Company: CIO
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000950170-25-023714
Chunk: 98

Company: City Office REIT, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 6
Chunk 98
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 provisions such as scheduled rent increases, renewal options and termination options. The majority of the Company’s leases include defined rent increases rather than variable payments based on an index or unknown rate. Lessee Accounting As a lessee, the Company has ground and office leases which are classified as operating and financing leases. As of December 31, 2024, these leases had remaining terms of two to 64 years and a weighted average remaining lease term of 50 years.  Right-of-use assets and lease liabilities have been included within other assets and other liabilities on the Company’s consolidated balance sheets as follows (in thousands): 

         December 31, 2024

         December 31, 2023

         Right-of-use asset – operating leases
          
         $
         10,101

         $
         12,564

         Lease liability – operating leases
          
         $
         8,286

         $
         8,550

         Right-of-use asset – financing leases
          
         $
         9,593

         $
         9,820

         Lease liability – financing leases
          
         $
         1,637

         $
         1,551

        Lease liabilities are measured at the commencement date based on the present value of future lease payments. One of the Company’s operating ground leases includes rental payment increases over the lease term based on increases in the Consumer Price Index (“CPI”). Changes in the 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