	4,320


	Year Ended December 31,
Other Information	2024		2023
Weighted-average remaining lease term (years)
Operating leases	45.5		45.3
Weighted-average discount rate
Operating leases	7.8	%	7.8	%

Lessor Arrangements

The Company receives rental income from the leasing of retail, office, multi-family, and other space under operating leases, as well as certain variable tenant recoveries. Operating leases for our retail, office, and other properties are with a variety of tenants and have a remaining average term of approximately seven years. Lease terms generally vary among tenants and may include early termination options, extension options, and fixed rental rate increases or rental rate increases based on an index. Multi-family leases generally have a term of 12 months or less. The Company elected the practical expedient to not separate lease components from non-lease components of its lease agreements for all classes of underlying assets. Minimum rent revenues related to operating leases are as follows:


	Year Ended December 31,
in thousands	2024		2023		2022
Total minimum rent revenues	$	21,289	$	17,325	$	11,275

Total future minimum rents associated with operating leases are as follows as of December 31, 2024:


	Total Minimum
in thousands	Rent
2025	$	21,859
2026		19,477
2027		19,603
2028		19,701
2029		19,373
Thereafter		86,850
Total	$	186,863

Minimum rent revenues are recognized on a straight‑line basis over the terms of the related leases when collectability is reasonably assured and the tenant has taken possession of, or controls, the physical use of the leased asset. Percentage rent in lieu of fixed minimum rent is recognized as sales are reported from tenants. Minimum rent revenues reported on the Consolidated and Combined Statements of Operations also include amortization related to above and below‑market tenant leases on acquired properties.