Property and equipment, net

3 Months Ended

Mar. 31, 2020

Property and equipment, net

Property and equipment, net

7.    Property and equipment, net

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

	March 31,		December 31,
	2020		2019
Office equipment	$	15,285	$	15,303
Laboratory equipment		72,352		70,510
Computer equipment		60,077		59,069
Land		10,227		10,203
Building and leasehold improvements		208,276		208,293
Operating lease right-of-use assets		18,641		19,672
Construction in progress		153,508		116,387
		538,366		499,437
Less accumulated depreciation and amortization		(128,332)		(121,870)
Property and equipment, net	$	410,034	$	377,567

In February 2018, we signed an agreement to rent a building in Morges, Switzerland for an initial term of 15 years plus one year of free rent, 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 finance lease right-of-use asset of $29.1 million, net of a lease incentive from our landlord of $2.0 million. As of March 31, 2020, we have capitalized approximately $18.2 million in on site preparation, design and construction costs.

In July 2018, we signed an agreement to purchase land located in Yverdon, Switzerland. The land was purchased, in cash, for approximately $4.8 million. Upon this parcel, we are constructing a large molecule production facility.  

Construction activity commenced in July 2018 and as of March 31, 2020, we have capitalized approximately $102.8 million in costs for construction, ground preparation and architectural and engineering studies. We currently anticipate the facility will be completed in the second half of 2020.

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 and are as follows (in thousands):

	March 31,		December 31,
	2020		2019
Current
Operating lease liabilities	$	9,021	$	9,343
Finance lease liabilities		910		664
Noncurrent
Operating lease liabilities		11,151		11,854
Finance lease liabilities		31,959		31,918
Total lease liabilities	$	53,041	$	53,779

The cash paid for amounts included in the measurement of our operating lease liabilities as of March 31, 2020 and 2019 was $3.2 million and $2.8 million, respectively, in operating cash flows. The cash paid for amounts included in the measurement of our finance lease liabilities as of March 31, 2020 and 2019 was $0.2 million in financing cash flows.

As of March 31, 2020, our finance and operating leases had a weighted average lease term of approximately 15.4 and 3.1 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 3.6% and 4.4%, respectively.

For the three months ended March 31, 2020, we incurred approximately $3.2 million of expense related to our operating leases, approximately $0.6 million of amortization on our finance lease right-of-use assets and approximately $0.3 million of interest expense on our finance lease liabilities. For the three months ended March 31, 2019, we incurred approximately $3.6 million of expense related to our operating leases, approximately $0.2 million 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 months ended March 31, 2020 and 2019 was approximately $3.5 million and $3.3 million, respectively. For the three months ended March 31, 2020 and 2019, the cost of our short term leases with a term less than 12 months was de minimis.