CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 FINANCIALS 208 209 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 YEAR ENDED 31 DECEMBER 2021 36 LEASES (CONT’D) Extension options Some property leases contain extension options up to 30 years (2020: 30 years) exercisable by the Group before the end of the non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control. The Group has estimated that the potential future lease payments, should it exercise the extension option, would result in an increase in lease liability of $43.6 million (2020: $41.6 million). Leases as lessor The Group leases out its investment properties consisting of its owned properties as well as leased properties (see note 5). All leases are classified as operating leases from a lessor perspective. Operating lease The Group and the Company lease out some of their investment properties and development properties. The Group has classified these leases as operating leases, because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Note 5 sets out information about the operating leases of investment properties. Rental income from investment properties and property subleases recognised by the Group during 2021 was $329,454,000 (2020: $348,906,000). The following table sets out a maturity analysis of lease rental receivables, showing the undiscounted lease payments to be received after the reporting date. Group Company 2021 2020 2021 2020 $’000 $’000 $’000 $’000 Less than one year 280,299 292,113 49,726 47,328 One to two years 204,207 224,177 33,138 30,434 Two to three years 147,205 149,880 17,158 16,904 Three to four years 104,056 106,910 3,489 6,376 Four to five years 79,376 89,320 681 678 More than five years 272,436 348,620 – – Total 1,087,579 1,211,020 104,192 101,720 Contingent rents, generally determined based on a percentage of tenants’ revenue, of $6,851,000 (2020: $6,666,000) has been recognised as revenue by the Group, in profit or loss during the year. 36 LEASES (CONT’D) Included in the non-cancellable operating lease rental receivables above are commitments with related parties which are set out below. Group Company 2021 2020 2021 2020 $’000 $’000 $’000 $’000 Non-cancellable operating lease rentals receivable from: – associates 30,752 – – – – joint ventures 134 39,182 – – – a fellow subsidiary 967 270 966 270 – subsidiaries – – 3,117 3,299 31,853 39,452 4,083 3,569 37 COMMITMENTS AND CONTINGENT LIABILITY (I) Commitments The Group and the Company have the following commitments as at the reporting date: Group Company 2021 2020 2021 2020 $’000 $’000 $’000 $’000 Development expenditure contracted but not provided for in the financial statements 1,221,021 677,935 – – Capital expenditure contracted but not provided for in the financial statements 192,097 66,093 – – Commitments in respect of purchase of properties for which deposits have been paid 286,475 55,240 – – Commitments in respect of investments in a joint venture and associates 70,956 105,223 – – Commitments in respect of capital contribution to investments in financial assets in: – related parties 36,118 63,499 – – – third parties 14,362 18,521 – – (II) Contingent liability A subsidiary of the Group in China, whose principal activities are the trading of development properties and leasing activities, would in the ordinary course of business act as guarantors for the bank loans taken by the buyers to finance the purchase of properties developed by this subsidiary, covering the period from loan contract date to the property delivery date. As at 31 December 2021, the outstanding notional amount of the guarantees amounted to $21.3 million (2020: $Nil).
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