On November 15, 2024, Allakos Inc., (the "Company"), reported to have entered into an Agreement for Termination of Lease and Voluntary Surrender of Premises (the "Lease Termination Agreement") with ARE-San Francisco No. 63, LLC, a Delaware limited liability company (the "Landlord"), amending the terms and conditions of its existing Lease Agreement, dated as of December 4, 2019, as amended (the "Lease") for certain premises located at 825 Industrial Road, San Carlos, California 94070 (the "Premises") that serve as the Company’s headquarters (Filing, 8-K, Allakos, NOV 15, 2024, View Source [SID1234648463]).
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The term of the Lease was scheduled to expire on November 30, 2031. The Lease Termination Agreement provides for, among other things, amendment of the term such that the Lease will terminate no earlier than January 1, 2025, and no later than March 31, 2025. As consideration for the Landlord’s agreement to enter into the Lease Termination Agreement and accelerate the expiration date of the Lease, the Company has agreed to pay a lease modification payment to the Landlord in an amount of approximately $2.3 million, of which approximately $1.5 million will be paid on or after January 1, 2025, by the Landlord drawing down and retaining the Company’s security deposit for the Premises in the form of a letter of credit secured by restricted cash, and the remainder will be paid upon the early lease termination date described above. The Company also incurred broker commissions of approximately $1.7 million. The net effect on cash and cash equivalents of these costs related to the termination is approximately $2.5 million.
Prior to the Lease Termination Agreement, the Lease represented annual expenditures of approximately $11 million. The Company is evaluating options to achieve significant reductions in future rent expense while meeting the Company’s operational needs.
The foregoing summary of the Lease Termination Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Lease Termination Agreement, a copy of which the Company anticipates filing as an exhibit to the Companyʼs Annual Report on Form 10-K for the year ending December 31, 2024.