Table of Contents operate, particularly in those markets where initial terms under our leases are shorter, could adversely affect our business, financial condition, results of operations and prospects. In addition, our ability to negotiate favorable terms to extend an expiring lease or to secure an alternate location will depend on then-prevailing conditions in the real estate market, such as overall rental cost increases, competition from other would-be tenants for desirable leased spaces and our relationships with current and prospective building owners and landlords, and may depend on other factors that are not within our control. If we are not able to renew or replace an expiring lease, we will incur significant costs related to vacating that space and redeveloping whatever alternative space we are able to find, if any. In addition, if we are forced to vacate a space, we could lose members who purchased memberships based on the design, location or other attributes of that particular space and may not be interested in the other spaces we have available. The average length of the initial term of our U.S. leases is approximately 15 years. As we continue to expand our presence into certain international markets, including Europe, Latin America, China, Japan and the Pacific, local market practices may require us to enter into leases that have shorter initial terms, which reduces the certainty of our future obligations with respect to these locations and the continued availability of our occupied spaces at these locations. The long-term and fixed-cost nature of our leases may limit our operating flexibility and could adversely affect our liquidity and results of operations. We currently lease a significant majority of our locations under long-term leases that, with very limited exceptions, do not contain early termination provisions. Our obligations to landlords under these agreements extend for periods that significantly exceed the length of our membership agreements with our members, which may be terminated by our members upon as little notice as one calendar month. Our leases generally provide for fixed monthly payments that are not tied to space utilization or the size of our member base, and all of our leases contain minimum rental payment obligations. As a result, if members at a particular space terminate their membership agreements with us and we are not able to replace these departing members, our lease cost expense may exceed our revenue. In addition, in an environment where cost for real estate is decreasing, we may not be able to lower our fixed monthly payments under our leases at rates commensurate with the rates at which we would be pressured to lower our monthly membership fees, which may also result in our rent expense exceeding our membership and service revenue. In any such event, we would not have the ability to reduce our rent under the lease or otherwise terminate the lease in accordance with its terms. If we experience a prolonged reduction in revenues at a particular space, our results of operations in respect of that space would be adversely affected unless and until the lease expires or we are able to assign the lease or sublease the space to a third party. Our ability to assign a lease or sublease the space to a third party may be constrained by provisions in the lease that restrict these transfers without the prior consent of the landlord. Additionally, we could incur significant costs if we decide to assign or sublease unprofitable leases, as we may incur transaction costs associated with finding and negotiating with potential transferees, and the ultimate transferee may require upfront payments or other inducements. Moreover, our leases generally contain notice requirements in connection with certain transactions, including the reorganization transactions or the incurrence of indebtedness, as well as this offering. The failure to deliver notice or satisfy the conditions related to providing such notices to our landlords and members could result in defaults under such leases. If we default under the terms of our leases and cease operations at leased spaces, we could be exposed to breach of contract and other claims, which could result in direct and indirect costs to us and could result in operational disruptions that could harm our reputation, brand and result of operations. Additionally, we are party to a variety of lease agreements and other occupancy arrangements, including management agreements and participating leases, containing a variety of contractual rights and obligations that may be subject to interpretation. Our interpretation of such contracts may be disputed by our landlords or members, which could result in litigation, damage to our reputation or contractual or other legal remedies becoming available to such landlords and members and may impact our results of operations. While our leases are often held by special purpose entities, our consolidated financial condition and results of operations depend on the ability of our subsidiaries to perform their obligations under these leases over time. Our business, reputation, financial condition and results of operations depend on our subsidiaries’ ongoing compliance with their leases. We may determine that it is necessary to fund the lease payments of our subsidiaries beyond the terms of 27