A shopping center landlord requires a percentage lease clause from a major department store anchor tenant. The anchor tenant negotiates a natural breakpoint. What is a natural breakpoint?
Correct Answer
B) The sales volume at which the percentage rent equals the base rent, calculated by dividing the annual base rent by the percentage rate
A natural breakpoint is calculated by dividing the annual base rent by the percentage rate. At this sales level, the percentage of sales equals the base rent. The tenant pays percentage rent only on sales exceeding the breakpoint.
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