Leases
The Company enters into lease arrangements with independent third parties and with related parties. The Company determines whether an arrangement is or contains a lease at inception. Leases are classified as either finance or operating at the commencement date of the lease, with classification affecting the pattern of expense recognition in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).
The Company’s operating leases, in which the Company is the lessee, include real estate for our office facilities and a significant portion of operating lease expense is paid to a related party. The Company currently does not have any finance leases. Refer to Note 8, Transactions with Related Parties for information regarding lease transaction expenses with related parties.
For lease arrangements where the Company is the lessee, the Company does not separate non-lease components of a contract from the lease component to which they relate. The Company elected that leases with an initial term of 12 months or less are expensed on a straight-line basis over the lease term in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) and not recorded on the Consolidated Balance Sheets. Some leases include options to extend or terminate the lease at the Company’s sole discretion on a lease-by-lease basis, and the Company evaluates whether those options are “reasonably certain” of being exercised considering contractual and economic-based factors. The Company used its periodic incremental borrowing rate, based on the information available at commencement date, to determine the present value of future lease payments.
The components of lease expense are presented in the table below:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Operating Lease Cost: | | | |
| Fixed lease expense | $ | 82 | | | $ | 77 | |
Variable lease expense (1) | 13 | | | 10 | |
| Total operating lease cost | $ | 95 | | | $ | 87 | |
(1) Variable lease payments are expensed in the period in which the obligation for those payments is incurred. These variable lease costs are payments that vary in amount beyond commencement date, for reasons other than passage of time. The Company’s variable payments mainly include common area maintenance and building utility fees.
Supplemental cash flow information related to leases:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | |
| Operating cash flows from operating leases | $ | 92 | | | $ | 84 | |
During the years ended December 31, 2025 and 2024, the ROU assets that were recorded for new and modified operating leases at the time of their commencement were $15 and $13, respectively.
Supplemental balance sheet information related to leases recorded in Other assets and Other liabilities on the Consolidated Balance Sheets:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Operating Leases: | | | |
| Total lease ROU assets | $ | 292 | | | $ | 282 | |
| Total lease liabilities | $ | 334 | | | $ | 319 | |
| Weighted average lease term | 4.4 years | | 5.0 years |
| Weighted average discount rate | 5.15 | % | | 4.98 | % |
| | | | | | | | |
| Maturity of Lease Liabilities | | Operating Leases |
| 2026 | | $ | 103 | |
| 2027 | | 95 | |
| 2028 | | 72 | |
| 2029 | | 40 | |
| 2030 | | 27 | |
| Thereafter | | 38 | |
| Total lease payments | | $ | 375 | |
| Less imputed interest | | 41 | |
| Total | | $ | 334 | |
When applying the requirements of ASC 842, Leases, the Company made assumptions about the determination of whether a contract contains a lease and the determination of the discount rate for the lease.
Lessor
While the Company is the sublessor in certain leasing arrangements, the majority of such lease arrangements are intercompany and eliminated in consolidation.