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?
Correct Answer
C) $68,000
In the first lease year the 3% increase has not yet applied. Base rent = 2,000 sq ft × $25 = $50,000. Percentage rent = 6% × ($800,000 − $500,000) = $18,000. Total first-year rent = $50,000 + $18,000 = $68,000.
Why This Is the Correct Answer
$68,000 is correct. Base rent is 2,000 × $25 = $50,000. Only sales above the $500,000 breakpoint attract percentage rent, so 6% × $300,000 = $18,000. The escalation has not started in year one, so the total is $50,000 + $18,000 = $68,000.
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Previous Question
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?
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A retail tenant pays $25 per square foot base rent plus 5% of gross sales over $500,000 annually. If the tenant's gross sales are $800,000 and they lease 2,000 square feet, what is their total annual rent?