Minimum lease payment significantly less than rent expense
Hi, Guys!
I am looking at one company that stated that the future minimum operating lease payments will be $769,000 in 2015. In the 10-k for the next year, the management shared information that the rent expense they incurred in 2015 was $1.7 million.
The company leases two properties:
- 208,120 sq. ft. property in Ohio with lease expiring in June 2016 (they renew it every 3 years)
- 7,691 sq. ft. property in Illinois with lease expiring in December 2015 (they renew it every year)
Does the $1 million discrepancy look suspicious to you?
A lot of retailers pay sales-based rent, i.e. the mall or shopping center takes a percentage of the revenue. If the company you're looking at is a retailer that would be the most likely explanation.
The company could also have an option on the lease that they exercised. For example, if the 200k sqft facility is a warehouse perhaps they originally only leased 100k sqft but then exercised an option to lease another 100k sqft. These types of arrangements are very common too.
Dolor veritatis consectetur et est assumenda. Velit et repellendus omnis minima numquam. Quisquam accusantium et dignissimos sit non dicta cum. Et dolorem iure quo quo autem dolor. Est commodi error ut et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...