Property and Equipment

12 Months Ended

Dec. 31, 2015

Note 6. Property and Equipment

Property and equipment consists of the following:


	December 31,
	2015		2014
	(in thousands)
Office equipment	$	6,753	$	6,090
Laboratory equipment		31,296		26,800
Computer equipment		22,491		18,648
Building and leasehold improvements		70,729		64,926
		131,269		116,464
Less accumulated depreciation and amortization		(45,263)		(34,674)
	$	86,006	$	81,790

Depreciation expense, including amortization expense of leasehold improvements, was $11.3 million, $5.1 million and $3.2 million for 2015, 2014 and 2013, respectively.

In 2013, we entered into a lease agreement for a new corporate headquarters, which consists of approximately 190,000 square feet of laboratory and office space located in Wilmington, Delaware. The term of this lease is 15 years from the date of commencement. The construction of the facility was completed and the lease commenced on October 1, 2014 with a monthly lease rate of $0.5 million for the first 10 years of the lease and with the monthly lease rate increasing annually during the last five years of lease.

We are accounting for the lease as a direct financing arrangement whereby over the construction period, we recorded the value of the facility (consisting of the estimated fair value of the existing shell, plus construction costs incurred) as a capital asset, with a corresponding lease liability, net of build out costs paid for by us during the construction period. The lease liability will be amortized over the term of the lease using the effective interest method. In addition, we have posted a $15.0 million letter of credit for the facility lease for the benefit of the landlord, which is collateralized by a restricted investments account for the same amount. This amount was recorded as restricted investments on the consolidated balance sheets and will be reduced over a period of time during the duration of the lease. The letter of credit could be subject to accelerated reductions if we meet certain pre‑defined financial targets and will be cancelled as a condition of closing of the purchase described in the next paragraph. Restricted investments related to this direct financing lease on the consolidated balance sheets at December 31, 2015 and 2014, respectively was $14.0 million and $14.5 million.

On August 21, 2015, we entered into an Agreement of Sale with Augustine Land II, L.P. (the “Seller”) to purchase the leased land and office building for approximately $79.9 million. The Agreement of Sale contains customary representations and warranties regarding the property and closing of the acquisition is subject to certain standard closing conditions. Closing of the acquisition is expected to occur in the first quarter of 2016. Pursuant to the terms of the Agreement of Sale, we initially made a $4.0 million deposit with a third party escrow agent and a $4.0 million deposit with the Seller. The escrow agent held the deposit until the building inspection process was completed, and the escrow agent released the $4.0 million to the Seller in October 2015 as an additional deposit. As of December 31, 2015, the purchase of the leased land and office building has not closed, and the closing is anticipated in the first quarter of 2016. The $8.0 million deposit made to the Seller is recorded in other assets, net on the consolidated balance sheet at December 31, 2015. The $8.0 million has also been reflected within capital expenditures on the consolidated statements of cash flows for the year ended December 31, 2015.