Leases

9 Months Ended

Sep. 30, 2019

On April 11, 2019, we entered into an agreement to lease approximately 13,000 square feet of office space located at 38 Sidney Street, Cambridge, Massachusetts, or the 38 Sidney Lease, with Thirty-Eight Sidney Street, LLC. The initial term of the 38 Sidney Lease commenced on May 1, 2019 and expires on February 29, 2028. At the end of the lease term, we have the option to extend the 38 Sidney Lease for two consecutive terms of five years at fair market rent at the time of the extension. The 38 Sidney Lease provides us with the right to lease additional space within the 38 Sidney Street building and also includes rent escalation clauses and a tenant improvement allowance of $1.0 million.

In connection with the 38 Sidney Lease, we also amended our existing building leases at 88 Sidney Street, Cambridge, Massachusetts and at 64 Sidney Street, Cambridge, Massachusetts to extend the initial terms of those leases by approximately three years through February 29, 2028. The amendments also provide us with the right to lease additional space at the 64 Sidney Street building. Our existing extension options for the 88 Sidney Street building and 64 Sidney Street building continue as set forth in the existing leases for those buildings.

Our building leases are comprised of office and laboratory space under non-cancelable operating leases. These lease agreements have remaining lease terms of eight years and contain various clauses for renewal at our option. The renewal options were not included in the calculation of the operating lease assets and the operating lease liabilities as the renewal option is not reasonably certain of being exercised. The lease agreements do not contain residual value guarantees. Operating lease costs for the three and nine months ended September 30, 2019 were $3.8 million and $10.6 million, respectively, and cash paid for amounts included in the measurement of operating lease liabilities for the three and nine months ended September 30, 2019 were $2.2 million and $8.5 million, respectively.

We have not entered into any material short-term leases or financing leases as of September 30, 2019.

As of September 30, 2019, undiscounted minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows (in thousands):


Remaining 2019	$	3,526
2020	14,015
2021	14,380
2022	16,773
2023	18,126
2024	18,660
Thereafter	63,891
	$	149,371

In arriving at the operating lease liabilities as of September 30, 2019, we applied the weighted-average incremental borrowing rate of 5.7% over a weighted-average remaining lease term of 8.4 years.

As of September 30, 2019, the following represents the difference between the remaining undiscounted minimum rental commitments under non-cancelable leases and the operating lease liabilities (in thousands):


Undiscounted minimum rental commitments	$	149,371
Present value adjustment using incremental borrowing rate	(33,977)
Operating lease liabilities	$	115,394

As of December 31, 2018, minimum rental commitments under non-cancelable leases, for each of the next five years and total thereafter were as follows (in thousands):


2019	$	12,759
2020	13,135
2021	13,473
2022	15,552
2023	17,145
Thereafter	19,223
	$	91,287