Property and Equipment, net

12 Months Ended

Dec. 31, 2020

Property and Equipment, net

Property and Equipment, net

Note 7. Property and Equipment, net

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

	December 31,
	2020		2019
Office equipment	$	17,880	$	15,303
Laboratory equipment		86,021		70,510
Computer equipment		66,640		59,069
Land		10,671		10,203
Building and leasehold improvements		238,042		208,293
Operating lease right-of-use assets		26,816		19,672
Construction in progress		257,929		116,387
		703,999		499,437
Less accumulated depreciation and amortization		(144,374)		(121,870)
Property and equipment, net	$	559,625	$	377,567

Depreciation expense, including amortization expense of leasehold improvements, was $29.6 million, $32.1 million and $32.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

In March 2017, we acquired additional adjacent buildings to our global headquarters in Wilmington, Delaware and in 2019, began demolition of these buildings and construction of a new laboratory and office building totaling approximately 200,000 square feet. As of December 31, 2020, we have capitalized approximately $79.5 million in on site preparation, design and construction costs and currently expect the building to be completed in the second half of 2021.

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 serves as our new

European headquarters and consists of approximately 100,000 square feet of office space. This building allowed for consolidation of our European operations that were located in Geneva and Lausanne, Switzerland. In June 2019, we obtained control of the Morges building to begin our construction activity, which was completed in 2020. 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 December 31, 2020, we have capitalized approximately $17.9 million in leasehold improvements.

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 December 31, 2020, we have capitalized approximately $167.4 million in costs for construction, ground preparation and architectural and engineering studies. We currently expect the facility will be operational in the second half of 2021.

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 consolidated balance sheets and are as follows (in thousands):

	December 31,		December 31,
	2020		2019
Current
Operating lease liabilities	$	12,674	$	9,343
Finance lease liabilities		2,284		664
Noncurrent
Operating lease liabilities		14,188		11,854
Finance lease liabilities		32,573		31,918
Total lease liabilities	$	61,719	$	53,779

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

	Operating		Finance
2021	$	14,091	$	3,652
2022		6,948		3,448
2023		3,714		3,341
2024		906		2,756
2025		761		2,772
After 2025		4,118		29,292
Total lease cash payments	$	30,538	$	45,261
Less: discount		3,676		10,404
Present value of lease liabilities	$	26,862	$	34,857

The cash paid for amounts included in the measurement of our operating lease liabilities for the years ended December 31, 2020 and 2019 was $12.1 million and $11.9 million, respectively, in operating cash flows. The cash paid for amounts included in the measurement of our finance lease liabilities for the years ended December 31, 2020 and 2019 was $0.8 million in financing cash flows.

As of December 31, 2020, our finance and operating leases had a weighted average lease term of approximately 14.2 and 4.7 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. As of December 31, 2019, our finance and operating leases had a weighted average lease term of approximately 15.8 and 3.0 years, respectively, and the weighted average discount rate of our finance and operating leases was approximately 3.6% and 4.5%, respectively.

For the year ended December 31, 2020, we incurred approximately $12.5 million of expense related to our operating leases, approximately $2.6 million of amortization on our finance lease right-of-use assets and approximately $1.2 million of interest expense on our finance lease liabilities. For the year ended December 31, 2019, we incurred approximately $12.7 million of expense related to our operating leases, approximately $1.7 million of amortization on our finance lease right-of-use assets and approximately $0.6 million of interest expense on our finance lease liabilities. For the years ended December 31, 2020 and 2019, the cost of our short term leases with a term less than 12 months was approximately $1.9 million and $1.1 million, respectively.