Question

The rent is $10 per square foot on a 1,000 square foot store. The sales breakpoint is $250,000 and the percentage factor is 5%. The store sales per square foot are $300. What is the percentage rent?

a. $2,500

b. $10,000

c. $15,000

d. $25,000

e. $12,500

Answer 1

Percentage rent is a type of lease in commercial real estate. It is a rental charge based on the gross income of the tenant rather than a fixed monthly or annual value. The percent rent only applies after a certain amount of base rent has been paid.

In given case,

Base rent = Rent per square foot * Total area of store = $10 * 1,000 = $10,000

Total sales = Store sales per square foot * Total area of store = $300 * 1,000 = $300,000

Sales Breakpoint = $250,000

Percentage factor = 5%

Hence, Percentage rent = (Total sales - Sales Breakpoint) * Percentage factor

Percentage rent = ($300,000 - $250,000) * 5% = $2,500

Hence, total rent = Base rent + Percentage rent = $10,000 + $2,500 = $12,500

And the answer is a. $2,500