In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation as the Company operates in an industry susceptible to patent legal claims. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and estimable. Legal costs associated with these matters are expensed when incurred. The Company is not currently a party to any material legal proceedings.

In July 2017, the Company entered into an agreement to lease approximately 41,346 square feet of laboratory and office space at 301 Binney Street in Cambridge, Massachusetts. Annual rent is approximately $3.1 million. The ten-year lease commenced in January 2018 and contains provisions for a free-rent period, annual rent increases and an allowance for tenant improvements. Additionally, we have paid for a tenant improvement investment of approximately $1.6 million. The Company was determined to be the accounting owner and recorded tenant improvements as leasehold improvements which reduce the initial measurement of the ROU asset. In conjunction with the lease, we established a letter of credit of approximately $1.0 million. Variable payments based on our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. The Company has an option to extend the term by five years and an option to terminate the agreement if a similar agreement is executed with the landlord or an affiliate of the landlord. Neither option is reasonably certain of exercise and are excluded from the lease liability calculation.

On December 7, 2018, Synlogic Operating Company, Inc., a wholly-owned subsidiary of Synlogic, Inc., entered into a Statement of Work (the “SOW”) with Azzur Group, LLC (“Azzur”) pursuant to a Master Contract Services Agreement (the “Master Services Agreement”), dated September 8, 2018, between the Company and Azzur.

Pursuant to the SOW, Azzur has agreed to provide the Company with access to, and the use of, an approximately 700 square foot cleanroom space to be constructed in Waltham, Massachusetts (the “Azzur Suite”), for a period of 44 months, from May 1, 2019 to December 31, 2022 (the “Term”). Azzur has also agreed to provide the Company with storage space and personnel support at the Azzur Suite. The total estimated project cost during the Term for access to, and use of, the cleanroom and storage space, and the personnel support and other services, is up to $4.8 million.

The Company may terminate the SOW on four months’ prior written notice at any time during the Term. In addition, either party may terminate the Master Services Agreement (including the SOW) due to a breach by the other party and failure to cure. If the Azzur Suite is not ready for use by the Company as of May 1, 2019, the Company may (i) elect to terminate the SOW, (ii) wait for the Azzur Suite to become available, without incurring any costs (other than a deposit) relating to the Azzur Suite until it becomes available, or (iii) accept an alternate cleanroom space from Azzur on different terms. As the lease has not yet commenced, the financial terms of the arrangement are not included in the schedules below.

The operating lease right-of-use asset and operating lease liability represents the Binney Street lease. Finance leases are made up of laboratory and office equipment. Cash paid for amounts included in the present value of operating lease liabilities was $0.8 million during the three months ended March 31, 2019 which is included in operating cash flows.

The components of lease cost for operating and finance leases for the three months ended March 31, 2019 were:

Operating leases	$ (in thousands)
Operating lease cost	$	694
Variable lease cost		263
		957
Short-term lease cost		119

Finance leases
Depreciation on finance leases		47
Interest on finance leases		7
		54
Total lease cost	$	1,130

The right-of-use asset for the operating lease is disclosed on the consolidated balance sheet. The right-of-use asset for finance leases are classified within property and equipment, net, the total right-of-use asset for finance leases is $0.9 million:

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2019 was:

The following table reconciles the undiscounted cash flows for the operating and finance leases at March 31, 2019 to the operating and finance lease liabilities recorded on the balance sheet:

Maturity of lease liabilities	Operating Lease		Finance Leases
	(in thousands)
2019	$	2,390	$	215
2020		3,270		214
2021		3,369		2
2022		3,470		-
2023		3,574		-
Thereafter		18,067		-
Total lease payments		34,140		431
Less: imputed interest		10,449		21
Total lease liabilities	$	23,691	$	410

Current lease liabilities		1,374		269
Long-term lease liabilities		22,317		141

The aggregate future lease payments for operating and capital leases as of December 31, 2018 are as follows:

	Operating lease		Capital leases
	(in thousands)
2019	$	3,175	$	287
2020		3,270		214
2021		3,369		2
2022		3,470		—
2023		3,574		—
Thereafter		18,067		—
Total future minimum lease payments	$	34,925	$	503
Less amounts representing interest				27
Capital lease obligations at December 31, 2018				476
Less current portion of capital lease obligations				266
Capital lease obligations, net of current portion			$	210