Note 7. Leases

Operating Leases

Avalon leases golf carts, machinery and equipment for the landfill operations, furniture and fixtures for The Grand Resort and office copiers under operating leases. Our operating leases have remaining lease terms ranging from less than 1 year to 5.0 years. The weighted average remaining lease term on operating leases was approximately 3.6 years and 3.9 years at June 30, 2026 and December 31, 2025, respectively.

During the first six months of both 2026 and 2025 the Company did not record any new operating lease right-of-use assets or corresponding obligations under operating leases.

Leased property and associated obligations under operating leases at June 30, 2026 and December 31, 2025 consists of the following (in thousands):

The weighted average discount rate on operating leases was 7.0% at both June 30, 2026 and December 31, 2025.

Finance Leases

In November 2003, Avalon entered into a long-term agreement with Squaw Creek Country Club to lease and operate its golf course and related facilities. The lease has an initial term of ten (10) years with four (4) consecutive ten (10) year renewal term options unilaterally exercisable by Avalon. Under the lease, Avalon is obligated to pay $15,000 in annual rent and make leasehold improvements of $150,000 per year. Amounts expended by Avalon for leasehold improvements during a given year in excess of $150,000 will be carried forward and applied to future leasehold improvement obligations. Based upon the amount of leasehold improvements already made, Avalon expects to exercise all its remaining renewal options. At June 30, 2026 there were approximately 27.3 years remaining on the golf course and related facilities finance lease. At December 31, 2025 there were approximately 27.8 years remaining on the golf course and related facilities finance lease. The net asset value of finance leases, excluding leasehold improvements was $1.5 million and $1.6 million at June 30, 2026 and December 31, 2025, respectively.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance equipment and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases. At June 30, 2026, the vehicles, golf course maintenance equipment and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 5.0 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.6 and 3.8 years at both June 30, 2025 and December 31, 2025, respectively.

Leased property and associated obligations under finance leases at June 30, 2026 and December 31, 2025 consists of the following (in thousands):

The weighted average discount rate on finance leases was 6.7% at both June 30, 2026 and December 31, 2025.

For the three and six months ended June 30, 2026 and 2025, components of lease expense were as follows (in thousands):

For the twelve months ending June 30, future commitments under long-term, operating and finance leases are as follows (in thousands):