TripAdvisor 2014 Annual Report Download - page 55

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Certain of our Chinese subsidiaries are entered into a RMB 189,000,000 (approximately $30 million), one-year revolving credit
facility with Bank of America (the “Chinese Credit Facility—BOA”) that is currently subject to review on a periodic basis with no-
specific expiration period. We had $19 million of outstanding borrowings from the Chinese Credit Facility—BOA as of December 31,
2014. Our Chinese Credit Facility—BOA currently bears interest based at a 100% of the People’s Bank of China’s base rate, which
was 5.6% as of December 31, 2014.
In addition, certain of our Chinese subsidiaries are entered into a RMB 125,000,000 (approximately $20 million) one-year
revolving credit facility with J.P. Morgan Chase Bank (“Chinese Credit Facility-JPM”). We had $19 million of outstanding
borrowings from the Chinese Credit Facility-JPM as of December 31, 2014. Our Chinese Credit Facility—JPM currently bears
interest based at a 100% of the People’s Bank of China’s base rate, which was 5.6% as of December 31, 2014.
Office Lease Commitments
We currently lease approximately 119,000 square feet for our corporate headquarters in Newton, Massachusetts, pursuant to a
lease with an expiration date of April 2015. We are currently in the process of negotiating an extension of this lease until mid-2015.
In June 2013, TripAdvisor LLC (“TA LLC”), our indirect, wholly owned subsidiary, entered into a lease (the “Lease”), for a
new corporate headquarters. Pursuant to the Lease, the landlord will build an approximately 280,000 square foot rental building in
Needham, Massachusetts (the “Premises”), and thereafter lease the Premises to TA LLC as TripAdvisor’s new corporate headquarters
for an initial term of 15 years and 7 months. If the landlord fails to deliver the Premises according to the schedule, subject to certain
conditions, TA LLC may be entitled to additional free rent, or in extreme cases, a right to terminate the Lease. Under the Lease, TA
LLC is required to pay an initial base rent of $33.00 per square foot per year, increasing to $34.50 per square foot by the final year of
the initial term, as well as all real estate taxes and other building operating costs. TA LLC also has an option to extend the term of the
Lease for two consecutive terms of five years each.
The aggregate future minimum lease payments are $143 million and are currently scheduled to be paid, beginning in November
2015, as follows: $1 million for 2015, $9 million for 2016, $9 million for 2017, $9 million for 2018, $9 million for 2019 and
$106 million for 2020 and thereafter. The Lease has escalating rental payments and initial periods of free rent. TA LLC was also
obligated to deliver a letter of credit to the Landlord in the amount of $1 million as security deposit, which amount is subject to
increase under certain circumstances. TA LLC also has an option to extend the term of the Lease for two consecutive terms of five
years each. In connection with the Lease, TripAdvisor entered into a Guaranty (the “Guaranty”), pursuant to which TripAdvisor
provides full payment and performance guaranty for all of TA LLC’s obligations under the Lease.
We have concluded we are the deemed owner (for accounting purposes only) of the Premises during the construction period
under build to suit lease accounting. Building construction began in the fourth quarter of 2013. Since construction began, we have
recorded estimated project construction costs incurred by the landlord as a construction in progress asset and a corresponding long
term liability in “Property and equipment, net” and “Other long-term liabilities,” respectively, on our consolidated balance sheets. We
will continue to increase the asset and corresponding long term liability as additional building costs are incurred by the landlord during
the construction period. In addition, the amounts that we have paid or incurred for normal tenant improvements and structural
improvements have also been recorded to the construction-in-progress asset.
Once the landlord completes the construction of the Premises (estimated to be mid 2015), we will evaluate the Lease in order to
determine whether or not the Lease meets the criteria for “sale-leaseback” treatment under GAAP. If the Lease meets the “sale-
leaseback” criteria, we will remove the asset and the related liability from our consolidated balance sheet and treat the Lease as either
an operating or capital lease based on the our assessment of the accounting guidance. However, we currently expect that upon
completion of construction of the Premises that the Lease will not meet the "sale-leaseback" criteria.
If the Lease does not meet “sale-leaseback” criteria, we will treat the Lease as a financing obligation and lease payments will be
attributed to (1) a reduction of the principal financing obligation; (2) imputed interest expense; and (3) land lease expense (which is
considered an operating lease) representing an imputed cost to lease the underlying land of the facility. In addition, the underlying
building asset will be depreciated over the initial term of the lease. And at the conclusion of the lease term, we would de-recognize
both the net book values of the asset and financing obligation. Although we will not begin making lease payments pursuant to the
Lease until November 2015, the portion of the lease obligations allocated to the land is treated for accounting purposes as an operating
lease that commenced in 2013.
We also lease an aggregate of approximately 470,000 square feet at approximately 40 other locations across North America,
Europe and Asia Pacific, in cities such as, New York, Boston, London, and Beijing, primarily for our sales offices, subsidiary
headquarters, and international management teams, pursuant to leases with expiration dates through November 2024.