Tesco 2015 Annual Report Download - page 140

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The Group has lease break options on certain sale and leaseback transactions. These options are exercisable if the Group exercises an existing option to buy
back, at market value and at a specified date, either the leased asset or the equity of the other joint venture partner. No commitment has been included in
respect of the buy-back option as the option is at the Group’s discretion. The Group is not obliged to pay lease rentals after that date, therefore minimum
lease payments exclude those falling after the buy-back date. The current market value of these properties is £4.7bn (2014: £5.4bn) and the total lease
rentals, if they were to be incurred following the option exercise date, would be £3.9bn (2014: £4.2bn) using current rent values. The lease break options
are exercisable between 2015 and 2023.
The additional lease rentals if incurred following the option exercise date would be as follows:
2015
£m
2014
£m
Within one year 10 –
Greater than one year but less than five years 372 336
Greater than five years but less than ten years 1,095 1,045
Greater than ten years but less than fifteen years 1,084 1,257
After fifteen years 1,349 1,611
Total contingent additional lease rentals 3,910 4,249
Operating lease commitments with joint ventures and associates
Since 1988 the Group has entered into several joint ventures and associates and sold and leased back properties to and from these joint ventures and associates.
The terms of these sale and leasebacks vary, however, common factors include: the sale of the properties to the joint venture or associate at market value;
options within the lease for the Group to repurchase the properties at market value; market rent reviews; and 20 to 30 full-year lease terms. The Group reviews
the substance as well as the form of the arrangements when determining the classification of leases as operating or finance. All of the leases under these
arrangements are operating leases.
Operating lease receivables – Group as lessor
The Group both rents out its properties and also sublets various leased buildings under operating leases. At the balance sheet date, the following future
minimum lease payments are contractually receivable from tenants: 2015
£m
2014
£m
Within one year 211 193
Greater than one year but less than five years 314 256
After five years 297 196
Total minimum lease receivables 822 645
Note 35 Events after the reporting period
On 20 March 2015 the Group regained sole ownership of 21 stores which were previously held in a joint venture with British Land Co PLC (‘British Land’). The
Group received British Land’s share of the 21 stores and cash of £96m. In exchange, British Land took sole ownership of three shopping centres, three retail
parks and three standalone stores which were held in two joint ventures between the two companies as at 28 February 2015. The Group will continue to lease
the stores at these sites at market rents which are not subject to RPI-indexed increases.
Note 34 Lease commitments continued
138 Tesco PLC Annual Report and Financial Statements 2015
Notes to the Group financial statements continued