In 2018, we purchased a fermentation facility in Winchester, Kentucky (the Kentucky Facility), including the equipment, machinery, and other personal property located at such facility, for $23.0 million and entered into a sale and leaseback transaction with a large, diversified commercial property REIT pursuant to which we sold the Kentucky Facility and certain of our facilities located in Bainbridge, Georgia to the REIT for $30.0 million and leased back the same properties under a net lease for an initial term of 20 years with renewal terms up to an additional 20 years at our option.

During the first year of the lease, the base annual rent was $2.4 million. The rent is subject to an adjustment of the lesser of (i) 2.0% or (ii) 1.25 times the change in the Consumer Price Index on January 1, 2020, and annually on every January 1st thereafter during the lease term, including any extension terms. The renewal terms have not been recognized as part of the right-of-use asset and lease liability since we have not determined that their exercise is reasonably certain. We used our estimated 2018 incremental borrowing rate of 12.89% when determining the discount rate for the lease.

In May 2020, we amended this lease to include a $7.3 million leasehold improvement allowance that was used to fund improvements in the Kentucky Facility. We accounted for these landlord payments as lease incentives and included these associated improvements in property, plant and equipment. The amendment also increased the annual base rent to $3.1 million in the initial year of the amendment and continued the annual adjustment as discussed above. We evaluated the present value of the revised payments using our estimated incremental borrowing rate of 11.5% as of

the date of the amendment, which increased the lease liability by $7.1 million. As of December 31, 2021, the lease, as amended, had a remaining term of 17 years.

In August, 2021, as part of the Novomer business combination, we acquired their principal operating facility in Rochester, New York. We evaluated the present value of the revised payments using our estimated incremental borrowing rate of 11.5%, and recorded a right-of use asset and lease liability of $2.7 million, respectively. Refer to Note 4 for additional information on the Novomer acquisition. As of December 31, 2021, the lease had a remaining term of approximately six years with an option for a five year renewal term, which we assumed will be exercised for lease accounting purposes.

As of December 31, 2021 and 2020, our weighted average remaining lease term was approximately 16.5 years and 18 years, respectively.

The following table sets forth the allocation of our operating lease costs.


	Years Ended December 31,
(in thousands)	2021		2020		2019
Cost of revenue	$	1,917	$	1,402	$	358
Selling, general and administrative		303		1,683		2,334
Research and development		268		535		443
Total operating lease cost	$	2,488	$	3,620	$	3,135

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities at December 31, 2021.


(in thousands)
Undiscounted future operating lease cash flows for the periods ending December 31,
2022	$	3,543
2023		3,545
2024		3,548
2025		3,550
2026		3,553
Thereafter		40,403
		58,142
Less interest		(32,112	)
Present value of lease liability	$	26,030