PACS Group, Inc.PACS
PACS Group, Inc. Leases Disclosure
LEASES
Operating Leases
The Company leases most of its skilled nursing and assisted living facilities, as well as its office space, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2050.
Substantially all operating leases for skilled nursing and assisted living facilities are on a “triple-net” basis, which require lessees to pay for all insurance, repairs, utilities, and real property taxes assessed on the leased property, and most of the leases are guaranteed by the Company and/or its stockholders.
For 36 of the facility operating leases, the Company holds an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of each of the purchase options was not reasonably certain. Options on three of the Company’s leases have become subject to disagreement with
the landlord regarding whether the option exercise window has closed, and the Company is working with the landlord to resolve the disagreement.
All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements. This additional percentage rent is variable and is expensed as incurred.
Finance Leases
The Company leases certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of one of the facility finance leases allow for a purchase option to be exercised during a specified window closing May 22, 2027. The Company has determined that it is reasonably certain to exercise the purchase option at the end of the purchase option window. Therefore, the Company has calculated the lease term through the end of the purchase option window for each such lease.
In addition, for one of the facility finance leases, the lessor holds an option which could require the Company to purchase the associated real estate. The total obligation to purchase such real estate is approximately $32,000 and can be exercised by the lessor through June 30, 2026 (the “Lessor Option”). For other finance leases, the duration of the lease term represented the major part of the remaining economic life of the facility at inception.
Finance lease right-of-use assets are included in property and equipment and have a balance of $150,595 and $139,472 as of December 31, 2025 and 2024, respectively. The current portion of finance lease liabilities is included in and has a balance of $28,935 and $21,177 as of December 31, 2025 and 2024, respectively. The non-current portion of finance lease liabilities is included in and has a balance of $126,960 and $125,470 as of December 31, 2025 and 2024, respectively.
The components of lease expense were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating lease expense | |||||||||||||||||
Rent - cost of services (1) | $ | 378,908 | $ | 284,953 | $ | 216,711 | |||||||||||
| General and administrative expense | 2,599 | 2,435 | 941 | ||||||||||||||
Other variable lease costs (2) | 38,620 | 31,480 | 26,399 | ||||||||||||||
| Total operating lease expense | $ | 420,127 | $ | 318,868 | $ | 244,051 | |||||||||||
| Finance lease expense | |||||||||||||||||
| Amortization of right-of-use assets | $ | 5,184 | $ | 3,327 | $ | 1,264 | |||||||||||
| Interest on lease liabilities | 11,142 | 7,370 | 1,113 | ||||||||||||||
| Total financing lease expense | $ | 16,326 | $ | 10,697 | $ | 2,377 | |||||||||||
| Total lease expense | $ | 436,453 | $ | 329,565 | $ | 246,428 | |||||||||||
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(1)Rent - cost of services includes variable lease costs such as Consumer Price Index (CPI) increases and other rent adjustments of $1,958, $2,383, and $2,745 for the years ended December 31, 2025, 2024, and 2023, respectively.
(2)Other variable lease costs of facilities, including property taxes and insurance, are classified in cost of services in the Company’s combined/consolidated statements of income.
The following table summarizes supplemental cash flow information related to leases:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating cash paid for amounts included in the measurement of operating lease liabilities | $ | 333,053 | $ | 252,742 | $ | 194,925 | |||||||||||
| Operating cash paid for amounts included in the measurement of finance lease liabilities | 11,142 | 7,370 | 1,113 | ||||||||||||||
| Financing cash paid for amounts included in the measurement of finance lease liabilities | 1,545 | 811 | 1,708 | ||||||||||||||
| Operating lease right-of-use assets obtained in exchange for lease liabilities | 173,355 | 1,326,598 | 805,866 | ||||||||||||||
Decrease in operating lease right-of-use assets and liabilities due to lease termination/modification | (15,463) | (141,382) | — | ||||||||||||||
Finance lease right-of-use assets obtained in exchange for lease liabilities | 118,947 | 18,298 | 5,521 | ||||||||||||||
Decrease in finance lease right-of-use assets and liabilities due to lease termination/modification | (102,640) | (2,272) | — | ||||||||||||||
Information relating to the lease term and discount rate is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted-average remaining lease term (years) | |||||||||||||||||
| Operating leases | 13 | 14 | 13 | ||||||||||||||
Finance leases | 22 | 6 | 3 | ||||||||||||||
| Weighted-average discount rate | |||||||||||||||||
| Operating leases | 6.5 | % | 6.4 | % | 5.7 | % | |||||||||||
Finance leases | 6.5 | % | 6.1 | % | 7.2 | % | |||||||||||
Maturities of lease liabilities as of December 31, 2025 were as follows:
| Finance Leases | Operating Leases | Total | |||||||||||||||
| 2026 | $ | 37,321 | $ | 343,651 | $ | 380,972 | |||||||||||
| 2027 | 24,885 | 345,250 | 370,135 | ||||||||||||||
| 2028 | 7,902 | 349,372 | 357,274 | ||||||||||||||
| 2029 | 7,746 | 352,039 | 359,785 | ||||||||||||||
| 2030 | 7,509 | 355,924 | 363,433 | ||||||||||||||
| Thereafter | 254,388 | 2,986,215 | 3,240,603 | ||||||||||||||
| Total lease payments | $ | 339,751 | $ | 4,732,451 | $ | 5,072,202 | |||||||||||
| Less: present value discount | (183,856) | (1,639,531) | (1,823,387) | ||||||||||||||
Present value of lease liabilities | $ | 155,895 | $ | 3,092,920 | $ | 3,248,815 | |||||||||||
Maturities of finance leases include amounts the Company would pay in the earliest period in which the lessor can exercise the Lessor Option.
In addition to its lessee activity, the Company generates an immaterial amount of revenue from arrangements where it is a lessor of certain facilities. Revenue from those arrangements is included in other revenue on the combined/consolidated statements of income.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Nov 19, 2025 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.