v3.22.4
RIGHT-OF-USE ASSETS & LEASE LIABILITIES
12 Months Ended
Dec. 31, 2022
RIGHT-OF-USE ASSETS & LEASE LIABILITIES  
RIGHT-OF-USE ASSETS & LEASE LIABILITIES

9. RIGHT-OF-USE ASSETS & LEASE LIABILITIES

Information related to operating and finance leases is as follows:

December 31, 2022

December 31, 2021

 

    

Operating Leases

    

Finance Leases

    

Operating Leases

    

Finance Leases

 

Incremental borrowing rate (weighted average)

 

11.98

%  

9.68

%  

12.66

%  

11.76

%

Weighted average remaining lease term

 

13.04

yrs

4.90

yrs

14.01

yrs

2.81

yrs

The maturities of the contractual lease liabilities as of December 31, 2022, are as follows:

    

Operating Leases

    

Finance Leases

    

Total

2023

    

$

28,694

$

12,862

$

41,556

2024

 

28,362

11,395

39,757

2025

 

27,919

5,466

33,385

2026

 

27,276

3,390

30,666

2027

 

26,007

2,302

28,309

2028 and beyond

236,700

8,356

245,056

Total undiscounted lease liabilities

 

374,958

43,771

418,729

Impact of discounting

(232,067)

(9,029)

(241,096)

Total present value of minimum lease payments

$

142,891

$

34,742

$

177,633

In June 2022, the Company completed a sale and lease back transaction to sell two cultivation and processing facilities for a purchase price of $28,107, excluding transaction costs. The Company leased back the facilities and continues to operate and manage them under a long-term agreement. The transaction qualified for sale-leaseback treatment under ASC 842. As a result of the sale, the Company divested of $22,206 of buildings and improvements, and $3,728 of land. The Company recognized a gain on sale related to the transaction of $2,173 which was recorded within gain on sale of assets on the statements of operations. The lease was recorded as an operating lease and resulted in a lease liability of $25,331 and an ROU asset of $25,339, which was recorded net of a $750 work allowance.

In June 2022, the Company closed on a real estate financing transaction resulting in $27,599 of cash proceeds for the sale and simultaneous leaseback of a cultivation facility. The transaction includes a construction financing allowance of up to $14,187, which will increase the base rent at the time the construction financing is drawn down. The initial term of the agreement is fifteen years, with two five-year options to renew. The initial payments are equal to 10% of the sum of the purchase price and increases when a draw is made on the construction finance allowance, payable monthly. In addition, a 3% increase in payments will be applied annually after the first year.

The transaction was classified as a finance lease and control was never transferred to the buyer-lessor accordingly the transaction did not qualify for sale-leaseback treatment. Therefore, the Company is deemed to own this real estate and will continue to depreciate the assets and reflect the properties on the Company’s balance sheet. The Company recorded a financing obligation for the consideration received from the buyer-lessor, and future cash lease payments will be allocated between interest expense and reduction to the financing obligation, as applicable. As the transactions did not qualify for sale-leaseback treatment, under ASC 842, Leases, no gain or loss was recognized.

9. RIGHT-OF-USE ASSETS & LEASE LIABILITIES (Continued)

Payments related to leases during the years ended December 31, 2022, and 2021, are as follows:

Year Ended

    

December 31, 2022

    

December 31, 2021

Lease liabilities - operating

Lease liabilities - operating expense, COGS

$

8,946

$

4,818

Lease liabilities - operating expense, G&A

 

14,795

 

8,518

Lease liabilities - finance

 

 

Amortization of right-of-use assets, COGS

 

4,858

 

1,050

Amortization of right-of-use assets, G&A

 

188

 

76

Interest on lease liabilities - finance, COGS

 

2,525

 

720

Interest on lease liabilities - finance, G&A

 

58

 

320

Total lease expense

$

31,370

$

15,502