5. Given the following for a retail property: This property is occupied by a sin

Question

5. Given the following for a retail property: This property is occupied by a single tenant: Net Rentable Space Lease Rate Real Estate Taxes Operating Expenses Insurance Gross Sales- Actual Percentage Lease Clause Percentage Lease Clause 10.000 sq. ft S16.00 per sq. ft. per year S 1.75 per sq. ft. per year S 0.55 per sq. ft. per year S 0.06 per sq. t. per year $2.400,000 S2,000,000 4.0% What is the amount of rent due on a per s9. n. basis (per year) if the tenant has a "double net (NN)" lease and a "percentage lease clause" in the lease?

Explanation / Answer

1. Calculation of Rent under Double Net (NN) lease method tenant bears the cost of Taxes, Operating Expenses and Insurance apart from Lease Rate hence in this case the amount of rent due on a per sq ft basis per year would be:-

16+1.75+.55+.06= 18.36 per sq.ft. per year

2. Rent due under "Percentage Lease clause" would be :-

Basic Rent :10000*16=160000

Percentage Sales Vale: (2400000-2000000)*4%=16000

Total Rent :160000+16000 = 176000

Lease due per sq ft per yr : 176000/10000 = 17.6

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