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

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

	2017		2016
Land	$	180,520	$	209,930
Buildings		366,566		398,984
Improvements		227,056		303,032
Restaurant equipment		192,217		222,646
Other equipment		71,851		82,204
Surplus properties*		17,139		4,354
Construction in progress and other		1,172		3,325
		1,056,521		1,224,475
Less accumulated depreciation		473,424		553,225
Property and equipment, net	$	583,097	$	671,250

* Surplus properties represent 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

months. These assets primarily consist of parcels of land upon which we have

intention to build restaurants, closed properties which include a building, and liquor licenses

not

needed for operations.

Included within the current assets section of our Consolidated Balance Sheets at

June 6, 2017

and

May 31, 2016

are amounts classified as assets held for sale totaling

$12.8

million and

$4.6

million, respectively. Assets held for sale primarily consist of

land and buildings of closed restaurants, parcels of land upon which we have

intention to build restaurants, and liquor licenses. In addition to Lime Fresh restaurants sold as discussed in Note

to the Consolidated Financial Statements, during fiscal years

2017,

2016,

and

2015

we sold surplus properties with carrying values of

$24.3

million,

$6.7

million, and

$9.5

million, respectively, at net gains of

$4.4

million,

$0.9

million, and

$1.7

million, respectively. Cash proceeds, net of broker fees, from these sales totaled

$28.7

million,

$7.6

million, and

$11.2

million, respectively.

We realized gains during fiscal year

2014

on the sale-leaseback transactions of

$0.8

million, 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

$1.1

million as of both

June 6, 2017

and

May 31, 2016,

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

$9.7

million and

$10.9

million as of

June 6, 2017

and

May 31, 2016,

respectively, and is included in Other deferred liabilities in our Consolidated Balance Sheets. Amortization of the deferred gains of

$1.1

million in each of fiscal year

June 6, 2017

and

May 31, 2016,

and

June 2, 2015

is included within Other restaurant operating costs in our Consolidated Statements of Operations and Comprehensive Loss.

The following is a schedule by year of future minimum lease payments under operating leases that have initial lease terms in excess of

one

year as of

June 6, 2017 (

in thousands):

2018	$	41,397
2019		38,117
2020		35,489
2021		33,153
2022		30,951
Subsequent years		327,308
Total minimum lease payments	$	506,415

The amounts included in the table above include lease payments for certain optional renewal periods for which exercise is considered reasonably assured as well as operating leases totaling

$2.6

million as discussed below for which sublease income from franchisees or others is contractually required.

The following schedule shows the future minimum sub-lease payments contractually due for the next

five

years and thereafter under noncancellable sub-lease agreements as of

June 6, 2017 (

in thousands):

2018	$	382
2019		285
2020		285
2021		291
2022		300
Subsequent years		1,019
Total minimum sub-lease payments	$	2,562

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

	2017			2016			2015
Minimum rent	$	38,922		$	49,699		$	50,489
Contingent rent		558			662			745
		39,480			50,361			51,234
Sublease rental income		(572	)		(940	)		(504	)
	$	38,908		$	49,421		$	50,730

The amounts shown for fiscal years

2017,

2016,

and

2015

above exclude rent expense of

$14.

million,

$3.6

million, and

$1.2

million, respectively, relating to lease reserves established for closed restaurants or dead sites, which is included within Closures and impairments expense in our Consolidated Statements of Operations and Comprehensive Loss.