We conduct substantially all operations from leased facilities. Our retail store locations, our corporate office and our distribution center are under operating leases that will expire over the next 1 to 10 years. Many of our leases include options to renew at our discretion. We include the lease renewal option periods in the calculation of our operating lease assets and liabilities when it is reasonably certain that we will renew the lease. We also lease certain equipment under finance leases that generally expire within 5 years.

In accordance with the Plan of Reorganization, on December 31, 2020, we sold our corporate office and Dallas distribution center properties and leased back those facilities. The lease of the corporate office is for a term of 10 years, and the lease of the distribution center is for an initial term of two and one-half years, with an option to extend the distribution center lease for one additional year. We believe it is reasonably certain the option to extend will be exercised. We determined the sale price represented the fair value of the underlying assets sold and have no continuing involvement with the properties sold other than a normal leaseback. The consideration received for the sale, as reduced by the closing and transaction costs, was $68.5 million, and the net book value of the properties sold was $18.9 million, resulting in a $49.6 million gain, which was recognized as of December 31, 2020. Cash proceeds were deposited directly into the Unsecured Creditor Claim Fund (See Note 2).

The two leases, associated with the transaction, were recorded as operating leases. As of July 2, 2022, we will pay approximately $7.6 million in fixed rents and in-substance fixed rents, over the remaining lease term for the corporate office and we will pay approximately $8.6 million in fixed rents and in-substance fixed rents for the Dallas distribution center property over the remaining lease term, including the one-year option period as noted above. Fixed rents and in-substance fixed rents for each lease were discounted using the incremental borrowing rate we established for the respective term of each lease.

In accordance with ASC 842, we determine whether an agreement contains a lease at inception based on our right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments, and the ROU assets represent our right to use the underlying assets for the respective lease terms.

The operating lease liability is measured as the present value of the unpaid lease payments and the ROU asset is derived from the calculation of the operating lease liability. As our leases do not generally provide an implicit rate, we use our incremental borrowing rate as the discount rate to calculate the present value of lease payments. The incremental borrowing rate represents an estimate of the interest rate that would be required to borrow over a similar term, on a collateralized basis in a similar economic environment.

Rent escalations occurring during the term of the leases are included in the calculation of the future minimum lease payments and the rent expense related to these leases is recognized on a straight-line basis over the lease term. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses allocated on a percentage of sales in excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expense in the period incurred. The ROU asset is adjusted to account for previously recorded lease-related expenses such as deferred rent and other lease liabilities.

Our lease agreements do not contain residual value guarantees or significant restrictions or covenants other than those customary in such arrangements.

The components of lease cost are as follows (in thousands):


	Fiscal Years Ended
	July 2,		June 30,
	2022		2021
Operating lease cost	$	67,724	$	62,617
Variable lease cost		9,568		10,924
Amortization of right-of-use assets		124		210
Interest on lease liabilities		1		8
Total lease cost	$	77,417	$	73,759

The table below presents additional information related to the Company’s leases as follows:


	Fiscal Years Ended
	July 2,			June 30,
	2022			2021
Weighted average remaining lease term (in years)
Operating leases		4.1			4.6
Finance leases		—			0.7
Weighted average discount rate
Operating leases		9.1	%		8.5	%
Finance leases		0.0	%		2.4	%

Other information related to leases, including supplemental disclosures of cash flow information, is as follows (in thousands):


	Fiscal Years Ended
	July 2,		June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	75,132	$	64,496
Operating cash flows from finance leases	$	1	$	9
Financing cash flows from finance leases	$	124	$	217
Right-of-use assets obtained in exchange for operating lease liabilities	$	15,522	$	(107,497	)

Maturities of lease liabilities were as follows as of July 2, 2022 (in thousands):


	Operating Leases
Fiscal year:
2023	$	65,051
2024		48,755
2025		35,474
2026		22,246
2027		16,604
Thereafter		15,023
Total lease payments	$	203,153
Less: Interest		34,969
Total lease liabilities	$	168,184
Less: Current lease liabilities		52,258
Non-current lease liabilities	$	115,926

There were no financing lease agreements at July 2, 2022. Current and non-current finance lease liabilities are recorded in “Accrued liabilities” and “Other liabilities – non-current”, respectively, on our Consolidated Balance Sheets. As of July 2, 2022, and June 30, 2021, there were no operating lease payments for legally binding minimum lease payments for leases signed by not yet commenced.

Rent expense for real estate leases for the fiscal years ended July 2, 2022, June 30, 2021, and 2020 was $77.3 million, $73.5 million, and $118.3 million, respectively. Rent expense includes minimum base rent as well as contractually required payments for maintenance, insurance and taxes on our leased store locations and distribution centers.

Total lease cost in fiscal 2022 was $77.4 million, including finance lease costs. Total lease costs of $73.8 million for fiscal 2021 excludes $5.6 million recorded for accelerated recognition of rent expense due to our abandonment of our Phoenix distribution center.