|12 Months Ended|
Dec. 31, 2021
|Operating Leases||Operating LeasesOn February 28, 2018, Legacy Canoo, via a wholly owned subsidiary, entered into a lease for an office facility in Torrance, California with an entity controlled by certain investors of Legacy Canoo, which was assigned to another entity controlled by certain investors of Legacy Canoo, on April 30, 2018. The original lease term is 15 years and commenced on April 30, 2018. During the first quarter of 2021, the Company entered into a separate lease for an office facility in Justin, Texas (“Justin lease”) with an entity controlled by the Executive Chair and Chief Executive Officer of the Company. The original lease term is five years 3 months, commencing on January 1, 2021. Effective July 30, 2021, the Company amended its Justin lease to extend the leased square footage for the duration of the arrangement term. The Torrance and Justin leases (collectively referred to herein as the “leases”) contain a 3% per annum escalation clause.
In June 2021, the Torrance lease property was sold to a non-related party lessor. The change in lessor did not impact the terms and conditions of the Torrance lease. As such, payments made to the new landlord after June 2021 will not be considered as a related party lease expense.
The leases contain the option to extend the terms of the leases for two additional 60-month periods and one additional 60-month period, respectively, commencing when the prior term expires. At the inception of each of the leases, it was not reasonably certain we would exercise any of the options to extend the term of the leases. There have been no changes to that assessment as of December 31, 2021.
The Company has determined that the leases do not effectively transfer control of the underlying facilities to the Company based on the lease terms and, accordingly, the Company has classified the leases as operating leases. As such, the rent and property taxes are expensed on a straight-line basis in the consolidated statements of operations.
The Company used judgment in determining an appropriate incremental borrowing rate to calculate the operating lease right-of-use asset and operating lease liability for the leases. The weighted average discount rate used was 7.9%. As of December 31, 2021, the remaining operating lease ROU asset and operating lease liability were approximately $14.2 million and $14.6 million, respectively. As of December 31, 2020, the operating lease ROU asset and operating lease liability were approximately $12.9 million and $13.7 million, respectively. As of December 31, 2021 and 2020, $0.8 million and $0.4 million, respectively, of the lease liability was determined to be short term and was included in and other current liabilities within the consolidated balance sheets.
Related party lease expense related to the operating leases was $1.3 million and $1.7 million for the years ended December 31, 2021 and 2020, respectively.
The weighted average remaining lease term at December 31, 2021 and 2020 was 10.7 years and 12.3 years, respectively.
Maturities of the Company’s operating lease liabilities at December 31, 2021 were as follows (in thousands):
(1)Calculated using the incremental borrowing rate
Michigan Facility Lease
On October 20, 2021, the Company entered into an agreement for a facility lease for which we did not have control of the underlying assets as of December 31, 2021. Accordingly, we did not record the lease liability and ROU asset within the consolidated balance sheets. The lease is for additional office and research and development spaces located in Auburn Hills, Michigan. We expect the lease commencement date to begin in fiscal year 2022 with a lease term of approximately 11 years from the commencement date and one option to extend the lease by a term of five years. The total minimum lease payments over the initial lease term is $12.7 million.
The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef