COMMITMENTS

Leases

On May 2, 2017, we entered into the Lease with Ascentris for an aggregate of 110,783 square feet of space in office and research facilities located at 1851, 1801 and 1751 Harbor Bay Parkway, Alameda, California. We also have the right to make certain tenant improvements to the space leased on the Premises. The Lease has an initial term of 10 years with a target commencement date of March 1, 2018 and rent payments will begin upon the target commencement date. We have two five-year options to extend the Lease and a one-time option to terminate the Lease without cause on the last day of the 8^th year of the initial term. We are obligated to make lease payments totaling $24.1 million over the Lease term. The Lease further provides that we are obligated to pay to Ascentris certain costs, including taxes and operating expenses. We also have a right of first offer to lease certain additional space, in the aggregate of approximately 170,000 square feet of space, as that additional space becomes available over the remainder of the initial term at 1601, 1701, 1751, and 1801 Harbor Bay Parkway, Alameda, California at a market rate determined according to the Lease.

We are deemed, for accounting purposes only, to be the owner of portions of the Premises, including two building shells, even though we are not the legal owner. See “Note 5. Property and Equipment - Build-to-Suit Lease” for a further description of the accounting for that portion of the Premises.

As of June 30, 2017, the aggregate future minimum lease payments under our leases are as follows (in thousands):



	Capital leases		Other financing obligations⁽¹⁾
Remainder of 2017	$	1,990	$	—
Year Ending December 31,
2018	2,802		566
2019	605		1,477
2020	630		1,685
2021	637		1,745
2022	646		1,814
Thereafter	3,465		10,441
	$	10,775	$	17,728

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(1)	Other financing obligations includes payments related to build-to-suit lease arrangements.

Rent expense and sublease income were as follows for the periods presented (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Gross rental expense	$	1,493		$	3,194		$	3,771		$	5,453
less: Sublease income	(306		)	(895		)	(1,225		)	(1,730		)
Net rental expense	$	1,187		$	2,299		$	2,546		$	3,723

Letter of Credit

We obtained a standby letter of credit in May 2017 in the amount of $0.5 million, which may be drawn down by Ascentris in the event we fail to fully and faithfully perform all of our obligations under the Lease and to compensate Ascentris for all losses and damages Ascentris may suffer as a result of the occurrence of any default on our part not cured within the applicable cure period. As of June 30, 2017, none of the standby letter of credit amount has been used.

See “Note 13 - Commitments” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 27, 2017 for a description of additional letters of credits that were entered into prior to December 31, 2016.