Does Aplus have leases that include options to purchase or automatic transfer of ownership of the leased property to the Partnership?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
At this time, the majority of active leases within our portfolio are classified as operating leases. Operating leases are included in operating lease right-of-use assets, net, operating lease current liabilities and operating lease non-current liabilities on our consolidated balance sheets. Finance leases represent a small portion of the active lease agreements and are included in other non-current assets and long-term debt, net on our consolidated balance sheets. The right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make minimum lease payments arising from the lease for the duration of the lease term.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 20 years or greater. The exercise of lease renewal options is typically at our discretion. Additionally, many leases contain early termination clauses, however early termination typically requires the agreement of both parties to the lease. At lease inception, all renewal options reasonably certain to be exercised are considered when determining the lease term. At this time, the Partnership does not have leases that include options to purchase or automatic transfer of ownership of the leased property to the Partnership. The depreciable life of leased assets and leasehold improvements are limited by the expected lease term.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable. At this time, many of our leases do not provide an implicit rate, therefore to determine the present value of minimum lease payments we use our incremental borrowing rate based on the information available at lease commencement date. The right-of-use assets also include any lease payments made and exclude lease incentives.
Minimum rent payments are expensed on a straight-line basis over the term of the lease. In addition, some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments we are typically responsible for include payment of real estate taxes, maintenance expenses and insurance.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to the 2024 Aplus Franchise Disclosure Document, Aplus does not have leases that include options to purchase or automatic transfer of ownership of the leased property to the Partnership. The majority of Aplus's active leases are classified as operating leases, which are included in operating lease right-of-use assets, net, operating lease current liabilities, and operating lease non-current liabilities on their consolidated balance sheets. Finance leases represent a small portion of their active lease agreements and are included in other non-current assets and long-term debt, net on their consolidated balance sheets.
The right-of-use assets represent Aplus's right to use an underlying asset for the lease term, and lease liabilities represent their obligation to make minimum lease payments arising from the lease for the duration of the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 20 years or greater, and the exercise of lease renewal options is typically at Aplus's discretion.
Many leases also contain early termination clauses, but early termination typically requires the agreement of both parties to the lease. At lease inception, all renewal options reasonably certain to be exercised are considered when determining the lease term. Minimum rent payments are expensed on a straight-line basis over the term of the lease, and some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments Aplus is typically responsible for include payment of real estate taxes, maintenance expenses, and insurance.