We lease most of our administrative and educational facilities under non-cancelable operating or finance leases expiring at various dates through 2050. In most cases, we are required to make additional payments under facility leases for taxes, insurance and other operating expenses incurred during the lease period, which are typically variable in nature.

We determine if a contract contains a lease when the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Upon identification and commencement of a lease, we establish a right of use (“ROU”) asset and a lease liability.

Quantitative information related to leases for the quarters ended March 31, 2026 and 2025 is presented in the following table (dollars in thousands):


	For the Quarter Ended March 31, 2026			For the Quarter Ended March 31, 2025
Lease expenses (1)
Operating fixed lease expenses	$	2,555		$	2,613
Finance lease amortization expense		1,279			1,279
Finance lease interest expense		156			230
Variable lease expenses		1,216			1,118
Sublease income (2)		(108	)		(77	)
Total lease expenses	$	5,098		$	5,163

Supplemental cash flow information (3)
Gross operating cash flows for operating leases	$	(3,710	)	$	(3,446	)
Gross operating cash flows for finance leases		(197	)		(230	)
Gross financing cash flows for finance leases		(1,324	)		(1,207	)
Operating cash flows from subleases		108			77

	As of March 31, 2026			As of March 31, 2025
Weighted average remaining lease term (in months) – operating leases		84			90
Weighted average remaining lease term (in months) – finance leases		22			34

Weighted average discount rate – operating leases		6.3	%		6.2	%
Weighted average discount rate– finance leases		5.9	%		5.9	%

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(1)

Lease expense and sublease income represent the amount recorded within our consolidated statements of income. Variable lease amounts represent expenses recognized as incurred which are not included in the lease liability.

(2)

For certain of our leased locations, we have vacated the facility and have fully or partially subleased the space.

(3)

Cash flows are presented on a consolidated basis and represent cash payments for fixed and variable lease costs.

During the first quarter of 2026, the Company entered into a lease agreement for a new facility for one of its campus locations. The lease is for a term of 12 years, and it is expected to commence in November 2026. As of March 31, 2026, this lease has not yet commenced and is not recorded on the condensed consolidated balance sheet. Upon commencement, the Company expects to recognize an ROU asset and a lease liability of approximately $5.0 million. The undiscounted future fixed lease payments under this agreement are approximately $7.0 million for the full term of the lease.

Upon construction commencement of the new St. Augustine campus in April 2023, the Company determined that it was the deemed owner for accounting purposes during the construction period under a build to suit (“BTS”) arrangement due to the extent of the Company’s involvement in the project. Lease commencement began in January 2025 upon substantial completion of the BTS arrangement with a stated lease term of 25 years from commencement date.

Upon lease commencement, the Company determined that it did not meet the criteria under ASC 606-10-25-30 to derecognize the asset as the Company retained control of the asset and the risks and rewards of ownership did not transfer to the landlord. As such the transaction is considered a failed sale leaseback and the Company will retain the asset on its condensed consolidated balance sheet and depreciate the asset over its useful life. A financing obligation liability was recognized in the amount of the net proceeds received. The Company will not recognize rent expense related to the leased asset. Instead, monthly rent payments under the lease agreement will be recorded as interest expense and a reduction of the outstanding liability.

Amortization and interest expense for this failed sale-leaseback was $1.6 million for each of the quarters ended March 31, 2026 and March 31, 2025.

Future minimum lease payments for the failed sale-leaseback financing transaction as of March 31, 2026 are as follows:


	Sale Leaseback Payments


2026 (1)	$	3,782
2027		5,143
2028		5,246
2029		5,351
2030		5,458
2031 and thereafter		127,827
Total minimum lease payments	$	152,807

Less – Amount representing interest		(109,505	)
Present value of minimum lease payments		43,302
Plus - liability remaining at term end representing residual value of asset		13,782
Failed sale leaseback liability		57,084

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(1)

Liabilities remaining for the year ending December 31, 2026.