Leases

12 Months Ended

Dec. 31, 2021

The Company leases certain office and laboratory space that was attributed to it in connection with the separation.

60 Binney Street lease

In September, 2015, bluebird bio entered into a lease agreement, which was attributed to the Company in connection with the separation. This is the Company’s corporate headquarters and includes office and laboratory space located in a building (the “Building”) at 60 Binney Street, Cambridge, Massachusetts (the “60 Binney Street Lease”). Under the terms of the 60 Binney Street Lease, starting on October 1, 2016, bluebird bio leased approximately 253,108 square feet of office and laboratory space at $72.50 per square foot per year, or $18.4 million per year in base rent, which is subject to scheduled annual rent increases of 1.75% plus certain operating expenses and taxes. bluebird bio historically maintained a $13.8 million collateralized letter of credit which, subject to the terms of the lease and certain reduction requirements specified therein, including market capitalization requirements, may decrease to $9.2 million over time. As the Company did not have legal ownership over any bank accounts prior to the separation, there were no cash and cash equivalent balances specifically attributable to the Company for the periods prior to the separation and, accordingly, no restricted cash is reflected in the consolidated and combined financial statements related to the letter of credit for periods prior to the separation. Pursuant to a work letter entered into in connection with the 60 Binney Street Lease, the landlord contributed an aggregate of $42.4 million toward the cost of construction and tenant improvements for the Building. The lease would continue until March 31, 2027.

In October 2021, bluebird bio entered into a consent to assignment and amendment to its lease agreement for its 60 Binney Street lease, pursuant to which bluebird bio's interest in the lease was assigned to the Company. In November 2021, the Company executed a $25.0 million letter of credit related to this lease. Under the assigned and amended lease agreement, the lease term was extended through March 31, 2034 with the 2022 base rent being $90.00 per square foot per year, or $22.8 million per year in base rent, subject to scheduled annual rent increases of 3.0% plus certain operating expenses and taxes. Starting April 1, 2026, the base rent will reset to $118.41 per square foot per year, or $30.0 million per year in base rent, subject to scheduled annual rent increases of 3.0% plus certain operating expenses and taxes. Pursuant to a work letter entered into in connection with the 60 Binney Street assignment and amended lease agreement, the landlord agreed to contribute up to an aggregate of $19.1 million toward the cost of tenant improvements for the leased space. As of December 31, 2021, the Company did not incur any tenant improvement costs.

The Company has classified this lease as an operating lease and recorded a right-of-use asset and lease liability. The Company is recognizing rent expense on a straight-line basis throughout the remaining term of the lease.

Seattle, Washington leases

In July 2018, bluebird bio entered into a lease agreement for office and laboratory space located in a portion of a building in Seattle, Washington, and moved into the facility in June 2019. This lease was assigned to the Company in connection with the separation. The lease was amended in October 2018 to increase the total rentable space to approximately 36,126 square feet at $54.00 per square foot in base rent per year, which is subject to scheduled annual rent increases of 2.5% plus certain operating expenses and taxes. The lease commenced on January 1, 2019 and the lease term will continue through January 31, 2027. The Company has classified this lease as an operating lease and recorded a right-of-use asset and lease liability at lease commencement.

In September 2019, bluebird bio entered into a second amendment to the lease (the “Second Amendment”). The Second Amendment added approximately 22,188 square feet to the existing space and extended the lease term of the entire premises by 16 months, or until April 2028. Fixed monthly rent for the expanded space will be incurred at a rate of $62.80 per square foot per year beginning in January 2021, subject to annual increases of 2.5%. The Second Amendment includes a five-year option to extend the term.

The execution of the Second Amendment was deemed to be a lease modification representing two separate contracts under ASC 842. One contract is related to a new right-of-use for the expanded 22,188 square feet of space, which is to be accounted for as a new lease, and the other is related to the modification of term for the original 36,126 square feet of space. An additional right-of-use asset and lease liability was recognized upon lease commencement of the expanded space. In September 2020, bluebird bio entered into a sublease agreement for the 22,188 square feet added under the Second Amendment at a fixed monthly rent of $62.80 per square foot per year beginning in January 2021, subject to annual increases of 2.5%. The sublease term will continue through April 2028.

In October 2021, bluebird bio entered into a consent to assignment and amendment to its lease agreement for office and laboratory space in Seattle, Washington and the related sublease that was executed in September 2020 for a portion of the space. The agreement reassigns bluebird bio’s interest in the lease and the sublease to the Company. In November 2021, the Company executed a $5.0 million letter of credit related to this lease.

The Company is recognizing rent expense on a straight-line basis through the remaining extended term of the respective leases. The head lease and the sublease will be accounted for as two separate contracts with the income from the sublease presented separately from the lease expense on the head lease.

Summary of all lease costs recognized under ASC 842

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the years ended December 31, 2021, 2020 and 2019 (in thousands):


	For the year ended December 31,
	2021			2020			2019
Lease cost (1)
Operating lease cost	$	24,838		$	22,454		$	21,406
Total lease cost	$	24,838		$	22,454		$	21,406

Other information
Operating cash flows used for operating leases	$	25,489		$	19,632		$	19,521
Weighted average remaining lease term	11.8 years			6.4 years			7.4 years
Weighted average discount rate	5.47		%	6.72		%	6.73		%

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(1)Short-term lease costs and variable lease costs incurred by the Company for the twelve months ended December 31, 2021, 2020 and 2019 were immaterial.

Rent expense is calculated on a straight-line basis over the term of the lease. Rent expense recognized under all leases, including additional charges for utilities, parking, maintenance, and real estate taxes that are not included

within lease costs in the table above, was $34.5 million, $32.5 million, and $30.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, future minimum commitments under ASC 842 under the Company’s operating leases were as follows (in thousands):


Maturity of lease liabilities	As of December 31, 2021
2022	$	27,078
2023	27,864
2024	28,675
2025	29,501
2026	32,920
2027 and thereafter	250,383
Total lease payments	396,421
Less: imputed interest	(114,206)
Total operating lease liabilities	$	282,215