Property and Equipment

3 Months Ended

Mar. 31, 2016

6. Property and Equipment

Property and equipment consists of the following:


	March 31,		December 31,
	2016		2015
	(in thousands)
Office equipment	$	8,115	$	6,753
Laboratory equipment		33,263		31,296
Computer equipment		26,186		22,491
Building and leasehold improvements		72,539		70,729
		140,103		131,269
Less accumulated depreciation and amortization		(47,481)		(45,263)
	$	92,622	$	86,006

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 the 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 cash and investments on the condensed 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 as described in the paragraph below. Restricted investments related to this direct financing lease on the condensed consolidated balance sheets at March 31, 2016 and December 31, 2015 were $13.9 million and $14.0 million, respectively.

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. 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 March 31, 2016, the $8.0 million Seller deposit is recorded in other assets, net on the condensed consolidated balance sheets.