Leases

12 Months Ended

Dec. 31, 2025

Lessor

The Company’s real estate properties are leased to tenants under operating leases with varying terms. Typically, the leases have provisions to extend the terms of the lease agreements. The Company retains substantially all of the risks and benefits of ownership of the real estate properties leased to tenants.

The following table summarizes the Company’s rental revenue from operating leases for the years ended December 31, 2025, 2024 and 2023 (amounts in thousands):


	Year Ended December 31,
		2025		2024		2023
Rental income		$	181,024	$	171,791	$	176,323
Variable lease income		15,280		15,065		12,742
Total rental revenue		$	196,304	$	186,856	$	189,065

Future rent to be received from the Company’s investments in real estate assets under the terms of non-cancellable operating leases in effect as of December 31, 2025, for each of the next five years ending December 31, and thereafter, are as follows (amounts in thousands):


	December 31, 2025(1)
2026	$	176,789
2027	176,848
2028	173,905
2029	170,358
2030	161,943
Thereafter	1,186,641
Total	$	2,046,484

(1)The table includes payments from a tenant who is on the cash basis of accounting for revenue recognition purposes that has continued to make rental payments as of December 31, 2025.

Lessee

The Company is subject to various non-cancellable operating lease agreements on which certain of its properties reside (ground leases) and for its corporate office. Additionally, the Company has one non-cancellable lease agreement that is classified as a finance lease related to a ground lease of a healthcare property.

The Company’s operating leases and finance lease do not provide implicit interest rates. In order to calculate the present value of the remaining operating and finance lease payments, the Company used incremental borrowing rates, or IBRs, adjusted for a number of factors. The determination of an appropriate IBR involves multiple inputs and judgments. The Company determined its IBRs considering the general economic environment, term of the underlying leases, and various financing and asset specific adjustments to ensure the IBRs are appropriate for the intended use of the underlying operating leases and finance lease.

The effects of the Company’s operating leases are recorded in right-of-use assets - operating leases and operating lease liabilities on the consolidated balance sheets. The effects of the Company’s finance lease are recorded in right-of-use assets - finance lease and finance lease liabilities on the consolidated balance sheets.

The future rent payments under non-cancellable leases in effect as of December 31, 2025, for each of the next five years ending December 31 and thereafter, are as follows (amounts in thousands):


	Operating		Finance
2026	$	2,803	$	9
2027	2,852		9
2028	2,868		9
2029	2,603		9
2030	2,129		9
Thereafter	101,384		58
Total undiscounted rental payments	114,639		103
Less imputed interest	(73,626)		(26)
Total lease liabilities	$	41,013	$	77

The weighted average IBR and weighted average remaining lease term as of December 31, 2025 and December 31, 2024 for the Company’s operating leases are as follows:


	December 31, 2025		December 31, 2024
Weighted average IBR	5.5	%	5.5	%
Weighted average remaining lease term	34.2 years		35.2 years

The IBR and remaining lease term as of December 31, 2025 and December 31, 2024 for the Company's finance lease is as follows:


	December 31, 2025		December 31, 2024
IBR	5.8	%	—	%
Remaining lease term	10.5 years		—

The following table provides details of the Company's total lease costs for the years ended December 31, 2025, 2024 and 2023 (amounts in thousands):


		Year Ended December 31,
	Location in Consolidated Statements of Comprehensive Income		2025		2024		2023
Operating lease costs:
Ground lease costs(1)	Rental expenses		$	2,755	$	2,742	$	2,727
Corporate operating lease costs	General and administrative expenses		714		749		735
Finance lease costs:

Interest on lease liability	Interest expense		3		—		—
Supplemental disclosure of cash flows information:
Operating cash outflows for operating leases(1)(2)			838		830		732
Right-of-use assets obtained in exchange for new operating lease liabilities			—		814		—
Right-of-use assets obtained in exchange for new finance lease liabilities			$	74	$	—	$	—

(1)The Company receives reimbursements from tenants for certain operating ground leases, which are recorded as rental revenue in the accompanying consolidated statements of comprehensive income.

(2)Amounts are net of reimbursements the Company receives from tenants for certain operating ground leases.

Leases

Sila Realty Trust, Inc. 10-K