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Understanding Percent Rent Terms

Percent rent enables you to negotiate a lower monthly base rent in exchange for a portion of your sales once the threshold is met. This lease method is appealing because you receive a lower monthly liability in months of lower sales. As the sales amount reaches a specified threshold (breakpoint), the percentage changes, thus altering the amount of the final rent amount. For a breakpoint, the rent can be a fixed amount, a percentage of sales, or a combination of fixed amount and percentage.

When multiple breakpoints are established, the system determines which breakpoint has been reached and adds its incremental percentage over and above the other breakpoints. For example, let's say the breakpoints are as follows:

If the sales amount is 1,500 USD, then the system takes the maximum of the prior breakpoint multiplied by that breakpoint percentage (or amount, or both depending on lease terms), adds the incremental amount over that breakpoint maximum, multiplied by the new breakpoint percentage.

In this example, the calculation is as follows: 1,000 × 5% + (1,500 − 1,000) × 4% = 70.

Using the previous example, if a lease had three breakpoints in percent rent setup, and the sales amount reached the third level (10,000), then the calculation is as follows: 1,000 × 5% + (4,999.99-1,000) × 4% + (10,000 − 4,999.99) × 3% +1,000 = 1360.

These tables provide additional examples of the percent rent category based calculation methodology:

Percent Rent Setup Data:

Financial Term

Amount

Current Base Rent

1000.00 USD

Minimum Fee

25.00 USD

Maximum Fee

800.00 USD

Sales Breakpoints

From

To

Type

Amount

Full Breakpoint

0

999.99

Percent

5%

50.00 USD

1000

4999.99

Percent

4%

160.00 USD

5000

9999.99

Percent

3%

150.00 USD

10000

99,999,999,999.99

Percent

2%

Not applicable

Sales Data

Year

Month

Reported Sales (USD)

Breakpoint Amount

Variable Rent (USD)

Adjusted Variable Amount (USD)

Total Rent (USD)

Comment

2004

January

250.00

5%

12.50

 

1,025.00

Minimum not met, use adjusted amount.

2004

February

2,000

VAR2

90.00

 

1,090.00

Second breakpoint reached, add full breakpoint calculation to incremental difference.

2004

March

1,800

VAR2

82.00

 

1,082.00

 

2004

April

6,000

VAR3

240.00

 

1,240.00

Third breakpoint reached, add full breakpoint calculations to incremental difference.

2004

May

5,000

VAR4

210.00

 

1,210.00

 

2004

June

50,000

VAR4

1,160.00

800.00

1,800.00

Maximum exceeded, use adjusted amount

2004

July

30,000

VAR4

760.00

 

1,760.00

 

2004

August

15,000

VAR4

460.00

 

1,460.00

 

2004

September

7,500

VAR3

285.00

 

1,285.00

 

2004

October

4,200

VAR2

180.00

 

1,180.00

 

2004

November

800

5%

40.00

 

1,040.00

 

2004

December

20,000

VAR4

560.00

 

1,560.00

 

You define the percentage breakpoints for the percent rent tier structure before activating the lease; after the lease is activated, you must create an amendment to perform any changes to the structure. You include percent rent terms on the lease and enter them into the system prior to lease activation. You set the various sales breakpoints (or tiers) for the lease under different sales categories. In the absence of actual reported data, you can enter or have the system attempt to estimate sales data. You enter the estimated information on the Sales Report Details page and set the type to Estimated. The Sales Report Details page is a worksheet to enter and calculate the total sales amounts. The system uses past data to help determine an appropriate estimate.

Weekly Sales Method

The system will allow only one sales category on the percent rent setup. The system will use this category to create the sales report and import sales. This method will use only current period sales data.

If the bill amount is less than the minimum fee, the percent rent shall be zero and only the minimum rent will be charged. If the bill amount is more than the minimum fee, it calculates percent rent (sales overage) rent by deducting the minimum fee from the total bill amount. If the bill amount is more than the maximum fee then the maximum fee will be charged. Sales overage rent will be equal to the Maximum Fee - Minimum Fee.

The system shall apply breakpoints to calculate the percent as follows:

If the operator is Percent then:

  • If sales amount is between first breakpoint range, then:

    First breakpoint's billable amount = (Sales amount – First breakpoint's from amount) * First breakpoint's percent.

  • If sales amount is between second breakpoint range, then:

    Second breakpoint billable amount = (Sales amount – Second breakpoint's from amount) * Second breakpoint's percent.

