Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2021
Leases [Abstract]  
Leases Leases
The Company currently leases office space in Boston, Massachusetts. In August 2015, the Company entered into a sublease to lease approximately 3,950 square feet. The sublease originally expired on February 27, 2022 or such earlier date pursuant to the termination provisions of the sublease. In July 2021, the Company extended the lease for this office space for an additional 10 months through December 31, 2022.
The Company also leased approximately 19,000 square feet of office and laboratory space in Freising, Germany under four agreements, or the Freising Leases, including three leases for space on three floors of the same building and a letter agreement for additional conference room space within the building. The Freising Leases expired on March 31, 2020.

In October 2018, Pieris GmbH entered into a new lease for office and laboratory space located in Hallbergmoos, Germany, or the Hallbergmoos Lease. Pieris GmbH moved its operations, formerly conducted in Freising, Germany, to the Hallbergmoos facility in February 2020.

Under the Hallbergmoos Lease, Pieris GmbH will rent approximately 105,000 square feet, of which approximately 98,400 square feet were delivered by the lessor in February 2020 and approximately 5,100 square feet were delivered by the lessor in May 2020. An additional approximately 22,300 square feet is expected to be delivered by the lessor by October 2024. Pieris GmbH has a first right of refusal to lease an additional approximate 13,400 square feet.
The Hallbergmoos Lease provides for an initial rental term of 12.5 years which commenced in February 2020 when the leased property was delivered to Pieris GmbH. Pieris GmbH also has an option to extend the Hallbergmoos Lease for two additional 60-month periods. The Company is not reasonably certain to exercise the option to extend the lease expiration beyond its current expiration date. Pieris GmbH may sublease space within the leased property with lessor’s consent, which may not be unreasonably withheld.

Monthly base rent for the initial 105,000 square feet of the leased property, including parking spaces, will total approximately $0.2 million per month, which amount shall be adjusted starting on the second anniversary of the commencement date by an amount equal to the German consumer price index. In addition to the base rent, Pieris GmbH is also responsible for certain administrative and operational costs in accordance with the Hallbergmoos Lease. Pieris GmbH provided a security deposit of $0.8 million as required by the Hallbergmoos Lease. The Company will serve as a guarantor for the Hallbergmoos Lease.

The Hallbergmoos Lease included $11.5 million of tenant improvements allowance for normal tenant improvements, for which construction began in March 2019. The Company capitalized the leasehold incentives which are included in Property and equipment, net on the Condensed Consolidated Balance Sheet and are amortized on a straight-line basis over the shorter of the useful life or the remaining lease term. The lease incentive allowance was also factored in as a reduction to the right-of-use asset upon the adoption of ASC 842.

The following table summarizes operating lease costs included in operating expenses (in thousands):
  Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Operating lease costs $ 370  $ 360  $ 1,126  $ 1,134 
Variable lease costs (1) 198  192  562  536 
Total lease cost $ 568  $ 552  $ 1,688  $ 1,670 
(1) Variable lease costs include certain additional charges for operating costs, including insurance, maintenance, taxes, utilities, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage.
The following table summarizes the weighted-average remaining lease term and discount rate:
  As of September 30, 2021
Weighted-average remaining lease term (years) 10.7
Weighted-average discount rate 10.5  %
Cash paid for amounts included in the measurement of the lease liabilities was $0.6 million and $1.9 million, respectively, for the three and nine months ended September 30, 2021. Cash paid for amounts included in the measurement of the lease liabilities was $0.6 million and $1.5 million, respectively, for the three and nine months ended September 30, 2020.
As of September 30, 2021, the maturities of the Company’s operating lease liabilities and future minimum lease payments were as follows (in thousands):
2021 $ 624 
2022 2,527 
2023 2,288 
2024 2,288 
2025 2,288 
Thereafter 15,065 
Total undiscounted lease payments 25,080 
Less: present value adjustment (9,604)
Present value of lease liabilities $ 15,476