LEASES

In May 2017, we entered into the Lease with Ascentris for office and research facilities located at the Premises in Alameda, California. The Lease was amended in October 2017 and June 2018 to increase the space leased to an aggregate of 134,765 square feet. We have the right to make certain tenant improvements to the space leased on the Premises. The Lease has an initial term through January 31, 2028. Rent payments began February 1, 2018, following the conclusion of a partial twelve-month rent abatement period. 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; none of these optional periods have been considered in the determination of the right-of-use asset or the lease liability for the Lease as we did not consider it reasonably certain that we would exercise any such options. 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 at 1601, 1701 and 1751 Harbor Bay Parkway, Alameda, California over the remainder of the initial term of the Lease at a market rate determined according to the Lease.

We had a lease for two buildings in South San Francisco, California with a total area of 116,063 square feet which expired in July 2018.

We have evaluated our facility leases and determined that, effective upon the adoption of Topic 842, they were all operating leases.

In April 2018, we entered into a three-year financing lease for office equipment that commenced in May 2018. We will be required to make cash payments totaling $0.2 million during the term of the lease.

We have performed an evaluation of our other contracts with customers and suppliers in accordance with Topic 842 and have determined that, except for the facility and equipment leases described above, none of our contracts contain a lease.

The balance sheet classification of our lease liabilities was as follows (in thousands):



	September 30, 2018		December 31, 2017
Operating lease liabilities:
Current portion included in Other current liabilities	$	2,315	$	—
Long-term portion of lease liabilities	12,529		—
Total operating lease liabilities	14,844		—
Financing lease liabilities:
Financing obligation for build-to-suit lease	—		14,530
Current portion included in Other current liabilities	49		—
Long-term portion of lease liabilities	90		—
Total financing lease liabilities	139		14,530
Total lease liabilities	$	14,983	$	14,530

The components of lease costs, which were included in Operating expenses in our Condensed Consolidated Statements of Operations, were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Operating lease cost	$	1,614	$	986	$	3,587	$	4,292
Variable lease cost	363		229		1,366		705
Sublease income	—		—		—		(1,225		)
Total lease costs	$	1,977	$	1,215	$	4,953	$	3,772

Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2018 was $3.3 million and was included in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows

As of September 30, 2018, the maturities of our operating lease liabilities were as follows (in thousands):



	Operating leases
Remainder of 2018	$	403
Years ending December 31,
2019	2,654
2020	2,823
2021	2,904
2022	3,000
Thereafter	16,665
Total lease payments	28,449
Less:
Imputed interest	(5,435		)
Tenant improvement reimbursements	(8,170		)
Operating lease liabilities	$	14,844

As of September 30, 2018, the weighted average remaining lease term is 9.3 years and the weighted average operating discount rate used to determine the operating lease liability was 4.50%.