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint billable amount = (Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent.

If the operator is Amount, then:

  • If sales amount is between first breakpoint range, then:

    First breakpoint billable amount = First breakpoint's fixed amount.

  • If sales amount is between second breakpoint range, then:

    Second breakpoint Billable amount = Second breakpoint's fixed amount.

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint billable amount = Nth breakpoint's fixed amount

If the operator is Both, then:

  • If sales amount is between first breakpoint range, then:

    First breakpoint billable amount = (Sales amount – First breakpoint's from amount) * First breakpoint's percent + First breakpoint's fixed amount.

  • If sales amount is between second breakpoint range, then:

    Second breakpoint billable amount = (Sales amount – Second breakpoint's from amount) * Second breakpoint's percent + Second breakpoint's fixed amount.

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint billable amount = (Sales amount – Nth breakpoint's from amount) * Nth breakpoint's percent + Nth breakpoint's fixed amount.

  • Total bill amount = first breakpoint's billable amount + second breakpoint's billable amount +…. + Nth breakpoint billable amount.

  • If the total bill Amount is less than minimum fee, then the sales overage rent will be zero.

  • If the total bill Amount is more than minimum fee, then deduct minimum fee from total bill amount to get the sales overage rent.

Weekly Sales Method Calculation Example

Assume the minimum is 2,500 USD and the maximum is 5,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

50,000.00

150,000.00

Percent

9

150,000.01

500,000.00

Percent

8

500,000.01

1,000,000.00

Percent

7

1,000,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Sales reported by tenant:

Period

Sales Amount

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

Final Bill

1

100,000.00

4,500.00

NA

NA

NA

4,500.00

4,500.00

2

200,000.00

9,000.00

4,000.00

NA

NA

13,000.00

13,000.00

3

60,000.00

900.00

NA

NA

NA

900.00

2,500.00

4

350,000.00

9,000.00

16,000.00

NA

NA

25,000.00

25,000.00

5

1,100,000.00

9,000.00

28,000.00

35,000.00

4,000.00

76,000.00

50,000.00

6

40,000.00

NA

NA

NA

NA

0

2,500.00

Each Period Method

This method will use only current period sales data. This calculation method will always have one sales category, which will be used for reporting/importing sales.

The system will annualize sales amount by multiplying the no. of periods in the calendar year. The system will apply breakpoints to annualized sales for calculating percent rent.

The annualized amount = current period's sales amount * Total Periods in a fiscal year.

The system shall apply breakpoints to calculate the percent as follows:

If the operator is Percent then:

  • If the sales amount is between first breakpoint range, then:

    First breakpoint's billable amount = (Annualized Sales amount – First breakpoint's from amount) * First breakpoint's percent.

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's billable amount = (Annualized Sales amount – Second breakpoint's from amount) * Second breakpoint's percent).

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint's billable amount = (Annualized Sales amount – Nth breakpoint's from amount) * Nth breakpoint's percent).

If the operator is Amount, then:

  • If sales amount is between first breakpoint range, then:

    First breakpoint's billable Amount = First breakpoint's fixed amount.

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's billable amount = Second breakpoint's fixed amount).

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint billable amount = Nth breakpoint's fixed amount).

If the operator is Both, then:

  • If sales amount is between first breakpoint range, then:

    First breakpoint's billable amount = (Annualized Sales amount – First breakpoint's from amount) * First breakpoint's percent + First breakpoint's fixed amount.

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's billable amount = (Annualized Sales amount – Second breakpoint's from amount) * Second breakpoint's percent + Second breakpoint's fixed amount.

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint billable amount = (Annualized Sales amount – Nth breakpoint's from amount) * Nth breakpoint's percent + Nth breakpoint's fixed amount.

Total billable amount = First breakpoint's billable amount + Second breakpoint's billable amount +…. + Nth breakpoint billable amount

If the total bill amount is less than minimum fee, then the percent rent will be Zero and only minimum fee will be charged.

If the total bill Amount is more than minimum fee, then deduct minimum fee from total bill amount to get percent rent.

