Ginkgo Bioworks Holdings Inc

8. Leases

The Company leases real estate for office and lab space as well as equipment used in research and development activities under operating and finance leases.

The Company’s real estate leases have initial lease terms ranging from 24 months to 14.4 years and are all classified as operating. Real estate leases may contain periods of free rent, tenant improvement incentives, expansion options, rent escalation clauses at pre-determined rates or at the prevailing market rates at the time of the increase, and options to extend or terminate the lease without cause at the option of either party during the lease term. The Company is not reasonably certain to exercise these options at the commencement of the lease. Equipment leases have initial lease terms ranging from 36 to 60 months and are classified as operating or finance if the lease contains bargain purchase options which the Company is reasonably certain to exercise.

Variable lease cost for real estate leases primarily consists of certain non-lease components such as real estate taxes, insurance and common area maintenance charges. These non-lease components are typically variable in nature and are recognized as lease expense in the period in which they arise. None of the Company's lease agreements contain material restrictive covenants or residual value guarantees.

In September 2023, Zymergen ceased the use of and exited a leased facility consisting of approximately 300,000 square feet of office and laboratory space in Emeryville, California. The facility was used pursuant to an operating lease with a minimum term expiring in August 2033. Zymergen's ceasing to use the space resulted in an impairment loss of $96.2 million, including $36.6 million for the right-of-use asset and $59.6 million for the related leasehold improvements. The impairment loss represents the amount by which the carrying value of the assets exceed their estimated fair values, as determined using a discounted cash flow model under the income approach. The fair value measurements are based on significant inputs not observable in the market and therefore represent Level 3 fair value measurements. The key inputs used in the valuation were estimated sublease rental income and a discount rate of 8.5%. The impairments are presented as impairment of lease assets in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2023.

The following table presents the components of total lease cost (in thousands):

Rent expense under operating leases was $17.7 million for the year ended December 31, 2021.

Supplemental cash flow information related to the Company’s operating leases were as follows (in thousands):

Supplemental balance sheet information related to operating leases were as follows:

The following table summarizes the maturity of the Company’s lease liabilities (in thousands):

In addition to the lease liabilities in the table above, as of December 31, 2023, the Company had $396.5 million of undiscounted commitments related to an operating real estate lease that was signed but not yet commenced. The lease is expected to commence in 2024 and has a lease term of 15 years.

The Company subleases a portion of its office and lab space to certain of its equity method investees, which are considered related parties. These lease agreements generally have lease terms of up to 5 years and may include renewal options. Related party sublease income for the years ended December 31, 2023, 2022 and 2021 was $2.1 million, $3.5 million and $1.1 million, respectively, included within other income (expense), net in the consolidated statements of operations and comprehensive loss.