Operating Leases

12 Months Ended

Dec. 31, 2022

Our leases consist of a Lease Agreement (the Mission Bay Lease) with ARE-San Francisco No. 19, LLC (ARE) for our 155,215 square foot corporate office and R&D facility located at 455 Mission Bay Boulevard South, San Francisco, California (the Mission Bay Facility) and a Lease Agreement (the Third Street Lease) with Kilroy Realty Finance Partnership, L.P. (Kilroy) for an additional 135,936 square foot of office space at 360 Third Street, San Francisco, California (the Third Street Facility). The following table presents key information regarding these leases (dollars in thousands):


	Mission Bay Facility	Third Street Facility
Lease commencement	September 2017	June 2018
Lease term	January 2030	January 2030
Renewal terms	Two consecutive five-year terms	One five-year term

•The monthly base rent for both facilities will escalate over the term of the lease at various intervals.

•Both leases include various covenants, indemnities, defaults, termination rights, security deposits and other provisions customary for lease transactions of this nature.

•During the term of the Mission Bay Lease, we are responsible for paying our share of operating expenses specified in the lease, including utilities, common area maintenance, insurance costs and taxes.

•For the Third Street Lease, our fixed annual base rent on an industrial gross lease basis includes certain expenses and property taxes paid directly by the landlord. We have a one-time right of first offer with respect to certain additional rental space at the Third Street Facility.

Due to our 2022 Restructuring Plan, during the year ended December 31, 2022, we recorded impairment charges of $54.6 million for our right-of-use assets which we are seeking to sublease. See Note 11 for additional information.

We generally recognize lease expense for our operating leases on a straight-line basis over the lease term, and we continue to recognize lease expense on a straight-line basis for spaces for which we did not recognize an impairment. For spaces where we did recognize an impairment charge, the aggregate lease expense recognized over the remaining term is reduced by the amount of the impairment charge, but we recognize the remaining lease expense on an accelerated basis. The components of lease expense, which we include in operating expenses in our Consolidated Statements of Operations, were as follows (in thousands):


	Year Ended December 31,
	2022		2021		2020
Operating lease expense	$	17,057	$	19,153	$	18,985
Variable lease expense	10,700		8,974		8,179
Total lease expense	$	27,757	$	28,127	$	27,164

During the years ended December 31, 2022, 2021 and 2010, we paid $20.1 million, $16.8 million and $16.2 million, respectively, of operating lease payments related to our lease liabilities, which we include in net cash used in operating activities in our Consolidated Statements of Cash Flows.

As of December 31, 2022, the maturities of our operating lease liabilities were as follows (in thousands):


Year ending December 31,
2023	$	19,216
2024	21,572
2025	22,254
2026	22,958
2027	23,681
2028 and thereafter	51,732
Total lease payments	161,413
Less: portion representing interest	(29,917)
Operating lease liabilities	131,496
Less: current portion	(18,667)
Operating lease liabilities, less current portion	$	112,829

As of December 31, 2022, the weighted-average remaining lease term is 7.1 years and the weighted-average discount rate used to determine the operating lease liability was 5.8%.

We have entered into subleases for certain spaces that provide recovery of $10.5 million in aggregate lease payments, as well as the subtenants' share of operating expenses. The reduction to lease expense for the year ended December 31, 2022, was not significant but will increase in future periods.