When would the LL require a percentage rate of the tenants sales? What is the normal percentage range?

In Leasing Property - Asked by Daniel C. - Jul 8, 2013
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Answer(s)

JON P.
Owner/Investor
Rancho Santa Fe, CA

On high volume retail business including restaurant. The personage override is 1-5%.
JP

Jul 9, 2013
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Paul R.
Broker/Agent
Denver, CO

Percentage rent is also very common in malls or high end retail centers. It is usually expressed as a percentage of sales above the break even point. They calculate what sales would cover the rent then charge a percentage on the sales above that level. The rate under this formula is 5%-8%.

Jul 9, 2013
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Juan M.
Broker/Agent
Middletown, OH

Tenants will sometimes offer or agree to pay percentage rent above a certain "natural break point". Most commonly this break point is the percentage of a tenant's annual dollar volume of sales that equates to the dollar amount of the base rent the landlord agrees to accept. For example, tenant establishes a sales projection of $1,000,000 and the agreed upon base rent is $80,000 resulting in a 8% percentage rent. Landlord receives $80,000 rent and 8% of sales above $1,000,000 for each year. If the base rent is scheduled to increase during the lease term the corresponding "break point" will increase accordingly. Before entering into a percentage rent lease the landlord should have some knowledge of the tenant company's average store sales in similar locations or hire someone to do the due diligence.

Jul 15, 2013
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