A retail tenant's lease has base rent of $40,000 in year one, rising 3% a year from year two, plus percentage rent of 5% of gross sales above $800,000. If gross sales in year one are $950,000, what is the total rent payable for year one?
Correct Answer
D) $47,500
Year-one rent is the base rent plus percentage rent on sales above the $800,000 breakpoint: $40,000 + 5% × ($950,000 − $800,000) = $40,000 + $7,500 = $47,500. The 3% increase starts in year two, so it does not affect year one.
Why This Is the Correct Answer
Percentage rent is 5% of the $150,000 of sales above the $800,000 breakpoint, which is $7,500. Adding the $40,000 base rent gives $47,500 for year one.
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Previous Question
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?
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A retail tenant's lease sets base rent at $25 per square foot, rising 3% each year after the first, plus percentage rent of 6% of gross sales over $500,000. The tenant occupies 2,000 square feet and has $800,000 in sales in the first lease year. What is the total rent for the first year?