LEASES

9 Months Ended

Sep. 30, 2025

NOTE 5 – LEASES

Operating Leases as Lessee

As a lessee, we record right-of-use assets and lease liabilities for the two ground leases at our Kerrow Restaurant Operating Business and our corporate office space. The two ground leases have extension options, which we believe will be exercised and are included in the calculation of our lease liabilities and right-of-use assets. During the second quarter of 2025, the Company extended its lease of a corporate office space, which qualified as an operating lease as of June 30, 2025. In calculating the lease obligations under both the ground leases and office lease, we used discount rates estimated to be equal to what the Company would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment.

Operating Lease Liability

Maturities of operating lease liabilities were as follows:


(In thousands)	September 30,
2025 (Three months)	$	173
2026		721
2027		743
2028		755
2029		768
Thereafter		4,420
Total Payments		7,580
Less: Interest		(1,855	)
Operating Lease Liability	$	5,725

The weighted-average discount rate for operating leases at September 30, 2025 was 4.70%. The weighted-average remaining lease term was 12.6 years.

Rental expense was $208 thousand and $230 thousand for the three months ended September 30, 2025 and 2024, respectively. Rental expense was $664 thousand and $689 thousand for the nine months ended September 30, 2025 and 2024, respectively.

Operating Leases as Lessor

Our leases consist primarily of single-tenant, net leases, in which the tenants are responsible for making payments to third parties for operating expenses such as property taxes, insurance, and other costs associated with the properties leased to them. In leases where costs are paid by the Company and reimbursed by lessees, such payments are considered variable lease payments and recognized in rental revenue.

The following table shows the components of rental revenue.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2025		2024		2025		2024
Lease revenue - operating leases	$	63,543	$	57,144	$	186,375	$	169,255
Variable lease revenue (tenant reimbursements)		2,965		2,144		8,429		7,145
Total Rental Revenue	$	66,508	$	59,288	$	194,804	$	176,400

Future Minimum Lease Payments to be Received

The following table presents the scheduled minimum future contractual rent to be received under the remaining non-cancelable term of the operating leases. The table presents future minimum lease payments due during the initial lease term only as lease renewal periods are exercisable at the option of the lessee.


(In thousands)	September 30,
2025 (Three Months)	$	64,276
2026		258,107
2027		251,215
2028		225,136
2029		198,672
Thereafter		979,757
Total Future Minimum Lease Payments	$	1,977,163

Ground Leases as Lessee

As of both September 30, 2025 and December 31, 2024, the Company had finance ground lease assets aggregating $13.9 million and $13.9 million, respectively. These assets are included in intangible real estate assets, net in the Consolidated Balance Sheets. The Company did not recognize a lease liability as no payments are due in the future under the leases. The Company’s ground lease assets have remaining terms ranging from 58.2 years to 93.2 years. All but two of these leases have options to extend certain of the lease terms for additional ninety-nine year terms, and all have the option to purchase the assets once certain conditions and contingencies are met. The weighted average remaining non-cancelable lease term for the ground leases was 88.3 years at September 30, 2025.

Four Corners Property Trust, Inc. 10-Q