A retail shopping center tenant has a percentage lease with 3% of gross sales above $500,000 annually, plus base rent of $8,000 monthly. If the tenant's annual gross sales are $750,000, what is their total annual rent payment?

Q: What is the correct answer to: A retail shopping center tenant has a percentage lease with 3% of gross sales above $500,000 annually, plus base rent of $8,000 monthly. If the tenant's annual gross sales are $750,000, what is their total annual rent payment?

The correct answer is $103,500. Option C correctly calculates the total annual rent by adding base rent and percentage rent. Base rent: $8,000 × 12 months = $96,000. Sales above threshold: $750,000 - $500,000 = $250,000. Percentage rent: $250,000 × 3% = $7,500. Total: $96,000 + $7,500 = $103,500. This follows standard percentage lease calculation methodology where percentage rent applies only to sales exceeding the specified threshold, not total sales.

Q: What background knowledge is needed for this Commercial Real Estate question?

Percentage leases are common in retail commercial real estate, particularly shopping centers and malls. They consist of base rent (fixed monthly amount) plus percentage rent (percentage of gross sales above a specified threshold). The threshold protects tenants from paying percentage rent until achieving sufficient sales volume. Gross sales typically include all revenue but may exclude returns, taxes, and other specified items per lease terms. These leases benefit landlords through participation in tenant success while providing tenants with lower fixed costs during slower periods. Commercial real estate professionals must understand these calculations for lease negotiations, property valuations, and investment analysis.

Q: What is a good way to remember the answer to this Commercial Real Estate question?

Remember BASE-PLUS: Base rent Annual total, Sales Exceeding threshold, Percentage applied, Leave out sales below threshold, Ultimate total by adding both components, Sum carefully. Think of it like a restaurant bill where you pay the base price PLUS a tip only on the amount above a certain threshold. When you see percentage lease questions, immediately identify the BASE (monthly rent × 12), then find the PLUS (sales above threshold × percentage). Never apply percentage to total sales - only the excess above the threshold amount.

Q: What exam tip applies to this Commercial Real Estate question?

Break percentage lease calculations into two clear steps: 1) Calculate annual base rent (monthly × 12), 2) Calculate percentage rent only on sales above threshold. Add both components for total annual rent.

Q: How does this Commercial Real Estate concept apply in real world practice?

A commercial real estate agent represents a clothing retailer negotiating a lease in a shopping center. The landlord proposes $5,000 monthly base rent plus 2% of gross sales above $400,000 annually. The tenant projects $600,000 in annual sales. The agent calculates total annual rent as $60,000 base rent plus $4,000 percentage rent (2% of $200,000 excess), totaling $64,000. This helps the tenant evaluate affordability and compare with other lease options.

Question

Commercial Real EstateLease TypesHARD

A retail shopping center tenant has a percentage lease with 3% of gross sales above $500,000 annually, plus base rent of $8,000 monthly. If the tenant's annual gross sales are $750,000, what is their total annual rent payment?

Answer Options

A

$96,000

B

$118,500

C

$103,500

D

$122,500