Each Period Calculation Example

Assume that the minimum is 2,500 USD and the maximum is 50,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

200,000.00

600,000.00

Percent

9

600,000.01

1,000,000.00

Percent

8

1,000,000.01

1,500,000.00

Percent

7

1,500,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Sales Reported by tenant:

Period (Monthly

Sales Amount

Annualized Sales

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

De-Annualized Bill Amount

Rent Amount

1

100,000.00

1,200,000,00

36,000.00

32,000.00

14,000.00

NA

82,000.00

6833.33

6833.33

2

200,000.00

2,400,000.00

36,000.00

32,000.00

35,000.00

36,000.00

139,000.00

11583.33

11583.33

3

60,000.00

720,000.00

36,000.00

9,600.00

NA

NA

45,600.00

3,800.00

3,800.00

4

350,000.00

4,200,000.00

36,000.00

32,000.00

35,000.00

108,000.00

211,000.00

17,583.33

17,583.33

5

1,200,000.00

14,400,000.00

36,000.00

32,000.00

35,000.00

516,000.00

619,000.00

51583.33

50,000.00

6

40,000.00

480,000.00

25,200.00

NA

NA

NA

25,200.00

2,100.00

2500.00

Cumulative Method

System will calculate YTD sales amount by summing sales from the first period of the current fiscal year to current period. This calculation method will always have one sales category, which will be used for reporting/importing sales. Breakpoints will be applied to cumulative sales for calculating percent rent.

The previous YTD bill amount excluding current period will be deducted from the total bill amount to get current period's bill amount.

The YTD sales amount will equal to sum of sales amount from first period to current period. Note: The = YTD sales amount will include current period's sale amount.

The previous YTD bill amount is the sum of the bill amount from first period to previous period. Note: Previous period will be one period before the current period.

If the Operator is Percent then:

  • If YTD Sales Amount is between First breakpoint range, then

    First breakpoint's YTD Billable Amount = (YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's YTD Bill Amount = (YTD Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent.

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint's YTD Bill Amount = (YTD Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent).

If the Operator is Amount, then:

  • If YTD Sales Amount is between First breakpoint range, then:

    First breakpoint's YTD billable Amount = First Breakpoint's Fixed Amount.

  • If YTD sales amount is between second breakpoint range, then:

    Second breakpoint's YTD Billable Amount = Second Breakpoint's Fixed Amount)

  • If YTD sales amount is between Nth breakpoint range, then:

    Nth breakpoint YTD Billable Amount = Nth breakpoint's fixed amount)

If the Operator is Both, then:

  • If YTD Sales Amount is between First breakpoint range, then:

    First Breakpoint's YTD Billable Amount = (YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent + First Breakpoint's Fixed Amount.

  • If YTD sales amount is between second breakpoint range, then:

    Second breakpoint's YTD Billable Amount = (YTD Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent + Second Breakpoint's Fixed Amount.

  • If YTD sales amount is between Nth breakpoint range, then:

    Nth breakpoint YTD Billable Amount = (YTD Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent + Nth breakpoint's fixed amount.

Total YTD Billable amount = First breakpoint's YTD bill amount + Second breakpoint's YTD bill amount +…. + Nth Breakpoint YTD Bill Amount

Current period's billable amount = total YTD billable amount – previous YTD bill amount

If the total bill Amount is less than minimum fee, then the sales overage rent will be zero.

If the total bill Amount is more than minimum fee, then deduct minimum fee from total bill amount to get the percent rent (sales overage).

If the total bill amount for the current period is greater than maximum fee then the maximum fee should be charged to the tenant. In this case, percentage rent will be maximum fee less minimum fee.

When sales amount exceeds a breakpoint, then the breakpoint will have maximum billable amount and it will equal to:

(Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent when operator is percentage

Breakpoint's fixed amount when operator is 'fixed':

(Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent + Breakpoint's fixed amount when operator is Both

Cumulative Calculation Example

Assume the minimum is 2,500 USD and the maximum is 50,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

200,000.00

600,000.00

Percent

9

600,000.01

1,000,000.00

Percent

8

1,000,000.01

1,500,000.00

Percent

7

1,500,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Sales reported by tenant:

Period (Monthly

Sales Amount

Cumulative Sales

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

Rent for Current Period

Rent Amount

1

100,000.00

100,000.00

NA

NA

NA

NA

0

0

2,500.00

2

200,000.00

300,000.00

9,000.00

NA

NA

NA

9,000.00

6,500.00

6,500.00

3

60,000.00

360,000.00

14.400.00

NA

NA

NA

14,400.00

5,400.00

5,400.00

4

350,000.00

710,000.00

36,000.00

8,800.00

NA

NA

44,800.00

30,400.00

30,400.00

5

1,100,000.00

1,810,000.00

36,000.00

32,000.00

35,000.00

12,400.00

115,400.00

70,600.00

50,000.00

6

40,000.00

1,850,000.00

36,000.00

32,000.00

35,000.00

14,000.00

117,000.00

22,200.00

22,200.00

Cumulative Pro Rata Method

YTD sales amount including current period sales will be used to calculate percent rent. This calculation method will always have one sales category.

