Property and Equipment, net

Property and equipment, net, is as follows (in thousands):



	As of December 31,
Property and Equipment, Net	2018			2017
Land, buildings, and improvements	$	50,123		$	68,404
Equipment and purchased software	93,170			93,849
Furniture and leasehold improvements	18,338			20,270
Gross	161,631			182,523
Less accumulated depreciation and amortization	(84,018		)	(83,761		)
Property and equipment, net	$	77,613		$	98,762

Depreciation expense was $18.6, $16.8, and $14.1 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Fremont, California. We entered into a 15-year lease agreement pursuant commencing on September 1, 2013 to which we leased approximately 59,000 square feet of a building located in Fremont, California next to our corporate headquarters. Minimum lease payments were $18.5 million, net of full abatement of rent for the first three years of the lease term. During the initial lease term, we also had certain rights of first refusal to (i) lease the remaining portion of the facility and/or (ii) purchase the facility. This location contained the engineering, marketing, and administrative operations for our Fiery operating segment.

On July 27, 2018, we executed an agreement (the “Termination Agreement”) to terminate the above lease agreement dated April 19, 2013. The Termination Agreement was effective July 31, 2018. The Company moved its Fiery segment operations and personnel from the formerly leased facility into our adjacent headquarters building in July 2018. Prior to executing the Termination Agreement, the underlying lease had a remaining term of ten years and minimum noncancellable lease payments of $16.0 million. For accounting purposes, we were considered the owner of the building and had recorded the asset at a net book value of $13.7 million in property and equipment, net, on our Consolidated Balance Sheet prior to the termination. As of July 31, 2018, we had derecognized the lease asset and removed the corresponding liability of $14.5 million, which represented the present value of the lease obligation. The Termination Agreement required us to pay total penalties of $0.8 million. The net loss from this lease termination of $0.1 million was charged to restructuring expense during the year ended December 31, 2018.

Prior to the termination date, the monthly lease payments were allocated between the land element of the lease, which was accounted for as an operating lease, and the imputed financing obligation. The imputed financing obligation was being amortized in accordance with the effective interest method.

Eagan, Minnesota. In 2016, management approved a plan to sell approximately 5.6 acres and the office building located at 1340 Corporate Center Curve, Eagan, Minnesota, consisting of 43,682 square feet, and the related improvements were classified as assets held-for-sale. On April 13, 2017, we entered into an agreement under which we agreed to sell the office building, improvements, and related land, subject to completion of a 150-day due diligence period, which expired on September 7, 2017 without the transaction closing. Accordingly, assets previously recorded as assets held-for-sale of $3.8 million, which consisted of $2.9 million net book value of the facility and $0.9 million of related land as of December 31, 2016, have been classified as assets held for use within property and equipment, net, in our Consolidated Balance Sheets as of December 31, 2018 and 2017.

Manchester, New Hampshire. On August 26, 2016, we entered into a lease agreement and have accounted for a lease term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester, NH to lease 16.9 acres adjacent to the Manchester Regional Airport. The land is subleased to MUFG during the term of the lease related to the manufacturing facility that was constructed on the site, which is described below. Minimum lease payments are $13.3 million during the entire 48.5-year term of the land lease, excluding six months of the land lease that were financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six-year lease with MUFG whereby a 225,000-square foot manufacturing and warehouse facility was constructed for our Industrial Inkjet operating segment at a cost of $39.8 million. Construction was completed in April 2018. Minimum lease payments during the initial six-year term are $1.8 million. Upon completion of the initial six-year term, we have the option to renew the lease, purchase the facility, or return the facility to MUFG subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value as of December 31, 2018. During the construction period, we were required to maintain restricted cash equivalents or restricted investments equal to the amount expended to date on the construction of the building as collateral. The funds were deposited with a third-party trustee and were restricted during the construction period. Upon completion of construction, $39.8 million was deposited with MUFG and is restricted as collateral until the end of the underlying building lease period.

Meredith, New Hampshire. During the fourth quarter of 2017, our management approved a plan to sell approximately 31.5 acres of land and two manufacturing buildings located at One Vutek Place and 189 Waukewan Street, Meredith, New Hampshire, consisting of 163,000 total square feet. These assets, which were previously recorded within property and equipment, net at a net book value of $5.1 million, were reclassified as assets held-for-sale upon the approval of the plan. We recognized an impairment charge of $0.9 million in the fourth quarter of 2017, and reported the assets at $4.2 million on our Consolidated Balance Sheet as of December 31, 2017. During the three months ended September 30, 2018, we sold the 189 Waukewan Street land and building for net proceeds of $1.1 million and recognized a gain of $0.1 million. During the fourth quarter of 2018, we recognized an additional impairment charge of $0.3 million on the One Vutek Place property. The current carrying value of $2.8 million is classified as assets held-for-sale on the Consolidated Balance Sheet as of December 31, 2018.