Real Estate Acquisitions and Leases

6 Months Ended

Jun. 30, 2025

Real Estate Acquisitions and Leases

Real Estate Acquisitions and Leases

Note 5. Real Estate Acquisitions and Leases

Real Estate Acquisitions

On April 4, 2025, the Company completed the acquisition of the Aliso Building, consisting of land, buildings and assumed leases, for a total purchase price of approximately $16.6 million. Upon closing, the Company assumed sellers’ interest, as lessor, in four existing leases with a weighted-average remaining term of two years, exclusive of certain tenant renewal options.

The Company accounted for the purchase as an asset acquisition and allocated the purchase price to land, building, and identified intangible assets and liabilities, based in each case on their relative estimated fair values and without giving rise to goodwill. Intangible assets and liabilities represent the value of in-place leases and below-market leases. In making estimates of fair values, the Company used various sources, including data provided by independent third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located.

In allocating the fair value of the identified tangible and intangible assets and liabilities of the acquired property, land is valued based upon comparable market data or independent appraisals. Buildings are valued on an as-if vacant basis based on a cost approach utilizing estimates of cost and the economic age of the building or an income approach utilizing various market data. In-place lease intangibles are valued based on the Company’s estimates of costs related to tenant acquisition and the carrying costs that would be incurred during the time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar leases at the time of the acquisition.

The following table presents the details of the tangible assets acquired and intangible lease liabilities assumed:

Component of Value	Assets		Liabilities
Land	$	10,127		-
Building		5,800		-
Site improvements		412		-
Tenant improvements		60		-
Tangible assets	$	16,399	$	-
Leasehold improvements (below market)		-		(459)
Leases in place		666		-
Intangible assets	$	666	$	(459)
Total fair value		17,065		(459)
Allocated purchase price	$	16,606

Land, buildings, site improvements and tenant improvements are recorded and stated at cost, using the straight-line method over the estimated remaining useful life of the assets, which is 30.0 years for the building, 20.0 years for site improvements and an average of approximately 2.2 years for tenant improvements.

The lease income and related lease expense associated with the four aforementioned leases are recorded within other income (expense), net within the accompanying condensed consolidated statements of operations and is not

material during the three months ended June 30, 2025 and will not be material for the full year ending December 31, 2025.

Leases

The Company has operating and finance leases for facilities and certain equipment. Leases with an initial term of 12 months or less are expensed and not recorded on the condensed consolidated balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company’s leases have non-cancelable lease terms of approximately one year to thirteen years, some of which include options to extend the leases for up to ten years. The exercise of lease renewal options is at the Company’s sole discretion. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for common area maintenance, landlord incentives and/or inflation.

The Company’s Aliso Facility is one property containing three existing office buildings, comprising approximately 160,000 rentable square feet of space, which was accounted for as a finance lease. The term of the Aliso Facility commenced on April 1, 2019 for expense recognition and continues for thirteen years. The lease agreement contains an option to extend the lease for two additional five year periods at market rates.

The Company also leases two adjacent buildings, two office suites and a warehouse located in San Clemente, California and a facility in Burlington, Massachusetts. The total leased square footage of the San Clemente facilities equals approximately 120,000 and the two most significant leases now expire on May 31, 2035, after executing a five-year extension from the previous May 31, 2030 expiration date, during the first quarter of 2025. Each of these two leases contain an option to extend the lease for one additional five-year period at market rates. The total leased square footage of the Burlington facility is approximately 60,000 square feet, and the lease expires on July 31, 2033. The Burlington facility lease contains an option to extend the lease for one additional five-year period at market rates.

The Company’s remaining foreign subsidiaries’ leased office and warehouse space totals less than 35,000 square feet.

The following table presents the maturity of the Company’s operating and finance lease liabilities within the condensed consolidated balance sheets:

Maturity of Lease Liabilities	Operating		Finance
(in thousands)	Leases (a)		Leases (b)
Remainder of 2025	$	2,135	$	2,690
2026		4,040		5,487
2027		4,315		5,651
2028		4,264		5,821
2029		4,268		5,995
2030		4,254		6,175
Thereafter		40,248		84,341
Total lease payments	$	63,524	$	116,160
Less: imputed interest		26,238		46,101
Total lease liabilities	$	37,286	$	70,059

(a) Operating lease payments include $26.0 million related to options to extend lease terms that are reasonably certain of being exercised.

(b) Finance lease payments include $75.8 million related to options to extend lease terms that are reasonably certain of being exercised.