Leases
 12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases
Leases
Finance Leases
The Company’s finance lease assets and liabilities primarily relate to its corporate headquarters in Boston and research site in San Diego (the “Buildings”). These Buildings are classified as finance leases because the present value of the sum of the lease payments associated with the Buildings exceeds substantially all of the fair value of the Buildings. The Company also has outstanding finance leases for equipment.
Prior to the adoption of ASC 842 on January 1, 2019, the Company was deemed for accounting purposes to be the owner of the Buildings during their construction periods and recorded project construction costs incurred by its landlords. Upon completion of the Buildings, the Company determined that the underlying leases did not meet the criteria for “sale-leaseback” treatment. Accordingly, the Company depreciated the Buildings over 40 years and recorded interest expense associated with the financing obligations for the Buildings. The Company bifurcated the lease payments pursuant to the Buildings into (i) a portion that was allocated to the Buildings and (ii) a portion that is allocated to the land on which the Buildings were constructed. The portion of the lease obligations allocated to the land was treated as an operating lease.
Pursuant to ASC 842, the Company adjusted the amounts recorded on its consolidated balance sheet as of January 1, 2019 for the Buildings to reflect the present value of the lease payments over the remaining lease term related to the Buildings. The finance lease assets associated with the Buildings are amortized to depreciation expense using the straight-line method over the remaining lease term, which is significantly shorter than the Buildings’ useful lives. The Company continues to record interest expense associated with the finance lease liabilities for the Buildings.
Corporate Headquarters
In 2011, the Company entered into two lease agreements, pursuant to which the Company leases approximately 1.1 million square feet of office and laboratory space in two buildings in Boston, Massachusetts for a term of 15 years. Base rent payments commenced in December 2013, and will continue through December 2028. The Company utilizes this initial period as its lease term. The Company has an option to extend the lease term for an additional ten years.
San Diego Lease
In 2015, the Company entered into a lease agreement pursuant to which the Company leases approximately 170,000 square feet of office and laboratory space in San Diego, California for a term of 16 years. Base rent payments commenced in the second quarter of 2019, and will continue through May 2034. The Company utilizes this initial period as its lease term. The Company has an option to extend the lease term for up to two additional five-year terms. The Company placed this building into service in the second quarter of 2018.
Operating Leases
The Company’s operating leases relate to its real estate leases that are not classified as finance leases.
Aggregate Lease Information Related to the Application of ASC 842
The following information is disclosed in accordance with ASC 842, which became effective January 1, 2019. The components of lease cost recorded in the Company’s consolidated statement of operations were as follows:
 
2019
 
 
Operating lease cost
$
11,972

Finance lease cost
 
Amortization of leased assets
49,778

Interest on lease liabilities
52,839

Variable lease cost
27,997

Sublease income
(6,391
)
Net lease cost
$
136,195


The Company’s variable lease cost during 2019 primarily related to operating expenses, taxes and insurance associated with its finance leases. The Company’s sublease income during 2019 primarily related to subleases for an insignificant portion of the Company’s corporate headquarters.
The Company’s leases are included on its consolidated balance sheets as follows:
 
As of December 31, 2019
 
As of December 31, 2018 ^
 
(in thousands)
Finance leases
 
 
 
Property and equipment, net
$
445,336

 
$
640,952

Total finance lease assets
$
445,336

 
$
640,952

 
 
 
 
Capital lease obligations, current portion
$
—

 
$
9,817

Other current liabilities
38,795

 
5,271

Capital lease obligations, excluding current portion
—

 
19,658

Construction financing lease obligation, excluding current portion
—

 
561,892

Long-term finance lease liabilities
538,576

 
—

Total finance lease liabilities
$
577,371

 
$
596,638

 
 
 
 
Operating leases
 
 
 
Other assets
$
88,202

 
$
—

Total operating lease assets
$
88,202

 
$
—

 
 
 
 
Other current liabilities
$
11,504

 
$
—

Other long-term liabilities
84,292

 
—

Total operating lease liabilities
$
95,796

 
$
—

^ As reported in the Company’s 2018 Annual Report on Form 10-K.

Maturities of the Company’s finance and operating lease liabilities in accordance with ASC 842 as of December 31, 2019 were as follows:
Year
 
Finance Leases
 
Operating Leases
 
Total
 
 
(in thousands)
2020
 
$
84,264

 
$
14,598

 
$
98,862

2021
 
89,440

 
12,907

 
102,347

2022
 
87,092

 
12,610

 
99,702

2023
 
85,257

 
12,451

 
97,708

2024
 
90,802

 
11,488

 
102,290

Thereafter
 
425,251

 
51,251

 
476,502

Total lease payments
 
862,106

 
115,305

 
977,411

Less: amount representing interest
 
(284,735
)
 
(19,509
)
 
