6. Property and Equipment, Net

Property and equipment, net consists of the following:


	March 31,		December 31,
	2020		2019
	(In thousands)
Computer equipment	$	11,453	$	11,453
Capitalized software		19,072		18,516
Fulfillment equipment		49,600		54,059
Furniture and fixtures		3,513		3,725
Leasehold improvements		32,254		41,735
Buildings(1)		114,877		148,507
Construction in process		2,034		1,803
Property and equipment, gross		232,803		279,798
Less: accumulated depreciation and amortization		(94,489)		(97,992)
Property and equipment, net	$	138,314	$	181,806

(1)

Buildings includes build-to-suit lease arrangements where the Company is considered the owner for accounting purposes including $31.3 million as of March 31, 2020 related to Linden, New Jersey and $62.1 million as of December 31, 2019 related to Linden, New Jersey and Fairfield, California. Buildings also includes costs incurred directly by the Company relating to these arrangements of $80.8 million and $82.3 million as of March 31, 2020 and December 31, 2019, respectively. Capitalized interest for construction projects related to build-to-suit lease arrangements was $2.8 million and $4.2 million as of March 31, 2020 and December 31, 2019, respectively.

Fairfield Lease Termination

In October 2017, the Company performed a review of its real estate needs and decided to no longer pursue its planned build-out of the Fairfield facility and as a result, pursued potential alternatives for the leased Fairfield property. On March 30, 2020, the Company terminated the lease for its Fairfield facility (the “Fairfield lease termination”). In connection with the Fairfield lease termination, the Company agreed to pay a termination fee in the amount of $1.5 million in the second quarter of 2020, which released the Company from all future minimum lease payments related to this facility in the amount of $32.9 million, which otherwise would have expired in 2028.

For accounting purposes, the Company was deemed to be the owner of this arrangement and followed build-to-suit accounting. Therefore, the Company capitalized the fair value of the building and direct construction costs incurred and recorded a corresponding facility financing obligation. Prior to the lease termination, the net carrying value of the build-to-suit assets totaled $31.1 million, the facility financing obligation totaled $35.7 million and the Company had deferred rent of $1.8 million. Accordingly, as of the termination date, the Company derecognized the net carrying value of the build-to-suit assets and liabilities and the deferred rent balance. As a result, the Company recorded a non-cash gain of $4.9 million, net of the lease termination fee, in Other operating expense for the three months ended March 31, 2020.

Impairment Charges on Long-Lived Assets

In February 2020, the Company announced the planned closure of its fulfillment center in Arlington, Texas and the consolidation of production volume from the Arlington, Texas fulfillment center to the Company’s fulfillment centers in Linden, New Jersey and Richmond, California in order to more efficiently continue to service its national footprint while also enabling the Company to redirect its financial resources into other parts of the business, including growth initiatives. The Company concluded that this change in operations represents a triggering event with respect to its long-lived assets at the Arlington facility and therefore performed an impairment test in accordance with ASC 360, Property, Plant, and Equipment. The carrying amount of the Company’s long-lived assets at the Arlington facility was $11.5 million and the fair value was $4.1 million as of the impairment date, resulting in an impairment of $7.4 million, primarily consisting of leasehold improvements and equipment, recorded in Other operating expense for the three months ended March 31, 2020. The fair value was primarily determined based on estimated market prices of the assets and represented a Level 3 valuation in the fair value hierarchy. Upon completion of the transition to the Linden and Richmond fulfillment centers, the Company expects its leasehold improvements to remain at its Arlington facility and its equipment to be primarily sold or relocated to the Company’s other fulfillment centers in the second half of 2020. In addition, the Company has future non-cancelable minimum lease payments of approximately $2.2 million through 2024 relating to its Arlington facility. The Company is pursuing a sublease for the facility, which is not expected to have a material impact on the Company’s Consolidated Financial Statements.