45. Lease Liabilities

Obligations under Finance Leases

The Group has concluded various finance lease and hire-purchase agreements for a number of properties, technical equipment, and operating and office equipment. These agreements relate to, among other things, quay walls, lifting and ground-handling vehicles, container wagons and chassis, and IT hardware. For the most part, the contracts include renewal options and, in some cases, a PUT (purchase upon termination) option. The renewal options are always for the lessee; the PUT option can be used by the respective lessor to force a sale.

The main obligations from finance leases result from the lease of mega-ship berths from Hamburg Port Authority (HPA), which owns the port areas and is a related party, see Note 48. The fixed lease initially runs until 2036, but HHLA anticipates that the lease terms of these assets will extend over 50 years, as in the past. The contracts make provisions for the allocation of liability in the event of nullity and the associated premature termination of the lease as a result of conflict with EU law. The Executive Board of HHLA believes the risk of a conflict with EU law is currently very low. Following the completion of a present value test, the mega-ship berth leases are to be classified as finance lease obligations according to IAS 17. Including expected increases in rent payment rates, this results in anticipated minimum lease payments of € 232,394 thousand (previous year: € 237,531 thousand).

Reconciliation between Future Minimum Lease Payments and their Liabilities

in € thousand

 

31.12.2017

 

31.12.2016

Within one year

 

9,313

 

9,325

Between one and five years

 

31,646

 

31,826

Over five years

 

234,030

 

241,582

Total minimum lease payments

 

274,989

 

282,733

Within one year

 

4,244

 

4,152

Between one and five years

 

11,641

 

11,422

Over five years

 

127,451

 

129,773

Liabilities from finance leases

 

143,336

 

145,347

Interest expenses from minimum lease payments

 

131,653

 

137,386

The minimum lease payments include interest due to the long terms of the finance leases. The underlying interest rate is 4.21 to 4.22 %, see also Note 47.

Liabilities from Operating Leases where the Group is Lessee

Contracts exist between the Free and Hanseatic City of Hamburg and/or HPA and the HHLA Group for the lease of land and quay walls in the Port of Hamburg and in the Speicherstadt historical warehouse district by companies in the HHLA Group. The main contracts expire between 2025 and 2036. Under the terms of the contracts, the lease payments are generally reviewed every five years on the basis of price developments in relevant competing ports or based on appropriate rental indices. Provisions are made for the anticipated increases in lease payments. Leasing expenses for the space in the Speicherstadt historical warehouse district are partly linked to the development of Group income from subletting these buildings.

Without the prior approval of the lessor, the leased areas and the buildings on them belonging to HHLA may not be sold or let. Major changes to the terms of subletting agreements also require the approval of the lessor.

There are also leases relating to real estate and movable property at the container terminal in Odessa, Ukraine. On the whole, the rents payable for this are fixed and will only change during the course of the agreement as a result of future inflation. The company will not have purchase options at the end of the lease agreements. The respective lease agreements have remaining terms of between two and 31 years.

The Group also has leases for various motor vehicles and items of technical equipment. These leases have an average term of four to ten years and generally do not include renewal options. The lessee takes on no obligations when signing these leases.

Future Minimum Lease Payments Obligations under Uncancellable Operating Leases

in € thousand

 

31.12.2017

 

31.12.2016

Within one year

 

45,387

 

46,360

Between one and five years

 

164,068

 

151,619

Over five years

 

587,246

 

607,609

 

 

796,701

 

805,588

Expenses of € 53,829 thousand (previous year: € 62,872 thousand) were incurred for leases in the financial year. Of this figure, € 2,085 thousand (previous year: € 2,017 thousand) related to conditional rental payments.

Operating Leases Where the Group is Lessor

The Group has signed leases for letting its investment properties on a commercial basis. The investment properties consist of office space, facilities and a commercial property not used by the Group. These leases have remaining uncancellable lease terms of between one and 17 years. After the end of the uncancellable lease period, some contracts give tenants the option of extending the lease for a period of between two years and a maximum of three times five years. Some leases contain a clause under which the rent can be increased in line with market conditions.

Future Minimum Lease Entitlements under Uncancellable Operating Leases for Investment Property

in € thousand

 

31.12.2017

 

31.12.2016

Within one year

 

33,549

 

35,502

Between one and five years

 

65,022

 

66,406

Over five years

 

35,476

 

46,084

 

 

134,047

 

147,992

In the financial year, income of € 58,676 thousand (previous year: € 57,036 thousand) was earned from letting property, plant and equipment and investment property.