6. LEASES

Operating leases

On February 28, 2018, the Company entered into a lease agreement for the lease of a portion of the building located at 490 Arsenal Way, Watertown, Massachusetts (the “Watertown Lease”) to be used as the Company’s corporate headquarters. The Company recognized the right-of-use asset and corresponding lease liability on November 15, 2018, by calculating the present value of lease payments, discounted at 9.9%, the Company’s estimated incremental borrowing rate, over the 13-year expected term.

In connection with the Watertown Lease, the Company issued a letter of credit to the landlord for $2.0 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as restricted cash as of March 31, 2020 and December 31, 2019.

For the three months ended March 31, 2020 and 2019, the variable lease expense for the Watertown Lease, which includes common area maintenance and real estate taxes, was $0.4 million and $0.1 million, respectively. The remaining lease term was 11.6 years as of March 31, 2020.

Vehicle Fleet lease

During the year ended December 31, 2019, the Company entered into a master fleet lease agreement (the “Vehicle Fleet Lease”), pursuant to which it currently leases approximately 65 vehicles. In connection with the Vehicle Fleet Lease, the Company issued a letter of credit for $0.5 million, which was reported as restricted cash on the balance sheet. The lease has an expected term of three years, which commenced upon the delivery of the vehicles in March 2019. As of March 31, 2020, the remaining lease term was 1.9 years.

The components of lease expense and related cash flows were as follows (in thousands):


	Three Months Ended March 31,
	2020		2019
Lease cost
Operating lease cost	$	1,185	$	1,102
Variable lease cost		410		124
Total lease cost	$	1,595	$	1,226

Operating cash outflows from operating leases	$	1,444	$	743