Property and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment:

Property and equipment consists of the following (in millions):



	As of December 31,
	2019			2018
Land	$	169.6		$	142.4
Buildings	2,084.8			1,875.2
Leasehold improvements	192.6			147.5
Vehicles	31.2			24.6
Furniture, fixtures, and equipment	505.1			441.6
	2,983.3			2,631.3
Less: Accumulated depreciation and amortization	(1,211.8		)	(1,147.0		)
	1,771.5			1,484.3
Construction in progress	187.8			150.5
Property and equipment, net	$	1,959.3		$	1,634.8

As of December 31, 2019, approximately 70% of our consolidated Property and equipment, net held by Encompass Health Corporation and its guarantor subsidiaries was pledged to the lenders under our credit agreement. See Note 10, Long-term Debt, and Note 21, Condensed Consolidating Financial Information.

The amount of depreciation expense and interest capitalized is as follows (in millions):



	For the Year Ended December 31,
	2019		2018		2017
Depreciation expense	$	130.0	$	124.2	$	111.8
Interest capitalized	$	8.3	$	6.0	$	3.7

In February 2016, we entered into a development/lease agreement with CR HQ, LLC (the “Developer”) to construct our new home office in Birmingham, Alabama. Under the terms of this agreement, the Developer was responsible for all costs of constructing the new facility ‘shell’ which is being leased to us for an initial term of 15 years with four, five-year renewal options. The lease commenced in April of 2018. We were responsible for the costs associated with improvements to the interior of the building. Due to the nature and extent of the tenant improvements we made to the new home office and certain provisions of the development/lease agreement, we were deemed to be the accounting owner of the new home office during the construction period. Construction commenced in the second quarter of 2016. As of December 31, 2018, Property and equipment, net included $55.0 million for the construction costs incurred by the Developer, and Long-term debt, net of current portion included a corresponding financing obligation liability of $54.8 million. The remaining corresponding financing obligation liability of $0.2 million as of December 31, 2018 is included in the Current portion of long-term debt. The amounts recorded for construction costs and the corresponding liability are noncash activities for purposes of our consolidated statement of cash flows. As a result of adopting ASC 842 on January 1, 2019, this lease became a finance lease obligation. See Note 1, Summary of Significant Accounting Policies, “Recent Accounting Pronouncements,” for additional information on ASC 842. See also Note 10, Long-term Debt.