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?
Correct Answer
A) $65,000
Base rent = 2,000 sq ft × $25 = $50,000. Percentage rent = ($800,000 - $500,000) × 5% = $15,000. Total annual rent = $50,000 + $15,000 = $65,000. The percentage rent only applies to sales exceeding the breakpoint of $500,000.
Why This Is the Correct Answer
Option A correctly calculates both components of the rent structure. Base rent equals 2,000 sq ft × $25 = $50,000. Since gross sales ($800,000) exceed the breakpoint ($500,000), percentage rent applies to the excess: ($800,000 - $500,000) × 5% = $15,000. Total annual rent is $50,000 + $15,000 = $65,000. This demonstrates proper understanding of percentage rent calculations where the percentage only applies to sales above the specified threshold, not total sales.
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Previous Question
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?
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A retail tenant pays $3,000 monthly base rent plus 4% of annual gross sales exceeding $900,000. If annual sales are $1,200,000, what is the total annual rent?