Note 6 — Leases

Capital Leases

We lease office space at 201 Industrial Road in San Carlos, California under a capital lease arrangement. Under the terms of the lease, rent increases up to 3% annually and the lease termination date is October 5, 2016. As of November 29, 2010, we ceased use of this space as a result of the relocation of our San Carlos operations and corporate headquarters to San Francisco, California. As a result of our relocation, an impairment test was performed for the building and related leasehold improvements located in San Carlos. As a result of this impairment test, we recorded an impairment charge of $12.6 million in 2010. As of December 31, 2013 and 2012, the gross amount of assets recorded under capital leases was $2.3 million and the recorded value of these assets, net of depreciation, was $1.0 million and $1.4 million, respectively.

We have subleased all of the San Carlos facility, but have not been relieved of any obligations under the terms of this lease. Our future minimum rental receipts under the San Carlos facility subleases total $7.4 million as of December 31, 2013.

Future minimum payments for our capital leases at December 31, 2013 are as follows (in thousands):


Years ending December 31,
2014	$	5,169
2015		5,280
2016		4,034

Total minimum payments required		14,483
Less: amount representing interest		(2,898	)

Present value of future minimum lease payments		11,585
Less: current portion		(3,536	)

Capital lease obligation, less current portion	$	8,049

Operating Lease

On September 30, 2009, we entered into an operating sublease (Sublease) with Pfizer, Inc. for a 102,283 square foot facility located in San Francisco, California (Mission Bay Facility). Upon completion of construction of the Mission Bay Facility, we moved in on November 29, 2010. The Mission Bay Facility includes a research and development center with biology, chemistry, pharmacology, and clinical development capabilities, as well as all of the functions previously located in San Carlos, California, including our corporate headquarters.

Under the terms of the Sublease, we will begin making non-cancelable lease payments in 2014, after the expiration of our free rent period on August 1, 2014. The Sublease term is 114 months, commencing in August 2010 and terminating on January 31, 2020. Monthly base rent will escalate over the term of the sublease at various intervals. In addition, throughout the term of the Sublease, we are responsible for paying certain costs and expenses specified in the Sublease, including insurance costs and a pro rata share of operating expenses and applicable taxes for the Mission Bay Facility.

On December 28, 2011, we expanded our lease of the Mission Bay Facility to include an additional 24,002 square feet of space. The lease term commenced on December 28, 2011 and ends on January 31, 2020. Monthly base rent will escalate over the term of the lease at various intervals.

Our future minimum lease payments for our operating leases at December 31, 2013 are as follows (in thousands):


Years ending December 31,
2014	$	2,559
2015		4,750
2016		4,892
2017		5,037
2018		5,187
2019 and thereafter		5,796

Total future minimum lease payments	$	28,221

We recognize rent expense on a straight-line basis over the lease period. For the years ended December 31, 2013, 2012, and 2011, rent expense for all our operating leases, including our Mission Bay Facility, was approximately $2.9 million, $2.8 million, and $2.4 million, respectively.