(304,244
)
Present value of lease liabilities
 
$
577,371

 
$
95,796

 
$
673,167


The weighted-average remaining lease terms and discount rates related to the Company’s leases were as follows:
 
As of December 31, 2019
Weighted-average remaining lease term (in years)
 
Finance leases
9.74

Operating leases
9.70

 
 
Weighted-average discount rate
 
Finance leases
9.04
%
Operating leases
3.75
%

Supplemental cash flow information related to the Company’s leases was as follows:
 
December 31, 2019
 
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
10,650

Operating cash flows from finance leases
$
50,527

Financing cash flows from finance leases
$
39,185

 
 
Right-of-use assets obtained in exchange for lease obligations
 
Operating leases *
$
34,605

Finance leases
$
—

* Includes $33.7 million acquired in 2019 pursuant to the Company’s acquisitions of Semma and Exonics.

Additional Lease Information Related to the Application of ASC 840
The following information is disclosed in accordance with ASC 840, Leases (Topic 840) (“ASC 840”), which was applicable until December 31, 2018. As of December 31, 2018, future minimum commitments under the Company’s real estate leases with initial terms of more than one year were as follows:
Year
 
Fan Pier
Leases
 
Other
Leases
 
Total Lease
Commitments
 
 
(in thousands)
2019
 
$
66,540

 
$
18,531

 
$
85,071

2020
 
72,589

 
23,397

 
95,986

2021
 
72,589

 
21,656

 
94,245

2022
 
72,589

 
21,172

 
93,761

2023
 
72,589

 
21,482

 
94,071

Thereafter
 
389,855

 
185,336

 
575,191

Total minimum lease payments
 
$
746,751

 
$
291,574

 
$
1,038,325


As of December 31, 2018, the Company’s total sublease income to be received related to its facility leases was $6.2 million. During 2018 and 2017, rental expenses were $17.3 million and $19.2 million, respectively.
The capital leases, which were related to equipment and leasehold improvements, bore interest at rates ranging from less than 1% to 6% per year. The Company’s capital lease amortization was included in depreciation expense during 2018 and 2017. The following table set forth the Company’s future minimum payments due under capital leases as of December 31, 2018:
Year
 
(in thousands)
2019
 
$
10,770

2020
 
7,282

2021
 
5,649

2022
 
3,300

2023
 
1,974

Thereafter
 
3,085

Total payments
 
32,060

Less: amount representing interest
 
(2,585
)
Present value of payments
 
$
29,475
Leases
Leases
Finance Leases
The Company’s finance lease assets and liabilities primarily relate to its corporate headquarters in Boston and research site in San Diego (the “Buildings”). These Buildings are classified as finance leases because the present value of the sum of the lease payments associated with the Buildings exceeds substantially all of the fair value of the Buildings. The Company also has outstanding finance leases for equipment.
Prior to the adoption of ASC 842 on January 1, 2019, the Company was deemed for accounting purposes to be the owner of the Buildings during their construction periods and recorded project construction costs incurred by its landlords. Upon completion of the Buildings, the Company determined that the underlying leases did not meet the criteria for “sale-leaseback” treatment. Accordingly, the Company depreciated the Buildings over 40 years and recorded interest expense associated with the financing obligations for the Buildings. The Company bifurcated the lease payments pursuant to the Buildings into (i) a portion that was allocated to the Buildings and (ii) a portion that is allocated to the land on which the Buildings were constructed. The portion of the lease obligations allocated to the land was treated as an operating lease.
Pursuant to ASC 842, the Company adjusted the amounts recorded on its consolidated balance sheet as of January 1, 2019 for the Buildings to reflect the present value of the lease payments over the remaining lease term related to the Buildings. The finance lease assets associated with the Buildings are amortized to depreciation expense using the straight-line method over the remaining lease term, which is significantly shorter than the Buildings’ useful lives. The Company continues to record interest expense associated with the finance lease liabilities for the Buildings.
Corporate Headquarters
In 2011, the Company entered into two lease agreements, pursuant to which the Company leases approximately 1.1 million square feet of office and laboratory space in two buildings in Boston, Massachusetts for a term of 15 years. Base rent payments commenced in December 2013, and will continue through December 2028. The Company utilizes this initial period as its lease term. The Company has an option to extend the lease term for an additional ten years.
San Diego Lease
In 2015, the Company entered into a lease agreement pursuant to which the Company leases approximately 170,000 square feet of office and laboratory space in San Diego, California for a term of 16 years. Base rent payments commenced in the second quarter of 2019, and will continue through May 2034. The Company utilizes this initial period as its lease term. The Company has an option to extend the lease term for up to two additional five-year terms. The Company placed this building into service in the second quarter of 2018.
Operating Leases
The Company’s operating leases relate to its real estate leases that are not classified as finance leases.
Aggregate Lease Information Related to the Application of ASC 842
The following information is disclosed in accordance with ASC 842, which became effective January 1, 2019. The components of lease cost recorded in the Company’s consolidated statement of operations were as follows:
 
