Leases

3 Months Ended

Mar. 31, 2020

The Company has operating leases for its new headquarters office at 9715 Key West Ave, Rockville, MD; its former headquarters office and lab space at 1550 East Gude Drive in Rockville, MD; and for its fleet vehicles. The Company’s existing leases for its former headquarters office and lab space run through April 2020. With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities.

New Headquarters Lease

The Company entered into a new lease agreement, effective January 31, 2019, with Advent Key West, LLC (Landlord), for its new headquarters office in Rockville, MD (Premises). The term of the new headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease. The lease includes options to extend the lease for up to 10 years, beyond 2034. Fixed rent with respect to the Premises began on the Commencement Date. However, the Landlord agreed to a rent abatement from the Commencement Date through April 30, 2020.

The initial fixed rental rate is approximately $195,000 per month for the first 12 months, and will automatically increase by 2% on each anniversary of the Commencement Date. Under the terms of the Lease, the Company provided a security deposit of approximately $195,000, and be required to pay all utility charges for the Premises, in addition to its pro rata share of any operating expenses and real estate taxes.

The lease also provides for a tenant improvement allowance of approximately $10.2 million in the aggregate. As of December 31, 2019, the tenant improvement allowance was fully utilized and recorded as leasehold improvements within Property and equipment on the condensed consolidated balance sheets.

Supplemental balance sheet information related to leases is as follows (dollars in thousands):


	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Lease assets	$	21,911		$	21,279

Liabilities
Accrued expenses and other current liabilities
Lease liabilities, current	$	3,456		$	2,825
Non-current
Lease liabilities, long term	30,804			30,440
Total lease liabilities	$	34,260		$	33,265

Weighted-average remaining lease term (years)	12.1			12.5
Weighted-average discount rate	4.3		%	4.4		%

Operating lease costs are as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Fixed lease cost	$	1,497	$	1,032
Variable lease cost	627		465
Total operating lease cost	$	2,124	$	1,497

Supplemental cash flow information related to leases is as follows (dollars in thousands):


	Three Months ended March 31,
	2020		2019
	(unaudited)
Cash paid for operating leases	$	1,261	$	1,313
Lease assets and tenant receivables obtained for new operating leases	$	1,715	$	17,136

Future minimum lease payments under noncancellable operating leases, as of March 31, 2020, are as follows (dollars in thousands, unaudited):


2020 (remaining)	$	3,672
2021	4,760
2022	4,226
2023	2,537
2024	2,587
Thereafter	26,784
Total future minimum lease payments	$	44,566
Less: Imputed interest ⁽¹⁾	(10,306)
Present value of lease liabilities	$	34,260

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⁽¹⁾Calculated using the interest rate for each lease.