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 term of this lease ended in August 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 September 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. In September 2017, the Company terminated it’s lease specific to the 1060 Space. The 1020 space serves as the Company’s corporate headquarters.

The delivery of the 1020 Space was April 2017. The 1020 lease commenced on August 8, 2017 for a period of 86 months, with one renewal option for a five-year term. The total obligation under this lease for the Company is approximately $20.0 million as of September 30, 2017.

As an inducement to enter into the lease, Landlord will provide the Company with approximately a $1.9 million tenant improvement allowance for the 1020 Space. The Company has provided the Landlord with a letter of credit to secure its obligations under the lease in the initial amount of approximately $2.4 million, reported as restricted cash on the balance sheet, which is subject to reductions in future years if certain financial hurdles are met.

Future minimum lease payments under all of the Company’s noncancelable operating and facility leases, as of September 30, 2017, were as follows (in thousands):

Year Ended December 31,
2017	$	903
2018		2,660
2019		2,732
2020		2,806
2021		2,882
Thereafter		8,329
Total	$	20,312

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 began occupying the 1020 Space in August 2017. The lease has a term of 86 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 $20.0 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 for the 1020 Space, 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 $8.9 million within property and equipment and recognized an $5.4 million corresponding build-to-suit obligation in non-current liabilities in the condensed consolidated balance sheet as of September 30, 2017. Of the $8.9 million, approximately $3.5 million has been recorded as a build-to-suit asset related to construction costs incurred as of September 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 September 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.