Leases

6 Months Ended

Jun. 30, 2021

Redwood City, CA Existing Lease

The Company leases its office and laboratory space pursuant to an operating lease ("Existing Lease"), which commenced on September 1, 2018 and had an original lease term expiring in February 2029. Upon the execution of the Existing Lease, the Company provided the landlord with a letter of credit in the amount of $1.0 million, which is classified as restricted cash under long term assets on the Company's condensed consolidated balance sheet.

Redwood City, CA Expansion Lease

On April 22, 2021, the Company entered into the first amendment to the Existing Lease pursuant to which the Company leased an additional building (the “Expansion Premises”) with a term of 10 years ("Expansion Lease"). The Expansion Lease commenced on June 9, 2021 and has a lease term expiring in December 2031.

The Expansion Lease provides a total of tenant improvement allowances for up to $10.2 million. On the execution of the Expansion Lease, the Company provided the landlord with a letter of credit in the amount of $2.5 million, which is classified as restricted cash under long term assets on the Company's condensed consolidated balance sheet, and will replace the letter of credit delivered in connection with the Existing Lease.

The first amendment to the Existing Lease also extends the term of the Existing Lease to expire in December 2031, with an option to extend the Existing Lease and the Expansion Lease for a period of eight years.

North Carolina Lease

On January 8, 2021, the Company entered into an operating lease agreement for a building in North Carolina ("NC Premises"). The lease commenced in April 2021 when the Company obtained control of the NC Premises, and the lease term expires in October 2037 with two options to extend the lease term for a period of five years each.

The Company has the right to make tenant improvements with a lease incentive allowance of up to $25.5 million. The rent payments begin in November 2022. The North Carolina Lease provides for an escalation of rent payment each year. In connection with the lease, the Company provided the landlord with a letter of credit in the amount of $2.8 million, which is classified as restricted cash under long term assets on the condensed consolidated balance sheet.

As of June 30, 2021, the weighted-average remaining lease term was 12.3 years and the weighted-average Incremental Borrowing Rate (“IBR”) was 6.79%. IBR is an estimated rate of interest used to determine present value of future lease payments in order to measure lease liability, which rate is what the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. In order to determine the IBR, the Company estimates its credit rating, adjusts the credit rating for the nature of the collateral, and benchmarks the borrowing rate against observable yields on comparable securities with a similar term.

The undiscounted future non-cancellable lease payments under the lease agreements as of June 30, 2021 is as follows:


Year ending December 31,	(In thousands)
2021 (remaining 6 months)	$	2,354
2022	8,517
2023	16,500
2024	17,048
2025	17,615
Thereafter	169,114
Total undiscounted lease payments	231,148
Less: Present value adjustment	(87,395)
Less: Tenant improvement allowance	(30,403)
Add: Lease incentive receivable	16,196
Total lease liability as of June 30, 2021	$	129,546

Rent expense for the three months ended June 30, 2021 and 2020 was $2.8 million, and $1.4 million, respectively, which includes variable lease costs for utilities, parking, maintenance, and real estate taxes. Variable lease expenses for the three months ended June 30, 2021 and 2020 were $0.4 million and $0.3 million, respectively. Rent expense for the six months ended June 30, 2021 and 2020 was $4.1 million, and $3.1 million, respectively, including variable lease cost of $0.7 million and $0.8 million, respectively.