Lease Obligations

3 Months Ended

Mar. 31, 2024

The Company has the following lease obligations:

Victoria, British Columbia

In December 2020, Aurinia entered into a lease for office space in Victoria, British Columbia. During September 2022, the fixed lease term ended on the Victoria lease and the Company exercised its right to enter into a short-term month to month lease, of which expenses are incurred in SG&A. On March 31, 2023, the Company terminated the Victoria lease.

Rockville, Maryland

During March 2020, the Company entered into a lease for its U.S. commercial office in Rockville, Maryland for a total of 30,531 square feet of office space. The lease has a remaining term of approximately seven years and has an option to extend for two five-year periods after the initial term of 11 years has elapsed and has an option to terminate after seven years. As of March 31, 2024, the Company had a right-of-use (ROU) asset of $4.4 million and lease liability of $7.2 million included in the condensed consolidated balance sheets. As of December 31, 2023, the Company had a right of use asset of $4.5 million and lease liability of $7.4 million included in the condensed consolidated balance sheets. The Company recorded leasehold improvement incentives in the amount of $2.3 million as additions to the lease liability.

The lease term commenced on March 12, 2020. When measuring the lease liability, the Company discounted lease payments using its incremental borrowing rate at March 12, 2020. The incremental borrowing rate applied to the lease liability on March 12, 2020 was 5.2% based on the financial position of the Company, geographical region and term of lease.

Edmonton, Alberta

During October 2022, the Company entered into a long term lease in Edmonton for a total of 4,375 square feet of office space. The lease is a six year lease and has an option to renew after five years at prevailing market rates. The lease commenced on November 1, 2022 and the Company recorded the lease as an operating lease. The lease is not material to the Company's financial position.

For all leases, the Company incurs variable lease costs. These costs include operation and maintenance costs included in SG&A and are expensed as incurred. The variable lease costs are not material to the Company's financial position.

The operating lease costs for all leases for the three months ended March 31, 2024 and March 31, 2023 were $0.2 million for both periods.

Monoplant

The Company, at lease inception, recorded an ROU asset of approximately $117.6 million and a corresponding lease liability of $94.1 million, which is the present value of the minimum lease payments beginning July 2023 and expiring in 2030. The incremental borrowing rate applied to value the lease liability at inception is 6.19%, which was based on the financial position of the Company, geographical region and term of lease.

As of March 31, 2024, the ROU asset, net and corresponding lease liability balance were $104.4 million and $81.2 million, respectively. As of December 31, 2023, the ROU asset, net and corresponding lease liability balance were $108.7 million and $90.1 million, respectively. For the three months ended March 31, 2024, ROU amortization was $4.4 million and interest expense was $1.3 million.

The following table represents the weighted-average remaining lease terms and discount rates as of March 31, 2024:


	As of March 31, 2024
	Weighted Average Remaining Lease Term (years)	Weighted Average Discount Rate
Operating leases	7.4	5.28%
Finance lease	6.0	6.19%

Supplemental cash flow information related to leases are as follows:


	Three months ended March 31,
	2024		2023
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance lease	$	(2,778)	$	—
Operating cash flows from finance lease	$	(1,370)	$	—
Operating cash flows from operating leases	$	(276)	$	(263)

Supplemental disclosure of noncash transactions
Finance right-of-use asset obtained in exchange for lease obligations (monoplant)	$	104,359	$	—
Finance lease liability arising from obtaining right-of-use assets (monoplant)	$	81,199	$	—

Future maturities of lease liabilities as of March 31, 2024 are as follows:


(in thousands)	Finance Lease Payments		Operating Lease Payments
Remainder of 2024	$	12,052	$	838
2025	16,070		1,141
2026	16,070		1,169
2027	16,070		1,198
2028	16,070		1,227
Thereafter	20,087		3,303
Total lease payments	96,419		8,876
Less: imputed interest	(15,220)		(1,538)
Total	$	81,199	$	7,338

Beinheim

The Company has entered into an equipment and facility finance lease for a backup manufacturing encapsulation site in Beinheim, France that has not yet commenced operations and is therefore, not included in the above table. As part of the agreement, the Company expects to make payments of approximately $1.0 million prior to lease commencement and the present value of minimum lease payments will total approximately $0.1 million.