In October 2019, the Company entered into a noncancelable facility lease agreement (the “the 2019 Lease”) for 34,522 square feet of research and development and office space in Watertown, Massachusetts. The term of the 2019 Lease is 120 months and expires on March 31, 2030. The 2019 Lease has an option to be extended for an additional five years. The lease is not reasonably certain to be extended and as such the additional term is not included in the measurement of the lease. The 2019 Lease includes a rent escalation clause, and rent expense is being recorded on a straight-line basis. In accordance with the lease agreement, the Company is required to maintain a security deposit and provided a letter of credit to the landlord, which is recorded in restricted cash as of September 30, 2023 and December 31, 2022. The letter of credit totaled $1.3 million and $1.6 million as of September 30, 2023 and December 31, 2022, respectively.

In December 2021, the Company entered into a noncancelable lease (the “2021 Lease”) for 100,624 square feet of office and laboratory space in Watertown, Massachusetts, which the Company expects to begin occupying in December 2023. The 2021 Lease is subject to base rent of $0.8 million per month beginning two months after the commencement date, plus the Company’s ratable share of taxes, maintenance and other operating expenses. Base rent is subject to a 3% annual increase over the lease term of approximately 134 months following the commencement date. The Company also has two consecutive options to extend the term of the lease for five years each at then-market rates. The 2021 Lease also includes a tenant improvement allowance of approximately $20.1 million. In connection with the signing of the 2021 Lease, the Company issued a letter of credit for $4.5 million which is classified as restricted cash as of September 30, 2023 and December 31, 2022. The Company also paid first month’s rent of $0.8 million upon execution of the 2021 Lease in December 2021 which is classified as other current assets and other non-current assets as of September 30, 2023 and December 31, 2022, respectively.

The 2021 Lease required the landlord to build-out the base building prior to the construction of the Company’s premises. The Company concluded the accounting commencement date occurred when the landlord completed the build-out of the base building and control passed to the Company, which occurred in early January 2023. The Company assessed the classification of the 2021 Lease at the accounting commencement date and concluded the lease should be accounted for as an operating lease. The Company recorded an operating lease liability of $48.9 million, measured as the present value of the remaining lease payments discounted using the incremental borrowing rate as of the accounting commencement date. The Company recorded an operating lease right-of-use asset of $48.9 million, measured as the present value of the remaining lease payments, net of the tenant incentives.

The Company concluded the improvements paid for by the landlord in connection with the tenant improvement allowance represent lessee assets and therefore recorded $12.9 million of leasehold improvements in property and equipment. The Company recorded an additional $8.5 million of leasehold improvements in excess of the tenant improvement allowance, all of which were not placed in service as of September 30, 2023.

The Company’s finance lease obligations consist of certain property and equipment financed through finance leases.

The components of the lease costs for the three and nine months ended September 30, 2023 and 2022, were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease costs	$	2,521	$	524	$	7,562	$	1,571
Finance lease costs:
Amortization of right-to-use assets, finance leases		369		297		1,108		855
Interest expense for finance lease liabilities		37		39		133		124
Variable lease costs		273		297		712		870
Total lease costs	$	3,200	$	1,157	$	9,515	$	3,420

Supplemental cash flow information relating to the Company’s leases for the nine months ended September 30, 2023 and 2022, were as follows (in thousands):


	Nine Months Ended September 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	1,989	$	1,931
Operating cash flows used in finance leases	$	1,001	$	833
Financing cash flows used in finance leases	$	133	$	124

Weighted average remaining lease terms and discount rates as of September 30, 2023 and 2022 were as follows:


	Nine Months Ended September 30,
	2023			2022
Remaining lease term:
Operating lease	10.45 years			7.59 years
Finance lease	2.13 years			1.81 years
Discount Rate:
Operating lease		8.78	%		10.50	%
Finance lease		8.48	%		8.73	%

The undiscounted future lease payments for operating and finance leases as of September 30, 2023, were as follows (in thousands):


Fiscal Year	Operating Leases			Finance Leases
2023 (fourth quarter)	$	(6,285	)	$	328
2024		11,496			839
2025		12,142			402
2026		12,506			133
2027		12,881			100
Thereafter		85,143			—
Total minimum lease payments	$	127,883		$	1,802
Less amounts representing interest or imputed interest		(48,693	)		(149	)
Present value of lease liabilities	$	79,190		$	1,653

The undiscounted future lease payments in 2023 includes approximately $7.0 million of future reimbursements related to landlord funded tenant improvements in connection with the 2021 Lease.