Leases

12 Months Ended

Jun. 30, 2022

The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheets as of June 30, 2022 and 2021:


	Line Item in the Company’s Consolidated Balance Sheets	June 30, 2022		June 30, 2021
Right-of-use assets:
Operating leases	Right-of-use lease assets	$	446,499	$	280,579
Lease liabilities:
Operating leases, current	Operating lease liabilities, current	65,310		73,423
Operating leases, noncurrent	Operating lease liabilities, non-current	427,971		233,556
Total lease liabilities		$	493,281	$	306,979

The following table summarizes the activity recorded within the Company’s consolidated and combined statements of operations for Fiscal Years 2022, 2021 and 2020:


	Line Item in the Company’s Consolidated and Combined Statements of Operations	Years Ended June 30,
		2022		2021		2020
Operating lease cost	Direct operating expenses	$	43,023	$	31,074	$	32,348
Operating lease cost	Selling, general and administrative expenses	30,053		26,438		25,081
Short-term lease cost	Direct operating expenses	—		—		348

Variable lease cost	Direct operating expenses	7,567		2,930		5,339
Variable lease cost	Selling, general and administrative expenses	61		57		61
Total lease cost		$	80,704	$	60,499	$	63,177

The Company excluded its ground lease with a subsidiary of Las Vegas Gaming, LLC (“The Venetian”) associated with MSG Sphere in Las Vegas from the ROU assets and lease liabilities balances recorded on the consolidated balance sheets as the ground lease will have no fixed rent. The Venetian agreed to provide us with $75,000 to help fund the construction costs, including the cost of a pedestrian bridge that links MSG Sphere to The Venetian Expo. Through June 30, 2022, The Venetian paid us $65,000 of this amount for construction costs. If certain return objectives are achieved, The Venetian will receive 25% of the after-tax cash flow in excess of such objectives. The ground lease is for a term of 50 years, commencing upon substantial completion of the MSG Sphere.

In November 2021, the Company executed an agreement with the existing landlord for its New York corporate office space pursuant to which it will be relocating from the space that the Company currently occupies to newly renovated office space within the same building. The Company will not be involved in the design or construction of the new space for purposes of the Company’s buildout prior to obtaining possession, which is expected to occur in Fiscal Year 2024. Upon obtaining possession of the space, the new lease is expected to result in an additional lease obligation and right of use asset. While lease payments under the new lease agreement will be recognized as a lease expense on a straight-line basis over the lease term, the Company will begin paying full rent in the second half of Fiscal Year 2026 due to certain tenant incentives included in the arrangement. Base rent payments will increase every five years beginning in Fiscal Year 2031 in accordance with the terms of the lease. The Company anticipates entering into a new sublease agreement with MSG Sports for a lease term equivalent to the November 2021 agreement that the Company entered into with the existing landlord. The future lease payments related to this new lease for the next five fiscal years and thereafter are expected to be as follows:



Fiscal Year 2022	$	—
Fiscal Year 2023	—
Fiscal Year 2024	—
Fiscal Year 2025	10,121
Fiscal Year 2026	16,276
Thereafter (Fiscal Year 2027 to Fiscal Year 2046)	877,996
Total lease payments	$	904,393

Supplemental cash flow information related to operating leases is as follows:


	Years Ended June 30,
	2022		2021		2020
Cash paid for amounts included in the measurement of operating lease liabilities	$	71,660	$	55,271	$	60,920
Lease assets obtained in exchange for new lease obligations	$	341,934	47,790		16,765

For Fiscal Year 2022, the Company received $17,697 of tenant incentives from a landlord for capital expenditures on behalf of the Company.

Maturities of operating lease liabilities as of June 30, 2022 are as follows:


Fiscal year ending June 30, 2023	$	69,070
Fiscal year ending June 30, 2024	78,175
Fiscal year ending June 30, 2025	56,577
Fiscal year ending June 30, 2026	33,704
Fiscal year ending June 30, 2027	42,932
Thereafter	456,503
Total lease payments	736,961
Less imputed interest	243,680
Total lease liabilities	$	493,281

The weighted average remaining lease term and weighted average discount rate for our operating leases are as follows:


	June 30,
	2022		2021
Weighted average remaining lease term (in years)	12.7		7.09
Weighted average discount rate	6.47	%	7.85	%

As of June 30, 2022, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 0.3 years to 34.7 years.

For Fiscal Year 2022, the Company recorded a net loss of $284 resulting primarily from the extinguishment of lease liabilities and right-of-use lease assets associated with certain Hakkasan venues of Tao Group Hospitality due to decisions made by management to cease operations.

Lessor Arrangements

In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed annual license fees scheduled to be paid monthly over the term of the agreements. The Company accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games. Operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the Arena License Agreements, the lease terms relate to non-consecutive periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.

The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. As a result of government-mandated suspension of events at The Garden beginning on March 13, 2020 due to the impact of the COVID-19 pandemic, The Garden was not available for use by MSG Sports from the effective date of the Arena License Agreements through the first quarter of Fiscal Year 2021, and, accordingly, the Company did not record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 when it became available at 100% seating capacity. The Company recorded $68,072 and $21,345 of revenues under the Arena License Agreements for Fiscal Year 2022 and 2021, respectively. In addition, the Company recorded revenues from third party and related party lease and sublease arrangements of $5,207 and $2,980 for Fiscal Year 2022 and 2021, respectively.