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Property and Equipment, net

12 Months Ended

Dec. 31, 2019

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,
		2019			2018
Office equipment		$	15,303		$	16,955
Laboratory equipment			70,510			61,697
Computer equipment			59,069			55,436
Land			10,203			10,122
Building and leasehold improvements			208,293			213,196
Operating lease right-of-use assets			19,672			—
Construction in progress			116,387			65,576
			499,437			422,982
Less accumulated depreciation and amortization			(121,870)			(103,231)
Property and equipment, net		$	377,567		$	319,751

Depreciation expense, including amortization expense of leasehold improvements, was $32.1 million, $32.3 million and $24.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

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 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, 2019, we have capitalized approximately $13.8 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 December 31, 2019, we have capitalized approximately $82.8 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.

As stated in Note 1, in January 2019, we adopted ASC 842, Leases, which changed the accounting and reporting of our 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 consolidated balance sheets.

As of December 31, 2019 our lease liabilities are as follows (in thousands):


Current
Operating lease liabilities		$	9,343
Finance lease liabilities			664
Noncurrent
Operating lease liabilities			11,854
Finance lease liabilities			31,918
Total lease liabilities		$	53,779

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

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


		Operating			Finance
2020		$	10,198		$	728
2021			6,015			2,495
2022			3,008			2,746
2023			1,594			2,754
2024			442			2,750
After 2024			962			32,522
Total lease cash payments		$	22,219		$	43,995
Less: discount			1,022			11,413
Present value of lease liabilities		$	21,197		$	32,582

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. 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 4.5%, respectively.

For the year ended December 31, 2019, we incurred approximately $12.8 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 year ended December 31, 2019, the cost of our short term leases with a term less than 12 months was approximately $1.1 million. We estimate rent expense for our short term leases for the next twelve months to be approximately $1.0 million. Rent expense for all leases for the years ended December 31, 2019, 2018 and 2017, was approximately $14.2 million, $9.4 million and $8.2 million, respectively.