The Company has operating leases for its retail stores, processing and cultivation facilities and corporate office space. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.

All real estate leases are recorded on the balance sheet. Equipment and other non-real estate leases with an initial term of twelve months or less are not recorded on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Certain real estate leases require payment for fixed and variable non-lease components, such as taxes, insurance and maintenance. The Company accounts for real estate leases and the related non-lease components together as a single component.

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract. For three and six months ended June 30, 2025, the Company recorded operating lease expense of $12,804 thousand and $25,572 thousand, respectively compared to operating lease expense of $12,425 thousand and $24,676 thousand for three and six months ended June 30, 2024, respectively.

Other information related to operating leases as of June 30, 2025 and December 31, 2024 were as follows:


	June 30, 2025	December 31, 2024
Weighted average remaining lease term (years)	10.28	10.74
Weighted average discount rate	12.22%	12.23%

Maturities of lease liabilities for operating leases as of June 30, 2025 were as follows:


		Maturities of Lease Liability
Year Ending December 31,		Third-Party		Related Party		Total
		(in thousands)
Remainder of 2025	$	23,986	$	259	$	24,245
2026		48,001		524		48,525
2027		48,265		491		48,756
2028		47,036		282		47,318
2029		43,809		287		44,096
2030 and Thereafter		293,896		768		294,664
Total Lease Payments		504,993		2,611		507,604
Less: Interest		(234,064)		(748)		(234,812)
Present Value of Lease Liability	$	270,929	$	1,863	$	272,792

Mosaic Real Estate, LLC, which owned certain facilities leased by the Company, is owned in part by Benjamin Kovler, the Chairman and Chief Executive Officer of the Company (through KP Capital, LLC), and Anthony Georgiadis, the President and a director of the Company (through Three One Four Holdings, LLC). For the three and six months ended June 30, 2025, the Company recorded lease expense of $126 thousand and $252 thousand, respectively, compared to lease expense of $166 thousand and $305 thousand for the three and six months ended June 30, 2024, respectively, associated with these leasing arrangements.