Annual report pursuant to Section 13 and 15(d)

Leases

v3.20.4
Leases
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases

8.

Leases

We lease our corporate headquarters in South San Francisco, California under a non-cancellable lease agreement that expires in May 2022 and for which we have an option to extend the lease for an additional five years. In connection with the lease, we are required to maintain a letter of credit in the amount of $0.2 million to the landlord, which expires and is renewed every 12 months, and is classified as restricted cash in our consolidated balance sheet. In November 2018, we entered into a lease agreement for additional office space in Thousand Oaks, California that expires in February 2026 and for which we have the option to extend the lease for an additional period of five years after the initial term. Additionally, we entered into a new lease for our office and lab space in Aurora, Colorado, effective May 2019, that expires in April 2024.

In February 2017, we entered into a lease agreement for approximately 90,580 square feet of office, lab and cellular therapy manufacturing space in Thousand Oaks, California. The initial 15-year term of the lease commenced on February 15, 2018, upon the substantial completion of landlord’s work as defined under the agreement. The contractual obligations during the initial term are $16.4 million in aggregate. We have the option to extend the lease for two additional periods of ten and nine years, respectively, after the initial term. In connection with the lease, we were required to issue a letter of credit in the amount of $1.2 million to the landlord, which is recorded as long-term restricted cash in our consolidated balance sheet.

Based on the terms of the lease agreement and on our involvement in certain aspects of the construction, we were deemed the owner of the building during the construction period in accordance with U.S. GAAP in effect prior to January 1, 2019. Under this build-to-suit lease arrangement, we recognized construction in progress based on all construction costs incurred by both us and the landlord. We also recognized a financing obligation equal to all costs funded by the landlord.

Due to completion of the construction by the landlord and not having met the criteria for sale-lease back accounting, we transferred the $10.3 million of landlord’s construction costs previously capitalized as construction in progress to a build-to-suit asset, and recognized a corresponding long-term financing obligation for the same amount in long-term liabilities in our consolidated balance sheets. In addition, we recorded $0.3 million of capitalized interest during the construction period through December 31, 2018. A portion of the monthly lease payment was allocated to land rent and recorded as an operating lease expense and the non-interest portion of the amortized lease payments to the landlord related to rent of the building was applied to the lease financing liability. Further, we recorded ground lease expense of $0.4 million for the year ended December 31, 2018 in our consolidated statement of operations and comprehensive loss, representing the estimated cost of renting the land during the construction period. Due to the adoption of ASU No. 2016-02, Leases (Topic 842), no ground lease expense was recognized for the years ended December 31, 2020 and 2019.

The maturities of lease liabilities under our operating and finance leases as of December 31, 2020 were as follows:

 

 

Operating Leases

 

Finance Leases

 

Years Ending December 31,

 

(in thousands)

 

2021

 

$

3,177

 

 

$

282

 

2022

 

 

2,835

 

 

 

130

 

2023

 

 

2,696

 

 

 

29

 

2024

 

 

2,593

 

 

 

 

2025

 

 

2,587

 

 

 

 

Thereafter

 

 

9,300

 

 

 

 

Total lease payments

 

$

23,188

 

 

$

441

 

Less: amount representing interest

 

 

(8,417

)

 

 

(37

)

Present value of lease liabilities

 

$

14,771

 

 

$

404

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

 

 

 

 

 

 

Other current liabilities

 

$

1,730

 

 

$

255

 

Operating lease liabilities - long-term

 

 

13,041

 

 

 

 

Other long-term liabilities

 

 

 

 

 

149

 

Total

 

$

14,771

 

 

$

404

 

 

The components of lease cost were as follows:

 

 

 

Year Ended

 

 

Year Ended

 

 

 

December 31, 2020

 

 

December 31, 2019

 

 

 

(in thousands)

 

Operating lease cost:

 

 

 

 

 

 

 

 

Operating lease cost

 

$

3,020

 

 

$

2,578

 

Short-term lease cost

 

 

987

 

 

 

770

 

Total operating lease cost

 

$

4,007

 

 

$

3,348

 

Finance lease cost:

 

 

 

 

 

 

 

 

Amortization expense

 

$

389

 

 

$

324

 

Interest on lease liabilities

 

 

60

 

 

 

56

 

Total finance lease cost

 

$

449

 

 

$

380

 

 

 

Rent expense under operating leases for the year ended December 31, 2018 was $2.2 million.

 

Other information related to leases was as follows:

 

 

 

Year Ended

 

 

Year Ended

 

 

 

December 31, 2020

 

 

December 31, 2019

 

 

 

(in thousands, except lease term and discount rate)

 

Supplemental Cash Flows Information

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of

   lease liabilities:

 

 

 

 

 

 

 

 

Operating cash flows for operating leases

 

$

2,878

 

 

$

2,346

 

Operating cash flows for finance leases

 

 

62

 

 

 

50

 

Financing cash flows for finance leases

 

 

389

 

 

 

486

 

 

 

 

 

 

 

 

 

 

Operating lease assets obtained in exchange for lease obligations:

 

$

 

 

$

838

 

Finance lease assets obtained in exchange for lease obligations:

 

 

281

 

 

 

323

 

Non-cash increase to operating lease assets due to

   remeasurement of lease liabilities:

 

 

639

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Remaining Lease Term

 

 

 

 

 

 

 

 

Operating leases

 

9.4 years

 

 

10.3 years

 

Finance leases

 

1.7 years

 

 

2.5 years

 

Weighted Average Discount Rate

 

 

 

 

 

 

 

 

Operating leases

 

 

10.3

%

 

 

10.4

%

Finance leases

 

 

9.7

%

 

 

10.0

%

 

Asset Retirement Obligation

The Company’s ARO consists of a contractual requirement to remove the tenant improvements at our manufacturing facility in Thousand Oaks, California and restore the facility to a condition specified in the lease agreement. The Company records an estimate of the fair value of its ARO in long-term liabilities in the period incurred. The fair value of the ARO is also capitalized in property and equipment, net and depreciated over the lease term. The fair value of our ARO was estimated by discounting projected cash flows over the estimated life of the related assets using our credit adjusted risk-free rate.

The following table presents the activity for our ARO liabilities:

 

 

 

ARO Liability

 

 

 

(In thousands)

 

Balance as of December 31, 2019

 

$

788

 

Accretion expense

 

 

78

 

Balance as of December 31, 2020

 

$

866