Lease obligation

6 Months Ended

Jun. 30, 2020

Lease obligation

Lease obligation

6. Lease obligation

Operating Leases

As of June 30, 2020, the Company has leases for office and lab space at 75 and 64 Sidney Street in Cambridge, Massachusetts through November 30, 2026.

In March 2020, the Company entered into an agreement to lease an additional facility at 75 Hayden Avenue in Lexington, Massachusetts through October 29, 2030. The facility includes laboratory and office space. The Company currently expects the facility to be ready for occupancy in late 2020. As of June 30, 2020, the Company did not have control of the space and therefore, did not record a right-of-use asset and corresponding lease liability. The expected contractual obligation under this lease is approximately $25.6 million, to be paid over the ten-year term of the lease. These payments are not included in the detailed table below.

The Company has received leasehold improvement incentives from the landlord totaling $1.3 million and $3.5 million for 75 Sidney Street and 64 Sidney Street, respectively. The Company recorded these incentives as a component of its right-of-use asset and is amortizing these incentives as a reduction of rent expense over the life of the leases. The leasehold improvements have been capitalized as fixed assets. The Company is entitled to receive approximately $0.1 million of leasehold improvements at 75 Sidney Street. The Company is also entitled to receive approximately $6.1 million of leasehold improvements for the space at 75 Hayden Avenue.

The Company’s lease agreements require the Company to maintain a cash deposit or irrevocable letter of credit in the aggregate amount of $1.8 million payable to the landlords as security for the performance of its obligations under the leases. These amounts are recorded as restricted cash and included in deposits and other non-current assets in the accompanying condensed consolidated balance sheets.

The following table summarizes the Company’s significant contractual obligations under operating leases as of payment due date by period at June 30, 2020:

	Total Minimum
	Lease Payments
	(in thousands)
2020 (remainder of year)	$	2,980
2021		6,138
2022		6,323
2023		6,512
2024		6,707
2025+		14,190
Total future minimum lease payments	$	42,850
Less: imputed interest		(10,246)
Total lease liability	$	32,604
Reported as:
Other current liabilities	$	3,421
Other non-current liabilities		29,183
Total lease liability	$	32,604

During the three and six months ended June 30, 2020, the Company incurred lease expense of $1.7 million and $3.4 million, respectively, for operating leases. As of June 30, 2020, the weighted average remaining lease term was 6.4 years and the weighted average incremental borrowing rate used to determine the operating lease liability was 8.5%.