2019
 
 
Operating lease cost
$
11,972

Finance lease cost
 
Amortization of leased assets
49,778

Interest on lease liabilities
52,839

Variable lease cost
27,997

Sublease income
(6,391
)
Net lease cost
$
136,195


The Company’s variable lease cost during 2019 primarily related to operating expenses, taxes and insurance associated with its finance leases. The Company’s sublease income during 2019 primarily related to subleases for an insignificant portion of the Company’s corporate headquarters.
The Company’s leases are included on its consolidated balance sheets as follows:
 
As of December 31, 2019
 
As of December 31, 2018 ^
 
(in thousands)
Finance leases
 
 
 
Property and equipment, net
$
445,336

 
$
640,952

Total finance lease assets
$
445,336

 
$
640,952

 
 
 
 
Capital lease obligations, current portion
$
—

 
$
9,817

Other current liabilities
38,795

 
5,271

Capital lease obligations, excluding current portion
—

 
19,658

Construction financing lease obligation, excluding current portion
—

 
561,892

Long-term finance lease liabilities
538,576

 
—

Total finance lease liabilities
$
577,371

 
$
596,638

 
 
 
 
Operating leases
 
 
 
Other assets
$
88,202

 
$
—

Total operating lease assets
$
88,202

 
$
—

 
 
 
 
Other current liabilities
$
11,504

 
$
—

Other long-term liabilities
84,292

 
—

Total operating lease liabilities
$
95,796

 
$
—

^ As reported in the Company’s 2018 Annual Report on Form 10-K.

Maturities of the Company’s finance and operating lease liabilities in accordance with ASC 842 as of December 31, 2019 were as follows:
Year
 
Finance Leases
 
Operating Leases
 
Total
 
 
(in thousands)
2020
 
$
84,264

 
$
14,598

 
$
98,862

2021
 
89,440

 
12,907

 
102,347

2022
 
87,092

 
12,610

 
99,702

2023
 
85,257

 
12,451

 
97,708

2024
 
90,802

 
11,488

 
102,290

Thereafter
 
425,251

 
51,251

 
476,502

Total lease payments
 
862,106

 
115,305

 
977,411

Less: amount representing interest
 
(284,735
)
 
(19,509
)
 
(304,244
)
Present value of lease liabilities
 
$
577,371

 
$
95,796

 
$
673,167


The weighted-average remaining lease terms and discount rates related to the Company’s leases were as follows:
 
As of December 31, 2019
Weighted-average remaining lease term (in years)
 
Finance leases
9.74

Operating leases
9.70

 
 
Weighted-average discount rate
 
Finance leases
9.04
%
Operating leases
3.75
%

Supplemental cash flow information related to the Company’s leases was as follows:
 
December 31, 2019
 
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
10,650

Operating cash flows from finance leases
$
50,527

Financing cash flows from finance leases
$
39,185

 
 
Right-of-use assets obtained in exchange for lease obligations
 
Operating leases *
$
34,605

Finance leases
$
—

* Includes $33.7 million acquired in 2019 pursuant to the Company’s acquisitions of Semma and Exonics.

Additional Lease Information Related to the Application of ASC 840
The following information is disclosed in accordance with ASC 840, Leases (Topic 840) (“ASC 840”), which was applicable until December 31, 2018. As of December 31, 2018, future minimum commitments under the Company’s real estate leases with initial terms of more than one year were as follows:
Year
 
Fan Pier
Leases
 
Other
Leases
 
Total Lease
Commitments
 
 
(in thousands)
2019
 
$
66,540

 
$
18,531

 
$
85,071

2020
 
72,589

 
23,397

 
95,986

2021
 
72,589

 
21,656

 
94,245

2022
 
72,589

 
21,172

 
93,761

2023
 
72,589

 
21,482

 
94,071

Thereafter
 
389,855

 
185,336

 
575,191

Total minimum lease payments
 
$
746,751

 
$
291,574

 
$
1,038,325


As of December 31, 2018, the Company’s total sublease income to be received related to its facility leases was $6.2 million. During 2018 and 2017, rental expenses were $17.3 million and $19.2 million, respectively.
The capital leases, which were related to equipment and leasehold improvements, bore interest at rates ranging from less than 1% to 6% per year. The Company’s capital lease amortization was included in depreciation expense during 2018 and 2017. The following table set forth the Company’s future minimum payments due under capital leases as of December 31, 2018:
Year
 
(in thousands)
2019
 
$
10,770

2020
 
7,282

2021
 
5,649

2022
 
3,300

2023
 
1,974

Thereafter
 
3,085

Total payments
 
32,060

Less: amount representing interest
 
(2,585
)
Present value of payments
 
$
29,475