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Property and equipment, net

9 Months Ended

Sep. 30, 2019

Property and equipment, net

Property and equipment, net

7. Property and equipment, net

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


		September 30,			December 31,
		2019			2018
Office equipment		$	15,224		$	16,955
Laboratory equipment			66,700			61,697
Computer equipment			56,743			55,436
Land			10,069			10,122
Building and leasehold improvements			211,342			213,196
Operating lease right-of-use assets			30,479			—
Construction in progress			83,209			65,576
			473,766			422,982
Less accumulated depreciation and amortization			(126,516)			(103,231)
Property and equipment, net		$	347,250		$	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 September 30, 2019, we have capitalized approximately $7.8 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 approximately $4.8 million. Upon this parcel, we are constructing a large molecule production facility. Construction activity commenced in July 2018, and as of September 30, 2019, we have capitalized approximately $59.9 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 September 30, 2019 our lease liabilities are as follows (in thousands):


Current
Operating lease liabilities		$	10,372
Finance lease liabilities			763
Noncurrent
Operating lease liabilities			13,326
Finance lease liabilities			31,732
Total lease liabilities		$	56,193

The cash paid for amounts included in the measurement of our operating lease liabilities for the nine months ended September 30, 2019 was $8.6 million in operating cash flows. The cash paid for amounts included in the measurement of our finance lease liabilities for the nine months ended September 30, 2019 was $0.6 million in financing cash flows.

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


		Operating			Finance
Remainder of 2019		$	3,469		$	212
2020			9,907			697
2021			5,894			2,454
2022			2,901			2,706
2023			1,575			2,713
After 2023			1,331			35,263
Total lease cash payments		$	25,077		$	44,045
Less: discount			1,379			11,550
Present value of lease liabilities		$	23,698		$	32,495

As of September 30, 2019, our finance and operating leases had a weighted average lease term of approximately 15.9 and 3.9 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 nine months ended September 30, 2019, we incurred approximately $3.6 million and $10.9 million, respectively, of expense related to our operating leases, approximately $0.7 million and $1.1 million, respectively, of amortization on our finance lease right-of-use assets and approximately $0.3 million of interest expense on our finance lease liabilities. Rent expense for the three and nine months ended September 30, 2018 was $3.6 million and $10.6 million, respectively. For the three and nine months ended September 30, 2019, the cost of our short term leases with a term less than 12 months was de minimis.