Company: CIO
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000950170-25-023714
Chunk: 26

Company: City Office REIT, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 15
Chunk 26
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 CPI were not estimated as part of the measurement of the operating lease liability. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company used a weighted average discount rate of 6.2% in determining its lease liabilities. The discount rates were derived from the Company’s assessment of the credit quality of the Company and adjusted to reflect secured borrowing, estimated yield curves and long-term spread adjustments. 

 72

 Right-of-use assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Operating lease expense for the years ended December 31, 2024 and 2023 was $0.9 million and $0.9 million, respectively. Financing lease expense for the years ended December 31, 2024 and 2023 was $0.3 million and $0.3 million, respectively. Future minimum lease payments to be paid by the Company as a lessee for operating and financing leases as of December 31, 2024 for the next five years and thereafter are as follows (in thousands): 

         Operating Leases

         Financing Leases

         2025
          
         $
         651

         $
         8

         2026

         724

         8

         2027

         587

         8

         2028

         587

         8

         2029

         587

         9

         Thereafter

         25,389

         6,921

         Total future minimum lease payments

         28,525

         6,962

         Discount

         (20,239
         )

         (5,325
         )

         Total
          
         $
         8,286

         $
         1,637

        10. Commitments and Contingencies The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties. Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the cost of removal or remed