Prime Medicine, Inc.PRME
Prime Medicine, Inc. Leases Disclosure
Leases
21 Erie Street, Cambridge, Massachusetts Lease
In March 2020, the Company entered into an operating lease to sublease office and laboratory space located at 21 Erie Street, Cambridge, Massachusetts. This lease was subject to various amendments and the amended lease agreement provided for escalating monthly rental payments with fixed costs for expenses and property taxes included in each payment. In November 2023, the Company exercised its option to terminate this lease with a seven-month notice.
38 Sidney Street, Cambridge, Massachusetts Lease
In July 2021, the Company entered into a non-cancelable operating lease to sublease office space in Cambridge, Massachusetts. The lease commenced in August 2021 and contained escalating monthly rental payments. The lease expired in December 2024 and the Company did not exercise its right to extend the lease for one additional six-month period.
64 Sidney Street, Cambridge, Massachusetts Lease
In July 2021, the Company entered into a non-cancelable operating lease to sublease office space located at 64 Sidney Street, Cambridge, Massachusetts. The lease commenced in April 2022 and contained escalating monthly rental payments. The lease term expires in April 2025. The Company has a right to extend the lease for one additional six-month period at a market rate, which is not probable of being exercised by the Company. The lease requires the Company to share in prorated expenses and property taxes based on actual amounts incurred.
60 First Street, Cambridge, Massachusetts Lease
In November 2021, the Company entered into a lease for three floors of office and laboratory space at 60 First Street, Cambridge, Massachusetts, with rent commencing in March 2024, subject to any credits pursuant to the terms of the lease (the “60 First Street Lease”). Subsequent to the initial non-cancelable term of the lease of ten years, the Company has an option to extend the lease for an additional period of ten years with the rent during the extension term being the then fair market rent. The Company secured the lease with a $13.1 million security deposit, which was recorded as restricted cash on the consolidated balance sheets as of December 31, 2024 and December 31, 2023.
Accounting Considerations
The Company determined that the lease contained three separate lease components, each of which represents a right of use that the Company can benefit from on its own and are neither highly dependent nor highly related to each other. The Company allocated the consideration among the three lease components based on their relative fair market values.
In accordance with ASC 842, Leases, the lease commenced for one of the lease components in March 2024 and the Company recorded a right-of-use asset of $44.9 million, and a corresponding lease liability of $33.6 million on the lease commencement date; this includes a reclass of $11.3 million from prepaid expenses to right-of-use asset related to build out costs which were determined to be owned by the lessor. As the exercise of the option to extend the lease term is not reasonably certain, the Company will recognize lease expense for this lease component through February 2034.
The lease commencement for the other two lease components is expected to occur in the first half of 2025. Any consideration paid to lease components for which the lease has not commenced are recorded as prepaid expense on the consolidated balance sheets.
In June, 2024, the Company filed a complaint in Massachusetts Superior Court against NW Cambridge Property Owner, LLC (“NWC”), the Company’s landlord at 60 First Street, alleging that NWC had breached the 60 First Street Lease by, among other reasons, refusing to provide the Company with certain rental credits for the late delivery of the leased space. While this lawsuit is pending, the Company has and is expecting to continue to make certain disputed payments under the 60 First Street Lease under protest. As the Company expects this lawsuit to be resolved in its favor and for the payments made under protest to be refunded to the Company, these payments are recorded within other current assets on the Company’s consolidated balance sheets. As of December 31, 2024, total payments made under dispute was $10.8 million.
Arsenal Street, Watertown, Massachusetts Lease
In August 2024, the Company entered into the third amendment to its existing lease for approximately 16,000 square feet of combined laboratory and office space at 480 Arsenal Street, Watertown Massachusetts (the “480 Arsenal Amendment”). In September 2024, the Company entered into a new lease for approximately 48,500 square feet of combined laboratory and office space at 500 Arsenal Street, Watertown, Massachusetts (the “500 Arsenal Lease”). The landlords of the spaces at 480 Arsenal Street and 500 Arsenal Street are affiliates.
The 480 Arsenal Amendment provides the Company with an additional 9,400 square feet of combined laboratory and office space (the “Expansion Space”) at no additional cost and also provides an early termination date for the existing space and the Expansion Space as the later of: 1) the date occurring 150 days after the lease commencement of 500 Arsenal Lease, or 2) 30 days after substantial completion of tenant improvements at 500 Arsenal Street.
The 500 Arsenal Lease term commenced in December 2024 with a base term of 11 months. Subsequent to the base term, the Company has an option to extend the lease through August 2028. The Company secured the lease with a $0.6 million security deposit, which was recorded as restricted cash on the consolidated balance sheets as of December 31, 2024. The 500 Arsenal Lease also provides a tenant improvement allowance of $2.4 million and an additional tenant improvement allowance of $1.2 million, which the Company would be obligated to repay to the landlord.
Accounting Considerations
As the 480 Arsenal Amendment and the 500 Arsenal Lease meet the criteria for combining contracts under ASC 842, the Company determined that both 480 Arsenal Amendment and the 500 Arsenal Lease are modifications to its existing lease at 480 Arsenal Street. Within the combined contract the Company identified two separate lease components, each of which represents a right of use that the Company can benefit from on its own and which are neither highly dependent nor highly related to the other. The Company allocated the consideration under the combined contract among the two lease components based on their relative fair market value. In calculating the allocable consideration and the fair market value of each lease component, the Company determined it is probable that it will exercise the option to extend the lease term provided under the 500 Arsenal Lease.
In accordance with ASC 842, the Company possessed the ability to control and derive the economic benefit for its leased space at 480 Arsenal on the effective date of the modification. Therefore, on the effective date, the Company recorded a right-of-use asset and a corresponding lease liability, which were not materially different from the existing right-of-use asset and lease liability as of the modification date.
For accounting purposes, the lease commencement for 500 Arsenal is expected to occur in the first quarter of 2025. Consideration paid for this lease component is recorded as prepaid expense on the consolidated balance sheets and is not recognized until lease commences.
Summary of lease costs recognized
The following tables contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the years ended December 31, 2024 and December 31, 2023.
The components of lease cost were as follows:
| Year Ended December 31, | ||||||||||||||
| (in thousands) | 2024 | 2023 | ||||||||||||
| Lease cost: | ||||||||||||||
| Operating lease cost | $ | 15,175 | $ | 13,664 | ||||||||||
| Variable lease cost | 5,716 | 2,145 | ||||||||||||
| Short-term lease cost | 3,512 | 2,816 | ||||||||||||
| Sublease income | (168) | (168) | ||||||||||||
| Total lease cost | $ | 24,235 | $ | 18,457 | ||||||||||
The weighted-average remaining lease term and discount rate were as follows:
| December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Weighted average remaining lease term (in years) | 8.4 years | 1.9 years | ||||||||||||
| Weighted average discount rate | 12.83 | % | 6.92 | % | ||||||||||
Future annual lease payments under non-cancelable operating leases as of December 31, 2024 were as follows:
| (in thousands) | Undiscounted Amounts | |||||||
| Undiscounted lease payments: | ||||||||
| 2025 | $ | 19,773 | ||||||
| 2026 | 23,387 | |||||||
| 2027 | 22,921 | |||||||
| 2028 | 22,294 | |||||||
| 2029 | 21,478 | |||||||
| Thereafter | 96,601 | |||||||
| Total undiscounted lease payments | 206,454 | |||||||
| Less: payments related to leases not commenced | (136,637) | |||||||
| Less: imputed interest | (29,023) | |||||||
| Total operating lease liability | $ | 40,794 | ||||||
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About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.