6. Commitments and Contingencies

Facility Leases

In March 2014, the Company entered into an operating facility lease agreement to lease approximately 12,900 square feet in Menlo Park, California for its new headquarters building for a period of thirty-nine months. The total obligation for the Company under this lease is approximately $0.1 million as of June 30, 2017.

In December 2015, the Company entered into an operating sublease agreement to lease approximately 10,900 square feet of additional office space in Menlo Park for a period of twenty-four months. The sublease date began January 1, 2016 and the total obligation under this sublease for the Company is approximately $0.3 million as of June 30, 2017.

In March 2017, the Company entered into an operating facility lease agreement for approximately 34,500 rentable square feet located in the building located at 1020 Marsh Road, Menlo Park, California and for approximately 17,400 rentable square feet located on the second floor of the building located at 1060 Marsh Road. This will serve as the Company’s corporate headquarters.

The delivery of the 1020 Space was April 2017. The anticipated delivery for the 1060 Space is November 2017. The initial term of the Lease is 93 months commencing on the date that is 120 days after the 1020 Space is delivered, with one renewal option for a five-year term. We have the option to terminate the lease with respect to the 1060 Space by so notifying Landlord on or before October 31, 2017, in which event the term of the Lease with respect to the 1020 Space will be reduced to 86 months.

With respect to the 1020 Space, base rent shall be approximately $0.2 million per month, subject to 3% annual increases. With respect to the 1060 Space, if we do not opt out, base rent shall be approximately $0.1 million per month, subject to 3% annual increases. In addition to the base rent, the Company shall pay additional rent for the Company’s proportionate share of operating expenses, taxes, utilities and insurance expenses for the complex in which the Premises are located.

As an inducement to enter into the lease, Landlord will provide us with approximately a $1.9 million and a $1.0 million tenant improvement allowance for the 1020 Space and the 1060 Space, respectively. We are providing the Landlord with a letter of credit to secure our obligations under the lease in the initial amount of approximately $2.4 million, reported as restricted cash on the balance sheet, to be increased to $3.6 million if we do not elect to terminate the lease with respect to the 1060 Space, which is subject to reductions in future years if certain financial hurdles are met.

Future minimum lease payments under all of our noncancelable operating and facility leases, including the 1020 lease which has not yet commenced, as of June 30, 2017, were as follows (in thousands):

Year Ended December 31,
2017	$	1,118
2018		3,550
2019		4,103
2020		4,214
2021		4,328
Thereafter		15,307
Total	$	32,620

Build-to-Suit

In March 2017, the Company entered into an operating facility lease agreement, as described above, to lease office space located in Menlo Park, California in a building to be constructed by the landlord. The company expects to occupy the 1020 Space and 1060 Space by August 2017 and February 2018, respectively. The lease has a term of 93 months from the commencement date as defined in the lease agreement with the Company’s option to extend the term of the lease for an additional five years. The Company is obligated to make lease payments totaling approximately $32.2 million over the initial term of the lease. In connection with this lease, the landlord is providing a tenant improvement allowance of approximately $1.9 million and $1.0 million for the 1020 Space and the 1060 Space, respectively, for costs associated with the design, development and construction of the Company’s improvements. The Company is obligated to fund all costs incurred in excess of the tenant improvement allowance.

Under the terms of the lease agreement, the Company has indemnified the landlord during the construction period. Accordingly, for accounting purposes, the Company has concluded that they are deemed the owner of the building during the construction period and the Company capitalized approximately $10.0 million within property and equipment and recognized an $8.2 million corresponding build-to-suit obligation in non-current liabilities in the condensed consolidated balance sheet as of June 30, 2017. Of the $10.0 million, approximately $1.2 million has been recorded as a build-to-suit asset and related accrued liability for work performed but net yet paid as of June 30, 2017.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

As of June 30, 2017 the Company is contingently committed to make development and sales-related milestone payments of up to $30.0 million under certain circumstances, and other payments of $10.0 million, as well as royalties relating to potential future product sales under the License Agreement with Amunix. The amount, timing and likelihood of these payments are unknown as they are dependent on the occurrence of future events that may or may not occur, including approval by the FDA of potential drug candidates.