Build-to-Suit Lease Obligation

12 Months Ended

Dec. 31, 2014

Leases [Abstract]

Build-to-Suit Lease Obligation

NOTE 7 — BUILD-TO-SUIT LEASE OBLIGATION

In the fourth quarter of 2013, the Company entered into a long-term property lease for approximately 52,000 square feet of space located in San Francisco, California. The lease agreement expires in July 2024, and the Company has an option to extend the lease term for up to an additional five years.

The Company is deemed, for accounting purposes only, to be the owner of the entire project including the building shell, even though it is not the legal owner. In connection with the Company’s accounting for this transaction, the Company capitalized $14.5 million as a build-to-suit property within property and equipment, net, and recognized a corresponding build-to-suit lease obligation for the same amount. The Company also recognized, as an additional build-to-suit lease obligation, structural tenant improvements totaling $3.6 million for amounts paid by the landlord and $1.5 million for capitalized interest during the construction period.

A portion of the monthly lease payment will be allocated to land rent and recorded as an operating lease expense and the non-interest portion of the amortized lease payments to the landlord related to the rent of the building will be applied to reduce the build-to-suit lease obligation. At December 31, 2014, $0.7 million of the build-to-suit lease obligation representing the expected reduction in the liability over the next twelve months is classified as a current liability and the remaining $18.7 million is classified as a non-current liability on the consolidated balance sheet. Expected reductions (increases) in the build-to-suit lease obligation at December 31, 2014 were as follows:

Years Ending December 31,	Build-To-Suit  Lease Obligation
2015	$	698
2016		(12	)
2017		66
2018		150
2019		241
2020 and thereafter		18,266
Total	$	19,409

The amounts included in the table above represent the reductions (increases) in the build-to-suit lease obligation on the Company’s consolidated balance sheet in each of the periods presented. The amount in the terminal period includes the amount to derecognize the build-to-suit lease obligation at the end of the lease term. The expected reductions (increases) in the build-to-suit obligation presented in the table above are impacted by the timing of the completion of the construction project. Actual expected lease payments under the build-to-suit lease obligation are included in Note 14, “Commitments and Contingencies.”