| Item 1.01 | Entry into a Material Definitive Agreement |
Lease Agreement
On July 31, 2018, Roku, Inc. (the “Company”) entered into leases for office space (each, a “New Lease”) with Hunter Properties (the “Landlord”) to lease approximately 472,319 square feet of office space located at:
| | • | | 1155 Coleman Avenue, San Jose, California, consisting of three (3) floors of the building totaling approximately 91,368 rentable square feet (“Building 2”), |
| | • | | 1173 Coleman Avenue, San Jose, California, consisting of the entire building totaling approximately 194,790 rentable square feet (“Building 3”), |
| | • | | 1167 Coleman Avenue, San Jose, California, consisting of the entire building totaling approximately 163,272 rentable square feet (“Building 4”), and |
| | • | | 1161 Coleman Avenue, San Jose, California, consisting of the entire building totaling approximately 22,889 rentable square feet (“Building A2”). |
(each, a “Building” and collectively, the “Premises”) for the Company’s new principal executive offices.
The New Lease for Building 2 commences on the earlier of (i) the first date on which the Company conduct business in Building 2, or (ii) the date on which the Landlord substantially completes certain improvements to Building 2 (the “Building 2 Commencement Date”), which is tentatively scheduled for January 2019. The New Leases for Buildings 3, 4 and A2 commence on the earlier of (i) the date upon which the Company first conducts business in the applicable Building and (ii) generally, the date that is the latest to occur of (a) five (5) months after the date that Landlord delivers the applicable Building in the required condition and (b) March 1, 2020. The New Leases terminate approximately one hundred forty (140) months after the Building 2 Commencement Date (the “Lease Term”), unless terminated earlier.
The New Leases provide for annual base rent of approximately $3.9 million in the first year of the Lease Term as to Building 2, increasing incrementally to approximately $5.5 million in the final year of the Lease Term, and an aggregate of approximately $16.9 million in the first year of the Lease Term as to Buildings 3, 4 and A2, increasing incrementally to approximately $22.8 million in the aggregate in the final year of the Lease Term. The New Leases also provides for certain limited rent abatements in the first year of the Lease Term for each respective Building.
We have one seven-year option to extend the initial Lease Term, and shall have a right of first offer to expand into (i) any space that becomes available in the remaining portion of Building 2, (ii) that certain project building located at 1143 Coleman Avenue, San Jose, California, and (iii) if constructed, that certain project building located at 1179 Coleman Avenue, San Jose, California.
The Company will also be obligated to pay to the Landlord for certain costs, taxes and operating expenses related with the Premises, subject to certain exclusions.
The Company will be entitled to a tenant improvement allowance of approximately $39.0 million for costs related to the design and construction of Company improvements that are permanently affixed to the Premises.
The Company has obtained two standby letters of credit (the “Letters of Credit”) in the aggregate amount of approximately $19.9 million, which may be drawn down by the Landlord to be applied for certain purposes upon the Company’s breach of any provisions under the New Leases. Provided that no default occurs under the terms of the New Leases and the Company is in compliance with certain financial tests, the Company will be entitled to periodically reduce the amount of the Letters of Credit down to a maximum of approximately fifty percent of the original amount as of the last day of the 90th full calendar month of each applicable Lease Term.
The foregoing descriptions are not intended to be a comprehensive summary and are qualified by the terms of the respective agreements. A copy of each of the New Leases will be filed as exhibits to the Company’s Quarterly Report on Form10-Q for the quarter ending June 30, 2018.
