At December 31, 2018, CoreCivic owned 70 correctional, detention, and residential reentry real estate properties, and 27 properties leased to third parties. At December 31, 2018, CoreCivic also managed seven correctional and detention facilities owned by governmental agencies.

	December 31,
	2018			2017
Land and improvements	$	294,774		$	258,244
Buildings and improvements		3,490,725			3,219,422
Equipment and software		432,196			399,630
Office furniture and fixtures		34,968			34,510
Construction in progress		94,590			28,104
		4,347,253			3,939,910
Less: Accumulated depreciation		(1,516,664	)		(1,393,066	)
	$	2,830,589		$	2,546,844

Construction in progress primarily consists of correctional facilities under construction or expansion. Interest is capitalized on construction in progress and amounted to $1.0 million and $0.6 million in 2018 and 2016, respectively. There was no interest capitalized on construction in progress in 2017.

Depreciation expense was $152.0 million, $145.7 million, and $165.8 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Ten of the facilities owned by CoreCivic are subject to options that allow various governmental agencies to purchase those facilities. Certain of these options to purchase are based on a depreciated book value while others are based on a fair market value calculation. Four of the facilities that are subject to options are accounted for in accordance with ASC 853 and are recorded in other real estate assets in the consolidated balance sheets, as further described in Note 2. As of December 31, 2018, CoreCivic had approximately $247.2 million in other real estate assets, including $150.1 million accounted for as a contract cost and $97.1 million accounted for as costs of fulfilling the related service contract. As of December 31, 2017, CoreCivic had approximately $255.6 million in other real estate assets, including $152.8 million accounted for as a contract cost and $102.8 million accounted for as an investment in the related service contract.

CoreCivic leases land and buildings for multiple properties under operating leases that expire over varying dates through 2034.

CoreCivic leases the South Texas Family Residential Center and the site upon which it was constructed from a third-party lessor. CoreCivic's lease agreement with the lessor is over a base period concurrent with an IGSA with ICE which was amended in October 2016, as further described in Note 11. However, ICE can terminate the agreement for convenience or non-appropriation of funds, without penalty, by providing CoreCivic with at least a 60-day notice. In the event CoreCivic cancels the lease with the third-party lessor prior to its expiration as a result of the termination of the IGSA by ICE for convenience, and if CoreCivic is unable to reach an agreement for the continued use of the facility within 90 days from the termination date, CoreCivic is required to pay a termination fee based on the termination date, currently equal to $7.0 million and declining to zero by October 2020.

CoreCivic's original lease agreement with the third-party lessor required CoreCivic to pay $70.0 million in September 2014, which resulted in CoreCivic being deemed the owner of the constructed assets for accounting purposes, in accordance with ASC 840-40-55, formerly Emerging Issues Task Force No. 97-10, "The Effect of Lessee Involvement in Asset Construction". Accordingly, CoreCivic recorded an asset representing the costs incurred attributable to the building assets constructed by the third-party lessor and a related financing liability. CoreCivic is depreciating the asset over the term of the lease, as amended and extended through September 2021, and is imputing interest on the financing liability. Additionally, CoreCivic determined that the lease with the third-party lessor also included separate units of account for the land and pre-existing cottages as well as food services provided by the third-party lessor. The amount of consideration allocated to each of these separate deliverables was determined based on the relative selling price of the lessor-financing, the land lease, the lease of pre-existing cottages, and the food services. The operating lease term for the land is equivalent to the term of the lease and is recognized on a straight-line basis over the lease term. The operating lease term for the pre-existing cottages was the four-month period in which CoreCivic used the cottages for housing residents. The food services provided by the third-party lessor are recognized proportionally based on the number of beds available to ICE.

The expense incurred for operating leases, inclusive of the expenses recognized for the South Texas lease, as described above, was $68.0 million, $66.2 million, and $103.4 million for the years ended December 31, 2018, 2017, and 2016, respectively. Future minimum lease payments as of December 31, 2018 under operating leases, inclusive of $138.6 million of payments expected to be made under the cancelable lease at the South Texas facility, are as follows (in thousands):

2019	$	53,779
2020		54,543
2021		40,982
2022		3,289
2023		2,426
Thereafter		21,510

In June 2013, CoreCivic entered into an Economic Development Agreement ("EDA") with the Development Authority of Telfair County ("Telfair County") in Telfair County, Georgia to implement a tax abatement plan related to CoreCivic's bed expansion project at its McRae Correctional Facility. The tax abatement plan provides for 90% abatement of real property taxes in the first year, decreasing by 10% over the subsequent nine years. In June 2013, Telfair County issued bonds in a maximum principal amount of $15.0 million. According to the EDA, legal title of CoreCivic's real property was transferred to Telfair County. Pursuant to the EDA, the bonds were issued to CoreCivic, so no cash exchanged hands. Telfair County then leased the real property back to CoreCivic. The lease payments are equal to the amount of the payments on the bonds. At any time, CoreCivic has the option to purchase the real property by paying off the bonds, plus $100. Due to the form of the transactions, CoreCivic has not recorded the bonds or the capital lease associated with the sale lease-back transaction. The original cost of CoreCivic's property and equipment is recorded on the balance sheet and is being depreciated over its estimated useful life.