Leases

12 Months Ended

Dec. 31, 2021

Redwood City

As of December 31, 2021, the Company has a lease for facilities in Redwood City, which provides a total of tenant improvement allowances of up to $10.2 million. Related to the Redwood City lease, the Company provided the landlord with a letter of credit in the amount of $2.5 million, which is classified as restricted cash under long term assets on the Company's consolidated balance sheets. The Redwood City lease expires in December 2031, with an option to extend for a period of eight years.

On November 1, 2021, the Company entered into an amendment to terminate the lease of one of its Redwood City premises under the existing lease and paid a termination fee of $0.4 million. Concurrently, the Company entered into an agreement to sublease a portion of such premises at $0.1 million monthly base rent. The sublease will expire on March 31, 2022 and may be extended on a month to month basis until June 30, 2022. For short-term leases the Company does not recognize the right-of-use asset and lease liability and recognizes the lease expense over the term of the lease on a straight-line basis.

The lease termination resulted in the requirement to test the recoverability of the carrying amount of the asset group. The carrying amount of the asset group, consisting of right-of-use assets and leasehold improvements, relating to the lease termination exceeds the Company's anticipated undiscounted cash flows. Accordingly, the Company reviewed the related right-of-use assets and leasehold improvements for impairment. As a result of the evaluation, the Company recorded an impairment charge of $1.1 million, which includes $0.8 million associated with the right-of-use assets and $0.3 million associated with leasehold improvements, for the year ended December 31, 2021. The assets indicated as impaired were written down to the estimated fair value, which was determined using the terms of the termination and sublease agreements. In connection with the termination of this lease, the Company derecognized the corresponding operating lease right-of-use asset and liability balances from the consolidated balance sheet

North Carolina

On January 8, 2021, the Company entered into an operating lease agreement for a building in North Carolina (“NC Premises”). The lease commenced in April 2021 when the Company obtained control of the NC Premises, and the lease term expires in October 2037 with two options to extend the lease term for a period of five years each.

On October 26, 2021, the Company entered into a sublease agreement with a subtenant for the North Carolina property through October 2037, the remainder of the lease term. The remainder of the tenant improvement allowance under the original lease of approximately $22.7 million was transferred to the subtenant. This change in the Company’s payment terms with the landlord at the time of the sublease was considered to be a lease modification and the Company remeasured the lease liability on the modification date. The base annual rental rates, payment schedules and amounts under the sublease agreement are substantially the same as the original payment terms by Adverum to the landlord.

As of December 31, 2021, the weighted-average remaining lease term was 11.7 years for the Company's leases and the weighted-average Incremental Borrowing Rate (“IBR”) was 9.4%. IBR is an estimated rate of interest used to determine present value of future lease payments in order to measure lease liability, which rate is what the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. In order to determine the IBR, the Company estimates its credit rating, adjusts the credit rating for the nature of the collateral, and benchmarks the borrowing rate against observable yields on comparable securities with a similar term.

As of December 31, 2021, the undiscounted future non-cancellable lease payments under the lease agreements are as follows (in thousands):


December 31,	Operating Leases		Sublease Payment Receivable

2022	$	6,049	$	491
2023	13,947		5,844
2024	14,406		6,019
2025	14,880		6,200
2026	15,369		6,385
Thereafter	133,883		82,751
Total undiscounted lease payments	198,534		107,690
Less: Present value adjustments	(91,672)
Less: Tenant improvement allowance	$	(9,577)
Add: Lease incentive receivable	$	5,709
Total	$	102,994

Rent expense for the years ended December 31, 2021, and 2020 was $12.8 million and $5.8 million, respectively, which includes variable lease costs for utilities, parking, maintenance, and real estate taxes. Variable lease expenses for the years ended December 31, 2021 and 2020 were $1.8 million and $1.5 million, respectively. Cash paid for amounts included in the measurement of lease liabilities for the twelve months ended December 31, 2021 and 2020 was $5.2 million and $4.2 million, respectively. Sublease income was $1.2 million for the year ended December 31, 2021, which was classified as a reduction in rent expense.