Sale-Leaseback Transactions
During fiscal 2013, the Company completed sale-leaseback transactions under which it sold a total of 256 stores to unrelated third-parties. Net proceeds from these sales were approximately $335.0 million. Upon closing of the transactions, the Company realized a gain on the sale of the stores of $84.7 million, of which approximately $2.4 million was recognized immediately and approximately $82.3 million was deferred and will be amortized over the initial lease term.
During fiscal 2012, the Company completed sale-leaseback transactions under which it sold a total of 276 stores to unrelated third-parties. Net proceeds from these sales were $359.7 million. Upon closing of the transactions, the Company deferred a gain of approximately $171.6 million realized on the sale of the stores and will amortize the gain over the initial lease term.
Concurrent with these sales in fiscal 2013 and 2012, the Company entered into agreements to lease the properties back from the purchasers over initial lease terms of 15 years. The master leases for the 532 stores includes an initial term of 15 years and four, five-year renewal options and provides for the Company to evaluate each store individually upon certain events during the life of the lease, including individual renewal options. The Company classified these leases as operating leases, actively uses the leased properties and considers the leases as normal leasebacks under ASC 840. The deferred gain on these transactions includes both a current and non-current portion, with the current portion based on the amount that is expected to amortize over the next 12 months. The current and non-current portions are included in Accrued Liabilities and Deferred Gain, respectively, on the Consolidated Balance Sheets.
Additionally, in fiscal 2013 the Company entered into an agreement with an unrelated third-party to construct new stores to lease under a build-to-suit structure. The transaction allows for the construction of stores up to $125 million through June 19, 2014. Under this agreement, the unrelated third-party will fund the construction of the stores, and the Company will act as the construction agent during the construction period. Upon the completion of the stores’ construction, the Company will lease the property under a 15-year operating lease. Each of the assets currently included in the portfolio are classified as operating leases under ASC 840, and all new transactions associated with this agreement will be assessed for classification as an operating lease. In connection with this agreement, the Company has sold 29 parcels of land to the unrelated third-party for proceeds of approximately $10.2 million. These sales qualify as sale-leaseback transactions under ASC 840.
