Operating Leases

12 Months Ended

Dec. 31, 2022

9. Operating Leases

In September 2021, the Company entered into an operating lease agreement, with a lease term commencement date of April 1, 2022, the date the Company took control of the property, for an office and laboratory space in Boston, Massachusetts. The lease payments began on December 21, 2022 and will continue through December 31, 2032 and with scheduled rent increases each year of 3%. In addition to the rent, the Company bears the costs of certain insurance, property taxes and maintenance, which represent the Company’s proportionate share of the actual expenses incurred by the landlord. There is an additional five-year option to extend the lease beyond December 31, 2032.

At the lease commencement date, the operating lease ROU assets of $15.3 million and lease liabilities of $15.3 million were recognized based on the present value of remaining fixed lease payments over the expected lease term using an incremental borrowing rate of 9.4%. As the Company’s operating lease does not provide an implicit rate, an estimated incremental borrowing rate based on the information available at the time of lease commencement date was used in determining the present value of lease payments. Under the lease agreement the landlord provided for a tenant improvement allowance of $6.4 million to be applied to the costs of the construction of the leasehold improvements, of which $3.0 million was received by the Company during the year ended December 31, 2022. The tenant improvement allowance is recognized as a reduction in operating lease ROU assets and lease liabilities on the lease commencement date.

The components of lease expense were as follows (in thousands):


	Year Ended December 31,
	2022			2021
Lease cost
Operating lease cost	$	1,978		$	650
Short-term lease cost		1,681			5
Variable lease cost		121			75
Total lease cost	$	3,780		$	730
Other information
Operating lease right-of-use asset obtained in exchange for new operating lease liabilities	$	14,497		$	—
Cash paid for amounts included in the measurement of lease liabilities, included in operating cash flows		—		$	663
Weighted-average remaining lease term (in years)		10.00			0.25
Weighted-average discount rate		9.40	%		10.00	%

Variable lease costs primarily relate to common area costs and other operating costs, which are assessed based on the Company’s proportionate share of such costs for the leased premises. Total lease costs are included as operating expenses in the Company’s consolidated statements of operations and comprehensive loss.

Maturities of lease liabilities as of December 31, 2022, were as follows (in thousands):


Years Ending December 31,	Operating Leases
2023	$	2,557
2024		3,208
2025		3,302
2026		3,399
2027		3,499
Thereafter		18,750
Total undiscounted payments		34,715
Less: tenant improvement allowance		(3,026	)
Less: present value adjustment		(12,768	)
Present value of future payments		18,921
Less: current portion of operating lease liabilities		—
Operating lease liabilities, net of current portion	$	18,921