INNOVATE Corp

9. Leases

Operating lease right-of-use-assets and assets held under finance leases are recognized in the Consolidated Balance Sheets within Other assets and Property, plant and equipment, net, respectively. Operating lease liabilities and finance lease liabilities are recognized in the Consolidated Balance Sheets within Other liabilities and Debt obligations, respectively. Right-of-use lease assets and lease liabilities consisted of the following (in millions):

The Company has entered into operating and finance lease agreements primarily for land, office space, equipment and vehicles, expiring between 2024 and 2045. For the year ended December 31, 2023, the Company recorded impairment charges to right-of-use assets of $0.6 million, primarily related to FCC licenses impaired. For the year ended December 31, 2022, the Company recorded an impairment charge to right-of-use-assets of $0.5 million. Impairment charges are included in Other operating loss in the Consolidated Statements of Operations.

For the years ended December 31, 2023 and 2022, the Company recorded short-term lease costs totaling $39.2 million and $34.8 million, respectively. Based on the short-term leases executed as of December 31, 2023, the Company expects that it will incur approximately $8.5 million in estimated short-term lease costs for the year ended December 31, 2024.

The tables below present financial information associated with the Company's leases as of, and for the years ended December 31, 2023 and 2022.

The following table summarizes the components of lease expense (in millions):

Cash flow information related to leases is as follows (in millions):

The weighted-average remaining lease term and the weighted-average discount rate for finance leases and operating leases are as follows:

Future minimum lease commitments (undiscounted) as of December 31, 2023, were as follows (in millions):

In November 2021, INNOVATE Corp. entered into aten-year lease arrangement for a special purpose space in Palm Beach, Florida, which was amended in February 2023, to extend the term of the lease to 15 years, with future monthly lease payments of approximately $0.2 million over the entire lease term and annual common area maintenance charges of $0.6 million, both of which are subject to a 3% annual upward adjustment, with total square footage of 25,184, as amended. In December 2023, the Company entered into a sublease agreement with Palm Beach Cultural Innovation Center, Inc. (“PBCIC”), a Florida not-for-profit corporation and related party to Avram A. Glazer, the Chairman of INNOVATE's Board of Directors, who is also on the board of directors of PBCIC. Pursuant to the sublease, the Company allows PBCIC use of the underlying space and, as consideration, PBCIC has agreed to undertake all of the tenant’s build-out costs and related obligations under the lease agreement between the Company, as tenant, and RPP Palm Beach Property LP, as landlord. As of December 31, 2023, the lease has not yet commenced. The Company previously recorded $1.1 million in prepaid rent related to this lease, which was written-off in December 2023 upon the execution of the sublease to PBCIC and is reflected in Other operating loss in the Consolidated Statement of Operations. The Company also incurred other expenses of $1.1 million since inception related to the special purpose space and PBCIC, of which $0.7 million and $0.4 million are reflected in Selling, general and administrative in the Consolidated Statement of Operations for the years ended December 31, 2023 and 2022, respectively.

In December 2021, the Company entered into afive-year lease agreement with an option to extend the lease for another five years for office space in West Palm Beach, Florida. The new lease has not commenced yet, but will require future monthly lease payments of approximately $0.1 million over the entire lease term, subject to 3% annual upward adjustment, with total square footage of 15,786. Other than a $0.2 million deposit included in Other assets, the future lease payments are not yet recorded on the Company's Consolidated Balance Sheets, as the building is still under construction. Management expects the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin in 2024.