Leases

6 Months Ended

Jun. 30, 2021

LEASES

The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease commencement, at which time the Company also measures and recognizes an ROU asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement. For the purposes of recognizing

ROU assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient to not recognize a ROU asset or lease liability for short-term leases, which are leases with a term of twelve months or less. The lease term is defined as the non-cancelable portion of the lease term plus any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised.

ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The rates implicit within the Company's leases are generally not determinable; therefore, the Company's incremental borrowing rate is used to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company looks to similar corporate credit ratings and bond yields when determining the incremental borrowing rate. As of November 1, 2020, at the lease commencement of the new ten year lease agreement for the new corporate office in Reston, VA, the Company's incremental borrowing rate was determined to be 4.25%. The lease is with an affiliate controlled and owned by our Chief Executive Officer and family, as landlord. This lease is classified as an operating lease and has a remaining term of nine years. This lease requires us to make fixed annual rental payments plus pay our share of common area, real estate, and utility expenses.

The Company's leases can contain various renewal and termination options. The period which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised. The period which is subject to an option to terminate the lease is included if it is reasonably certain that the option will not be exercised. Lease costs related to the Company's operating leases are generally recognized as a single ratable lease cost over the lease term.

Lease costs related to the Company's operating leases are reflected within 'Direct costs' in the Condensed Consolidated Statements of Operations as it is a reimbursable cost under the 2019 Asset Management Agreement ("AMA"). The lease costs were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating Lease Cost
Fixed lease cost	$	249	$	—	$	497	$	—
Variable lease cost	88		—		163		—
Total operating lease cost	$	337	$	—	$	660	$	—

Supplemental cash flow information related to leases was as follows (in thousands):


	Six Months Ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	280	$	—

Maturities of operating lease liabilities at June 30, 2021 were as follows (in thousands):


2021	$	449
2022	917
2023	939
2024	961
2025	984
Thereafter	5,099
Total lease payments	9,349
Less: imputed interest	1,698
Present Value of lease liabilities	$	7,651