8. Lease Agreements

The Company leases one facility in Emeryville, California under an operating lease that expires in February 2023. The Emeryville lease contains both an option to early terminate the lease and an option to extend the lease for an additional term, however, the Company is not reasonably certain to exercise either option.

The Company also previously leased two facilities in Berkeley, California under operating leases that had a remaining lease term until 2021 and 2023. On December 18, 2019, the Company entered into a Lease Termination Agreement with each of the 7th Street Properties II (“7th Street LP”) and 7th Street Property General Partnership (“7th Street GP”) to early terminate the Company’s two operating leases in Berkeley, California. As a result of the lease terminations the Company was also released from all financial obligations under its sublease agreements.  The Company agreed to pay an early termination fee of $1.6 million in total and recognized a loss on lease termination of $0.4 million for the year ended December 31, 2019, which was included in other income (loss), net in the consolidated statements of operations and comprehensive loss.

 

The following table summarizes maturity of the Company’s operating lease liabilities as of December 31, 2019 (in thousands):

The following table summarizes the Company’s future undiscounted lease payments under operating leases (as defined by prior guidance) as of December 31, 2018 (in thousands):

 

Rent expense recognized for operating leases was $2.3 million and $2.1 million for the years ended December 31, 2019 and 2018, respectively. Under the terms of the lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. Variable lease payments for operating leases were $1.7 million for the year ended December 31, 2019, including non-lease components such as common area maintenance fees.

 

The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):

 

 Sublease Agreements

On December 18, 2019, upon termination of the leases in Berkeley, California, the Company’s rights and obligations under its sublease arrangements for the two facilities transferred to 7th Street LP and 7th Street GP and XOMA was released from all financial obligations under its sublease agreements. Upon termination the Company recognized a $0.4 million in Other income (expense).

In connection with restructuring events in 2017 and 2018 the Company completely vacated its leased facilities in Berkeley, California and subleased the space in the vacated buildings to four subtenants.  On November 21, 2017, the Company entered into a non-cancellable sublease agreement for a portion of one of its three leased facilities. The term of the sublease agreement commenced on December 26, 2017. The sublease provided for a tenant improvement allowance of $0.8 million to the subtenant, which was funded by the Company in January 2018. Upon execution of the sublease agreement, the Company recognized a loss on the sublease equal to the tenant improvement allowance. Under the sublease agreement, the sub-lessee executed a standby letter of credit naming the Company as the beneficiary amounting to $1.0 million as security under the sublease in the event of uncured default by the sub-lessee. As of the termination date the Company had not drawn any funds from the letter of credit as there was no default by the sub-lessee. For the years ended December 31, 2019 and 2018, the Company recognized $1.4 million and $1.5 million, respectively, of sublease income under this agreement.

On April 14, 2018, the Company entered into a non-cancellable sublease agreement for a portion of one of its three leased facilities. The term of the sublease agreement commenced on May 1, 2018. The sublease provided for a tenant improvement allowance of $65,000 to the subtenant, and payment of broker commissions of $89,000.  Upon execution of the sublease agreement, the Company recognized a loss on the sublease of $0.6 million, which was recorded in the restructuring charges line item of the consolidated statement of operations and comprehensive loss during the three months ended June 30, 2018. For the years ended December 31, 2019 and 2018, the Company recognized $0.4 million and $0.3 million, respectively, of sublease income under this agreement in Other income (expense).

In October 2018, the Company entered into a non-cancellable sublease agreement for a portion of one of its three leased facilities. The term of the sublease agreement commenced on October 24, 2018. During the years ended December 31, 2019 and 2018 the Company recognized $0.6 million and $0.1 million, respectively, of sublease income under this agreement in Other income (expense).

In January 2019, the Company entered into a non-cancellable sublease agreement for a portion of one of its three leased facilities. The term of the sublease agreement commenced on January 18, 2019. The sublease provided for a tenant improvement allowance of $91,000 to the subtenant, and payment of broker commissions of $53,000. During the year ended December 31, 2019, the Company recognized $0.6 million of sublease income under this agreement in Other income (expense).