Property and equipment, net

6 Months Ended

Jun. 30, 2019

Property and equipment, net

7.    Property and equipment, net

Property and equipment, net consists of the following (in thousands):

	June 30,		December 31,
	2019		2018
Office equipment	$	15,240	$	16,955
Laboratory equipment		65,439		61,697
Computer equipment		56,687		55,436
Land		10,161		10,122
Building and leasehold improvements		211,346		213,196
Operating lease right-of-use assets		27,622		—
Construction in progress		69,038		65,576
		455,533		422,982
Less accumulated depreciation and amortization		(116,411)		(103,231)
Property and equipment, net	$	339,122	$	319,751

In February 2018, we signed an agreement to rent a building in Morges, Switzerland for an initial term of 15 years, with multiple options to extend for an additional 20 years. The building will serve as our new European headquarters and will consist of approximately 100,000 square feet of office space. This building will allow for consolidation of our European operations that are currently located in Geneva and Lausanne, Switzerland. Building permits were granted by the local government authorities in September 2018, and construction activity began immediately thereafter. In June 2019, we obtained control of the Morges building to begin our construction activity. At that time, we determined the lease to be a finance lease and  recorded a lease liability of $31.1 million and a lease right-of-use asset of $29.1 million, net of a lease incentive from our landlord of $2.0 million. As of June 30, 2019, we have capitalized approximately $3.9 million in on site preparation, design and construction costs.

In July 2018, we signed an agreement to purchase land located within Y-PARC, Switzerland’s largest technology park in Yverdon. The land was purchased, in cash, for $4.8 million. Upon this parcel, we plan on constructing a large molecule production facility.  Construction activity commenced in July 2018, and as of June 30, 2019, we have recorded approximately $55.2 million in costs for construction, ground preparation and architectural and engineering studies. We currently anticipate the facility to be completed in the second half of 2020.

As stated in Note 2, in January 2019, we adopted ASC 842, Leases, which changed the accounting and reporting of our lease activity. Although we do not have significant lease activity, we are the lessee of several contracts, including those to secure fleet vehicles, buildings and equipment. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. Some of our building leases include options to renew and the exercise of these options is at our discretion. Our current operating lease liabilities are reflected in accrued and other current liabilities and our noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheets.

As of June 30, 2019 our lease liabilities are as follows (in thousands):

Current
Operating lease liabilities	$	10,832
Finance lease liabilities		791
Noncurrent
Operating lease liabilities		13,284
Finance lease liabilities		31,643
Total lease liabilities	$	56,550

The cash paid for amounts included in the measurement of our operating lease liabilities for the six months ended June 30, 2019 was $5.4 million in operating cash flows. The cash paid for amounts included in the measurement of our finance lease liabilities for the six months ended June 30, 2019 was $0.4 million in financing cash flows.

The maturity of our lease liabilities are as follows (in thousands):

	Operating		Finance
Remainder of 2019	$	6,771	$	449
2020		7,901		697
2021		5,121		2,454
2022		2,831		2,706
2023		1,588		2,713
After 2023		1,346		35,262
Total lease cash payments	$	25,558	$	44,281
Less: discount		1,442		11,847
Present value of lease liabilities	$	24,116	$	32,434

As of June 30, 2019, our finance and operating leases had a weighted average lease term of approximately 16.0 and 4.5 years, respectively. The discount rate of our leases is an approximation of an estimated incremental borrowing rate and is dependent upon the term and economics of each agreement. The weighted average discount rate of our finance and operating leases is approximately 3.7% and 4.7%, respectively. For the three and six months ended June 30, 2019, we incurred approximately $3.6 million and $7.3 million, respectively, of expense related to our operating leases, approximately $0.2 million and $0.4 million, respectively, of amortization on our finance lease right-of-use assets and a de minimis amount of interest expense on our finance lease liabilities. Rent expense for the three and six months ended June 30, 2018 was $3.7 million and $7.0 million, respectively. For the three and six months ended June 30, 2019, the cost of our short term leases with a term less than 12 months was de minimis.