NOTE 11 – LEASES

The Company is committed under non-cancelable operating leases for the rental of facilities and land. These leases expire or become subject to renewal between December 31, 2017 and January 29, 2044.

As of August 31, 2017, the Company’s warehouse clubs occupied a total of approximately 2,925,731 square feet of which 522,131 square feet were on leased property. The following is a summary of the warehouse clubs and Company facilities located on leased property:



			Approximate		Remaining
			Square	Current Lease	Option(s)
Location	Facility Type	Date Opened	Footage	Expiration Date	to Extend
Salitre, Colombia	Warehouse Club	October 29, 2014	98,566	January 29, 2044	20 years
Via Brazil, Panama	Warehouse Club	December 4, 1997	68,696	October 31, 2026	10 years
Miraflores, Guatemala	Warehouse Club	April 8, 1999	68,977	December 31, 2020	5 years
Pradera, Guatemala	Warehouse Club	May 29, 2001	48,438	May 28, 2021	none
Tegucigalpa, Honduras	Warehouse Club	May 31, 2000	64,735	May 30, 2020	none
Oranjestad, Aruba	Warehouse Club	March 23, 2001	64,627	March 23, 2021	10 years
Port of Spain, Trinidad	Warehouse Club	December 5, 2001	54,046	July 5, 2031	none
St. Thomas, U.S.V.I.	Warehouse Club	May 4, 2001	54,046	February 28, 2020	10 years
Barbados	Storage Facility	December 1, 2012	12,517	November 30, 2025	3 years
Chaguanas, Trinidad	Employee Parking	May 1, 2009	4,944	April 30, 2024	none
Chaguanas, Trinidad	Container Parking	April 1, 2010	65,340	March 31, 2025	none
Jamaica	Storage and Distribution Facility	September 1, 2012	17,000	July 14, 2019	2 years
Santo Domingo, Dominican Republic	Central Offices	June 1, 2010	2,002	January 14, 2021	5 years
Bogota, Colombia	Central Offices	October 21, 2010	9,707	December 31, 2017	none
San Diego, CA (1)	Corporate Headquarters	April 1, 2004	45,826	May 31, 2026	5 years
Miami, FL(2)	Dry Distribution Facility	March 1, 2008	206,041	July 31, 2021	none
Miami, FL	Cold Distribution Facility	August 1, 2016	100,295	December 31, 2027	none
Panama	Central Offices	November 4, 2014	17,975	December 12, 2028	15 years
Costa Rica	Storage and Distribution Facility	January 28, 2013	37,674	January 27, 2019	3 years
Costa Rica (3)	Distribution Facility and Parking Lot	March 26, 2018	233,794	March 25, 2038	10 years
Panama	Distribution Facility	August 14, 2017	4,874	August 13, 2020	2 years
Trinidad(4)	Storage and Distribution Facility	August 18, 2014	17,110	August 17, 2017	none

⁽¹⁾

On October 31, 2016, the contract to sub-lease 2,799 square feet of space to a third party expired. The Company has since occupied all 2,799 square feet of space as an expansion to its Corporate Headquarters and included the additional square feet in the table above.

⁽²⁾

In January 2017, the Company purchased a distribution center in Medley, Miami-Dade County, Florida. The Company transferred its Miami dry distribution center activities that were previously in the leased facility to the new facility during the third quarter of fiscal year 2017. Some portions of the vacated space were subleased (and subsequently returned to the landlord) while the remainder remains available for sublease.

⁽³⁾

In June 2017, the Company executed a contract to acquire 233,794 square feet of space for a regional distribution center and parking lot. Delivery date is expected to be March 26, 2018 and June 26, 2018, respectively.

⁽⁴⁾

Although the Company’s lease agreement for the Trinidad storage and distribution facility expired on August 17, 2017, the Company continues to occupy the space as an agreement for a one-year renewal has been reached with the landlord, pending execution of the contract. The Company has also included this one-year lease as part of the minimum lease commitments.

The following table summarizes the components of rental expense charged for operating leases of open locations for fiscal years 2017, 2016 and 2015 (in thousands):



	Years Ended August 31,
	2017		2016		2015
Minimum rental payments	$	11,223	$	9,986	$	10,074
Deferred rent accruals		(80)		1,363		1,355
Total straight line rent expense		11,143		11,349		11,429
Contingent rental payments		3,320		3,208		3,137
Common area maintenance expense		1,174		1,369		1,321
Rental expense	$	15,637	$	15,926	$	15,887

Future minimum lease commitments for facilities under these leases with an initial term in excess of one year are as follows (in thousands):



	Leased
Years Ended August 31,	Locations(1)
2018	$	11,596
2019		11,715
2020		11,093
2021		9,615
2022		8,894
Thereafter		116,066
Total	$	168,979	(2)(3)

⁽¹⁾

Operating lease obligations have been reduced by approximately $928,000 to reflect sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

⁽²⁾

As of August 31, 2016, total future minimum lease commitments were $120.9 million. The increase during fiscal year 2017 is primarily related to the extension of an existing lease within the Company’s Guatemala subsidiary for its Pradera location. The subsidiary signed an extension on November 25, 2016, extending the lease termination date from May 31, 2021 to November 30, 2043. The lease extension included the real property at this location currently used by the Company and added additional square footage in the same shopping center to the lease. This has effectively provided the Company with possession of substantially all of the real property available at that location. The Company plans to expand and upgrade the current warehouse club and parking areas and to improve access into and out from the location.

⁽³⁾

Future minimum lease payments include $3.2 million of lease payment obligations for the prior leased Miami distribution center. For the purposes of calculating the minimum lease payments, no reduction was considered for the potential sub-lease income the Company could receive during the remaining lease term. This potential sub-lease income was considered, however, for the purposes of calculating the exit obligation of $57,000 recorded on the balance sheet as of August 31, 2017. Projected income for any executed sub-leases would be used to reduce the amount reported as minimum lease payments.

The following table summarizes the components of rental income recorded for operating leases for fiscal years 2017, 2016 and 2015 (in thousands):



	Years Ended August 31,
	2017		2016		2015
Minimum rental receipts	$	2,654	$	2,735	$	2,873
Deferred rent accruals		(17)		56		47
Total straight line rent income		2,637		2,791		2,920
Contingent rental receipts		121		112		86
Common maintenance area income		141		151		148
Rental income	$	2,899	$	3,054	$	3,154

The Company is the landlord for rental of land and/or building space for properties it owns. The following is a schedule of future minimum rental income on non-cancelable operating leases with an initial term in excess of one year from owned property as of August 31, 2017 (in thousands):



Years Ended August 31,	Amount
2018	$	2,427
2019		2,103
2020		1,835
2021		1,562
2022		941
Thereafter		4,407
Total	$	13,275