Lease Obligations

9 Months Ended

Sep. 30, 2022

Lease Obligations

Leases Obligations

7. Lease Obligations

The following presents certain information related to the costs for leases where the Company is the lessee (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	27,824	$	29,116	$	84,401	$	87,249
Finance lease cost:
Amortization of finance lease assets		3,165		1,776		8,830		3,717
Interest on finance lease liabilities		1,441		575		3,580		1,638
Short-term lease cost		392		478		1,410		1,437
Variable lease cost		5,878		5,749		17,674		17,582
Sublease income		(432)		(467)		(1,131)		(1,401)
Net lease costs	$	38,268	$	37,227	$	114,764	$	110,222

As of September 30, 2022 and December 31, 2021, finance lease assets of $91.2 million and $75.7 million, respectively, were included in property and equipment, net in the accompanying condensed consolidated balance sheets.

The following presents supplemental cash flow information related to leases (in thousands):

	Nine Months Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	85,175	$	87,812
Operating cash flows for finance leases		3,508		1,588
Financing cash flows for finance leases		4,541		2,188
Lease assets obtained in exchange for lease liabilities:
New, remeasured and terminated operating leases		14,433		55,330
New, remeasured and terminated finance leases		24,440		15,362

Sale-Leaseback Arrangement Recorded as Financing Transaction

On February 8, 2022, FRHP Lincolnshire, LLC sold three properties for a total sale price of $28.0 million. Concurrent with the sale of these properties, the Company entered into three separate twenty-year lease agreements, whereby the Company will lease back the properties from the acquiring company. Under each lease agreement, FR has four consecutive options to extend the lease term for additional periods of five years for each option. This transaction is accounted for as a financing transaction. The Company recorded a liability for the amount received, will continue to depreciate the non-land portion of the assets, and has imputed an interest rate so that the net carrying amount of the financial liability and remaining non-land assets will be zero at the end of the initial lease terms. The financial liability is included in other long-term liabilities in the condensed consolidated balance sheet as of September 30, 2022.