XML 35 R13.htm IDEA: XBRL DOCUMENT v3.23.1
Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases Leases
Redwood City
As of December 31, 2022, the Company has a lease for facilities in Redwood City, which provided a total of tenant improvement allowances of $6.8 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 through June 30, 2022. For short-term leases the Company does not recognize a right-of-use asset and lease liability and recognizes the lease expense over the term of the lease on a straight-line basis.
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.
Sublease income for operating leases is classified as a reduction of rent expense in operating expenses. The difference between sublease income recorded and cash received from the subtenant accrues as a deferred rent receivable. During the year ended December 31, 2022, management reassessed the probability of collection of the deferred rent receivable from the subtenant over the remaining term of a sublease. Management assessed the collectability to be less than probable and the Company recognized an adjustment to eliminate the deferred rent receivable as a current period adjustment to sublease income, resulting in an increase in general and administrative expenses during the year ended December 31, 2022. The deferred rent receivable as of December 31, 2022 and 2021 was zero and $0.8 million, respectively.
As of December 31, 2022, the weighted-average remaining lease term was 10.2 years for the Company's leases and the weighted-average Incremental Borrowing Rate (“IBR”) was 9.9%. 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.
On March 24, 2023, the Company entered into an agreement to terminate the lease of one of its Redwood City premises, which will be effective September 30, 2023. As of December 31, 2022, including the effect of this subsequent event, the undiscounted future non-cancellable lease payments under the lease agreements are as follows (in thousands):
December 31,Operating LeasesSublease Payment Receivable
2023$11,484 $5,844 
202411,857 6,019 
202512,242 6,200 
202612,639 6,385 
202713,050 6,577 
Thereafter104,410 76,174 
Total undiscounted lease payments165,682 107,199 
Less: Present value adjustments(74,766)
Total$90,916 
Rent expense for the years ended December 31, 2022, and 2021 was $17.2 million and $12.8 million, respectively, which includes variable lease costs for utilities, parking, maintenance, and real estate taxes. Variable lease expenses for the years ended December 31, 2022 and 2021 were $2.3 million and $1.8 million, respectively. Cash paid for amounts included in the measurement of lease liabilities for the twelve months ended December 31, 2022 and 2021 was $6.0 million and $5.2 million, respectively. Sublease income was $(0.3) million and $1.2 million for the years ended December 31, 2022 and 2021, respectively, which was classified as a general and administrative expense or reduction in general and administrative expense, respectively.