Leases

We lease certain retail locations, warehouses, distribution centers, office space, land, equipment, and software. Assets held under capital leases are included in property and equipment. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term.

Rent expense is included in SG&A expenses. Some of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Certain leases require us to pay real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These expenses are classified in SG&A, consistent with similar costs for owned locations. Rent income received from tenants who rent properties is recorded as a reduction to SG&A expense.



Rent Expense (millions)	2015			2014			2013
Property, equipment, and software	$	198		$	195		$	212
Rent income ^(a)	(16		)	(9		)	(8		)
Total rent expense	$	182		$	186		$	204

^(a)Includes rental income from CVS. See Note 6 for further discussion.

Total capital lease interest expense was $42 million, $38 million, and $39 million in 2015, 2014, and 2013, respectively, and is included within net interest expense on the Consolidated Statements of Operations.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years or more. Certain leases also include options to purchase the leased property. Assets recorded under capital leases as of January 30, 2016 and January 31, 2015 were $735 million and $711 million, respectively. These assets are recorded net of accumulated amortization of $321 million and $242 million as of January 30, 2016 and January 31, 2015, respectively.



Future Minimum Lease Payments (millions)	Operating Leases ^(a)		Capital Leases ^(b)		Rent Income			Total
2016	$	186	$	130	$	(21	)	$	295
2017	183		73		(19		)	237
2018	178		71		(18		)	231
2019	167		70		(17		)	220
2020	157		69		(17		)	209
After 2020	2,842		1,277		(286		)	3,833
Total future minimum lease payments	$	3,713	$	1,690	$	(378	)	$	5,025
Less: Interest ^(c)			831
Present value of future minimum capital lease payments ^(d)			$	859

Note: Minimum lease payments exclude payments to landlords for real estate taxes and common area maintenance. Minimum lease payments also exclude payments to landlords for fixed purchase options which we believe are reasonably assured of being exercised.


^(a)	Total contractual lease payments include $1,995 million related to options to extend lease terms that are reasonably assured of being exercised and also includes $90 million of legally binding minimum lease payments for stores that are expected to open in 2016 or later.


^(b)	Capital lease payments include $614 million related to options to extend lease terms that are reasonably assured of being exercised and also includes $311 million of legally binding minimum lease payments for stores that are expected to open in 2016 or later.


^(c)	Calculated using the interest rate at inception for each lease.


^(d)	Includes the current portion of $59 million.