7. Property, Equipment, Assets Held for Sale, Operating Leases, and Sale-Leaseback Transactions

Property and equipment, net, is comprised of the following (in thousands):

	2013	2012
Land	$ 222,385	$ 244,498
Buildings	448,681	494,537
Improvements	402,371	421,143
Restaurant equipment	260,576	276,576
Other equipment	91,351	95,400
Construction in progress and other*	23,080	26,473
	1,448,444	1,558,627
Less accumulated depreciation	588,614	592,022
	$ 859,830	$ 966,605

* Included in Construction in progress and other as of June 4, 2013 and June 5, 2012 are $14.8 million and $21.8 million, respectively, of assets held for sale that are not classified as such in the Consolidated Balance Sheets as we do not expect to sell these assets within the next 12 months. These assets primarily consist of parcels of land upon which we have no intention to build restaurants.

Included within the current assets section of our Consolidated Balance Sheets at June 4, 2013 and June 5, 2012 are amounts classified as assets held for sale totaling $9.2 million and $4.7 million, respectively. Assets held for sale primarily consist of parcels of land upon which we have no intention to build restaurants, land and buildings of closed restaurants, and various liquor licenses. In addition to operating restaurants sold and leased back, as discussed below, during fiscal 2013, 2012, and 2011 we sold surplus properties with carrying values of $6.4 million, $5.3 million, and $6.5 million, respectively, at net gains of $0.6 million, $0.8 million, and $0.1 million, respectively. Cash proceeds, net of broker fees, from these sales totaled $7.0 million, $6.0 million, and $6.6 million, respectively.

Approximately 55% of our 724 restaurants are located on leased properties. Of these, approximately 66% are land leases only; the other 34% are for both land and building. The initial terms of these leases expire at various dates over the next 23 years. These leases may also contain required increases in minimum rent at varying times during the lease term and have options to extend the terms of the leases at a rate that is included in the original lease agreement. Most of our leases require the payment of additional (contingent) rent that is based upon a percentage of restaurant sales above agreed upon sales levels for the year. These sales levels vary for each restaurant and are established in the lease agreements. We recognize contingent rental expense (in annual as well as interim periods) prior to the achievement of the specified target that triggers the contingent rental expense, provided that achievement of that target is considered probable.

During the years ended June 4, 2013 and June 5, 2012, we completed sale-leaseback transactions of the land and building for 24 and 10 Company-owned Ruby Tuesday concept restaurants, respectively, for gross cash proceeds of $54.4 million and $22.2 million, respectively, exclusive of transaction costs of approximately $2.6 million and $1.1 million, respectively. Equipment was not included. The carrying value of the properties sold was $41.4 million and $16.5 million, respectively. The leases have been classified as operating leases and have initial terms of 15 years, with renewal options of up to 20 years. Net proceeds from the sale-leaseback transactions were used for general corporate purposes, including the repurchase of shares of our common stock, and debt payments.

We realized gains during fiscal 2013 and 2012 on these transactions of $10.4 million and $4.6 million, respectively, which have been deferred and are being recognized on a straight-line basis over the initial terms of the leases. The current portion of the deferred gains on all sale-leaseback transactions to date was $1.0 million and $0.3 million as of June 4, 2013 and June 5, 2012, respectively, and is included in Accrued liabilities – Rent and other in our Consolidated Balance Sheets. The long-term portion of the deferred gains on all sale-leaseback transactions to date was $13.2 million and $4.2 million as of June 4, 2013 and June 5, 2012, respectively, and is included in Other deferred liabilities in our Consolidated Balance Sheets. Amortization of the deferred gains of $0.8 million and $0.1 million is included within Other restaurant operating costs in our Consolidated Statements of Operations and Comprehensive (Loss)/Income for the fiscal years ended June 4, 2013 and June 5, 2012, respectively.

The following is a schedule by year of future minimum lease payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of June 4, 2013 (in thousands):


2014	$ 47,966
2015	44,211
2016	40,273
2017	36,940
2018	34,083
Subsequent years	188,336
Total minimum lease payments	$ 391,809

The following schedule shows the future minimum sub-lease payments contractually due from franchisees and others for the next five years and thereafter under noncancelable sub-lease agreements (in thousands):

	Franchisees	Others	Total
2014	$ 201	$ 125	$ 326
2015	117	125	242
2016	94	73	167
2017	93	–	93
2018	93	–	93
Subsequent years	78	–	78
Total minimum sub-lease payments	$ 676	$ 323	$ 999

The following table summarizes our minimum and contingent rent expense and our sublease rental income under our operating leases (in thousands):

	2013		2012		2011
Included within continuing operations
Minimum rent	$ 51,398		$ 47,808		$ 43,432
Contingent rent	472		467		741
	51,870		48,275		44,173
Sublease rental income	(357	)	(416	)	(1,217	)
	$ 51,513		$ 47,859		$ 42,956

Included within discontinued operations	$ 546		$ 967		$ 409

The amounts shown for fiscal 2013, 2012, and 2011 above exclude rent expense/(income) of $2.0 million, $3.4 million, and $(0.4) million, respectively, relating to lease reserves established for closed restaurants or dead sites, which is included with Closures and impairments expense in our Consolidated Statements of Operations and Comprehensive (Loss)/Income.