Sale Leaseback Transactions

In the second quarter of fiscal 2016, we entered into an agreement pursuant to which we sold our BEF Foods industrial properties located in Lima, Ohio, and Sulphur Springs, Texas, for $51,600. We received net proceeds of $50,017, after consideration of closing and other transaction costs. In conjunction with the sale, assets with a net book value of$22,415 and $29,142 for the Lima and Sulphur Springs properties, respectively, were retired. The transaction resulted in a deferred gain of $2,305 for the Lima facility, which is recorded in the deferred gain on sale leaseback transactions line on the Consolidated Balance Sheets, and a pretax loss on disposal of $3,432, recognized in fiscal 2016, for the Sulphur Springs facility, which is recorded within the S,G&A line on the Consolidated Statements of Net Income and in the BEF Foods segment.

Concurrent with the sale, the Company also entered into a master lease agreement with the same party that purchased the assets, pursuant to which we leased both the Lima and Sulphur Springs properties for an initial term of 20 years, with two renewal options of 10 years each. The leases include a 2.0% annual rent escalator. Annual, straight-line rent expense will be $4,127, inclusive of the amortized deferred gain on the Lima property, and recorded within the other operating expenses line on the Consolidated Statements of Net Income and in the BEF Foods segment. Refer to the table below for a summary of our BEF Foods sale leaseback transaction:



(in thousands)	Lima, Ohio				Sulphur Springs, Texas
Selling Price	$	25,284			$	26,316
Direct transactions costs	(564		)		(606		)
Net book value of assets sold	(22,415		)		(29,142		)
Net gain (loss) on sale	$	2,305		(1)	$	(3,432	)

(1) The gain on the sale of our Lima facility is deferred and will be recognized over the lease term

In the fourth quarter of fiscal 2016 we entered into an agreement pursuant to which we sold 143 restaurant properties for $197,191. We received net proceeds of $191,713 after consideration of closing and certain other transaction costs. In conjunction with the sale, assets with a net book value of $139,621 were retired. After consideration of all direct transaction costs, the sale resulted in a deferred gain of $56,868 on 111 properties, which is recorded in the deferred gain on sale leaseback transactions line on the Consolidated Balance Sheets, and a pretax loss on disposal of $8,451 on 32 properties, recognized in the fourth quarter of fiscal 2016 within the S,G&A line on the Consolidated Statements of Net Income and in the Bob Evans Restaurants segment.

Concurrent with the sale, the Company also entered into absolute net master leases for the portfolio properties, for an initial term of 20 years, with five renewal options of five years each, at an annual rent of 6.65% of the purchase price for the first year. Certain of the properties include a CPI-based rent escalator with a maximum 1.5% annual increase, while others include a 1.5% annual rent escalator. In addition, the Company and BEF Foods, Inc. entered into payment and performance guaranties. Rent expense in fiscal 2017 will be $10,638, inclusive of the amortized deferred gain on 111 properties and recorded within the other operating expenses line on the Consolidated Statements of Net Income and in the Bob Evans Restaurants segment. Refer to the table below for a summary of our Bob Evans Restaurant sale leaseback transaction:



(in thousands)	Sold Restaurants
Selling Price	$	197,191
Direct transactions costs	(9,153		)
Net book value of assets sold	(139,621		)
Deferred gain on sale	(56,868		)
Loss on sale recorded in fiscal 2016 4th quarter	$	(8,451	)