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Leases

6 Months Ended

Jun. 30, 2024

3. Leases

Effective April 2024, the Company began utilizing the Warren Premises, as described below, as its principal office space. The Company also leases office space in South Plainfield, New Jersey through August 2024, in addition to office and laboratory space in Bridgewater, New Jersey and other locations throughout the United States and office space in various countries for international employees primarily through workspace providers.

The Company has a lease agreement (the “Warren Lease”) with Warren CC Acquisitions, LLC (the “Warren Landlord”) relating to the lease of two entire buildings comprised of approximately 360,000 square feet of shell condition, modifiable space (the “Warren Premises”) at a facility located in Warren, New Jersey. The rental term of the Warren Lease commenced on June 1, 2022, with an initial term of seventeen years (the “Warren Initial Term”), followed by three consecutive five-year renewal periods at the Company’s option. The aggregate base rent for the Warren Initial Term is approximately $163.0 million; provided, however, that if the Company is not subject to an Event of Default (as defined in the Warren Lease), the Company is entitled to a base rent abatement over the first three years of the Warren Initial Term of approximately $18.6 million, reducing the Company’s total base rent obligation to $144.4 million.

The Company is entitled to an allowance of approximately $36.2 million to be provided by the Warren Landlord to be used towards such improvements. The Landlord is providing the allowance to cover those assets that are real property improvements, such as structural components, roofs, flooring, etc., whose useful lives are typically longer in nature. The Company evaluated the leasehold improvements under ASC 842 and determined that the Company will be the owner of the improvements, and therefore the $36.2 million allowance and $5.0 million due from the Landlord were treated as lease incentives at the commencement of the lease and included in the calculation of the lease ROU asset and lease ROU liability, effectively reducing both at the commencement date of the lease. As a result, the Company recorded an operating lease ROU asset of $28.9 million and an operating lease ROU liability of $28.9 million as of the commencement date of the lease.

The Company also leases office and laboratory space at a facility located in Hopewell Township, New Jersey pursuant to a Lease Agreement (the “Hopewell Lease”) with Hopewell Campus Owner LLC. In connection with the disposition of certain assets related to gene therapy manufacturing, on June 17, 2024, the Company and Hopewell Campus Owner LLC entered into an amendment and restatement of the Hopewell Lease (the “Hopewell Lease Amendment”). At its inception, the Hopewell Lease was determined to have four separate lease components. The Hopewell Lease Amendment terminated three of the four lease components, reducing the leased space from 220,500 square feet to 93,461 square feet and significantly reducing the corresponding rent subject to the lease. The Company did not pay any termination fees in connection with the Hopewell Lease Amendment. As a result of the three terminated lease components, the related ROU asset was written off, the lease liability was derecognized, and the Company recognized a gain of $2.2 million during the three months and six months ended June 30, 2024. The gain is included within tangible asset impairment and losses (gains) on transactions, net on the Company’s consolidated statements of operations. The Hopewell Lease Amendment did not fully or partially terminate the remaining lease component, which was therefore remeasured using an incremental borrowing rate at the date of modification of 7.5%, which resulted in an increase of the ROU asset and operating lease liability of $1.6 million, respectively. In connection with the Hopewell Lease Amendment, $2.5 million of the letter of credit was returned to the Company and recorded as part the Company’s cash balance as of June 30, 2024.

The Company also has a finance lease related to its commercial manufacturing agreement with MassBiologics of the University of Massachusetts Medical School (“MassBio”). As of June 30, 2024, the balance of the finance lease liabilities-current and finance lease liabilities-noncurrent are $2.3 million and $15.6 million, respectively, and are directly related to the Company’s MassBio agreement. As of December 31, 2023, the balance of the finance lease liabilities-current and finance lease liabilities-noncurrent were $3.0 million and $17.2 million, respectively. Additionally, the Company recorded finance lease costs of $0.3 million and $0.7 million related to interest on the lease liability during the three and six months ended June 30, 2024, respectively. The Company recorded finance lease costs of $0.4 million and $0.7 million related to interest on the lease liability during the three and six months ended June 30, 2023, respectively.

The Company also leases certain vehicles, lab equipment, and office equipment under operating leases. The Company’s leases have remaining operating lease terms ranging from 0.2 years to 14.9 years and certain of the leases include renewal options to extend the lease for up to 15 years. Rent expense was $6.8 million and $7.2 million for the three months ended June 30, 2024 and 2023, respectively, and $13.6 million and $14.3 million for the six months ended June 30, 2024 and 2023, respectively.

The components of operating lease expense were as follows:


	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
		June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Operating Lease Cost
Fixed lease cost	$	5,549	$	5,500	$	11,124	$	10,973
Variable lease cost		973		1,411		2,042		2,764
Short-term lease cost		228		292		442		595
Total operating lease cost	$	6,750	$	7,203	$	13,608	$	14,332

Total operating lease cost is a component of operating expenses on the consolidated statements of operations.

Supplemental lease term and discount rate information related to leases was as follows as June 30, 2024 and December 31, 2023:


	June 30, 2024		December 31, 2023
Weighted-average remaining lease terms - operating leases (years)	12.16		11.55
Weighted-average discount rate - operating leases	8.12	%	8.69	%
Weighted-average remaining lease terms - finance lease (years)	8.51		9.01
Weighted-average discount rate - finance lease	7.80	%	7.80	%

Supplemental cash flow information related to leases was as follows as of June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,617	$	7,624
Financing cash flows from finance lease		1,490		1,379
Operating cash flows from finance lease		1,510		1,621

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1,723	$	—

Changes due to lease modification and termination:
Net decrease in right-of-use assets	$	31,763	$	—
Net decrease in operating lease liabilities		33,908		—

Future minimum lease payments under non-cancelable leases as of June 30, 2024 were as follows:


	Operating Leases		Finance Lease
2024 (excludes the six months ended June 30, 2024)	$	10,080	$	—
2025		16,184		3,000
2026		15,635		3,000
2027		13,406		3,000
2028 and thereafter		135,123		15,000
Total lease payments		190,428		24,000
Less: Imputed Interest expense		97,596		6,134
Total	$	92,832	$	17,866