Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3
Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

7.

Leases

We lease our corporate headquarters in South San Francisco, California under a non-cancellable lease agreement that expires in April 2021. 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 condensed 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. 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 was recorded as long-term restricted cash in our condensed 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 have recognized a corresponding long-term financing obligation for the same amount in long-term liabilities in our condensed 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.

Future minimum payments under our operating, finance and capital leases as of December 31, 2018 were as follows:

 

 

Operating Leases

 

 

Finance Leases

 

 

 

Capital Leases

 

Years Ending December 31,

 

(in thousands)

 

2019

$

 

1,107

 

 

$

 

934

 

 

 

$

540

 

2020

 

 

1,666

 

 

 

 

962

 

 

 

 

234

 

2021

 

 

1,555

 

 

 

 

991

 

 

 

 

29

 

2022

 

 

1,337

 

 

 

 

1,020

 

 

 

 

 

2023

 

 

1,375

 

 

 

 

1,051

 

 

 

 

 

Thereafter

 

 

3,122

 

 

 

 

11,458

 

 

 

 

 

Total minimum payments

$

 

10,162

 

 

$

 

16,416

 

 

 

$

803

 

Less: amount representing interest

 

 

 

 

 

 

 

 

 

 

 

 

(65

)

Present value of capital lease obligations

 

 

 

 

 

 

 

 

 

 

 

 

738

 

Less: current portion

 

 

 

 

 

 

 

 

 

 

 

 

(490

)

Capital lease obligation, net of current

   portion

 

 

 

 

 

 

 

 

 

 

 

$

248

 

 

The maturities of lease liabilities under our operating and finance leases as of September 30, 2019 were as follows:

 

 

 

Operating Leases

 

 

Finance Leases

 

Periods Ending December 31,

 

(in thousands)

 

Remaining 2019

 

$

650

 

 

$

151

 

2020

 

 

2,867

 

 

 

236

 

2021

 

 

2,740

 

 

 

30

 

2022

 

 

2,611

 

 

 

 

2023

 

 

2,685

 

 

 

 

Thereafter

 

 

14,477

 

 

 

 

Total lease payments

 

$

26,030

 

 

$

417

 

Less: amount representing interest

 

 

(10,338

)

 

 

(24

)

Present value of lease liabilities

 

$

15,692

 

 

$

393

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2019

 

 

 

 

 

 

 

 

Other current liabilities

 

$

1,160

 

 

$

308

 

Operating lease liabilities

 

 

14,532

 

 

 

 

Other long-term liabilities

 

 

 

 

 

85

 

Total

 

$

15,692

 

 

$

393

 

 

The components of lease cost were as follows:

 

 

 

September 30, 2019

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

(in thousands)

 

Operating lease cost:

 

 

 

 

 

 

 

 

Operating lease cost

 

$

602

 

 

$

1,976

 

Short-term lease cost

 

 

188

 

 

 

583

 

Total operating lease cost

 

$

790

 

 

$

2,559

 

Finance lease cost:

 

 

 

 

 

 

 

 

Amortization expense

 

 

83

 

 

$

250

 

Interest on lease liabilities

 

 

12

 

 

 

43

 

Total finance lease cost

 

$

95

 

 

$

293

 

 

Rent expense under operating leases for the three and nine months ended September 30, 2018 was $0.6 million and $1.6 million respectively.

 

Other information related to leases was as follows:

 

 

 

Nine Months Ended

 

 

 

September 30, 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

 

$

1,696

 

Operating cash flows for finance leases

 

 

43

 

Financing cash flows for finance leases

 

 

345

 

 

 

 

 

 

Operating lease assets obtained in exchange for lease obligations:

 

$

838

 

 

 

 

 

 

Weighted Average Remaining Lease Term

 

 

 

 

Operating leases

 

10.5 years

 

Finance leases

 

1.1 years

 

Weighted Average Discount Rate

 

 

 

 

Operating leases

 

 

10.4

%

Finance leases

 

 

9.9

%

 

Asset Retirement Obligation

The Company’s Asset Retirement Obligation (“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 as construction in progress. 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, 2018

 

$

717

 

Accretion expense

 

 

53

 

Balance as of September 30, 2019

 

$

770