The sales amount will be annualized by multiplying the YTD sales with the no. of periods in a calendar year divided by no. of sales periods included in YTD sales. Breakpoints will be applied to annualized cumulative sales when calculating percent rent.

To calculate current period bill amount, percent rent amount will be de-annualized and from that amount the previous YTD bill amount will be reduced.

Add YTD sales to get the Cumulative amount. The YTD sales amount will be the sum of sales amount from first period to current period. Note: Include current period sales into YTD sales. Annualize the YTD sales. Annual sales amount = YTD sales * (total periods in fiscal year/ no. periods in YTD sales). Calculate YTD bill amount by applying lease level breakpoints to annualized cumulative sales.

If the Operator is Percent then:

  • If Sales Amount is between First breakpoint range, then:

    First breakpoint Billable Amount = (Annualized YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's Billable Amount = (Annualized YTD Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint's Billable Amount = (Annualized YTD Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent)

If the Operator is Amount, then:

  • If sales Amount is between First breakpoint range, then:

    Bill Amount = First Breakpoint's Fixed Amount

  • If sales amount is between second breakpoint range, then:

    Bill Amount = (First Breakpoint maximum Bill Amount + Second Breakpoint's Fixed Amount)

  • If sales amount is between Nth breakpoint range, then:

    Bill Amount = (First breakpoint's maximum bill amount + Second breakpoint's maximum bill amount +….+(n-1) breakpoint's maximum bill amount + Nth breakpoint's fixed amount)

If the Operator is Both, then:

  • If Sales Amount is between First breakpoint range, then:

    First breakpoint's Billable Amount = (Annualized YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent) + First Breakpoint's Fixed Amount

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's Billable Amount = (Annualized YTD Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's percent + Second Breakpoint's fixed amount)

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint billable amount = (Annualized YTD sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent + Nth breakpoint's fixed amount

Total annualized YTD Billable amount = First breakpoint's billable amount + Second breakpoint's billable amount +…. + Nth Breakpoint Billable Amount

De-annualize the above value to get YTD billable amount. YTD billable amount = Total annualized YTD billable amount * (No. periods in YTD sales / Total periods in fiscal year)

System will calculate Total bill amount by deducting previous YTD bill amount from rent calculated in step above (de-annualized rent).

If the total bill Amount is less than minimum fee, then the sales overage rent will be zero. If the total bill amount is more than minimum fee, then deduct minimum fee from total bill amount to get sales overage rent. If the total bill amount for the current period is greater than maximum fee then the maximum fee should be charged to the tenant. In this case, percentage rent will be maximum fee less minimum fee.

When sales amount exceeds a breakpoint, then the breakpoint will have maximum billable amount and it shall equal to: (Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent when operator is percentage

Breakpoint's fixed amount when operator is fixed: (Breakpoint's "To amount" - Breakpoint's From amount) * Breakpoint's percent + Breakpoint's fixed amount when operator is Both

Cumulative Pro Rata Calculation Example

Assume the minimum is 2,500 USD and the maximum is 50,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

500,000.00

1,000,000.00

Percent

9

1,000,000.01

1,500,000.00

Percent

8

1,500,000.01

1,500,000.00

Percent

7

3,000,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Sales reported by tenant:

Period (Monthly)

Sales Amount

Cumulative Sales

Annualized Cumulative Sales

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

De-Annualized Percent Rent

Rent for Current Period

Rent Amount

1

100,000.00

100,000.00

1,200,000.00

45,000.00

16,000.00

NA

NA

61,000.00

5,083.33

5,083.33

5,083.33

2

200,000.00

300,000.00

1,800,000.00

45,000.00

40,000.00

21,000.00

NA

106,000.00

17,666.67

12,583.33

12,583.33

3

60,000.00

360,000.00

1,440,000.00

45,000.00

35,200.00

NA

NA

80,200.00

20,050.00

2,383,33

2,500.00

4

350,000.00

710,000.00

2,130,000.00

45,000.00

40,000.00

44,100.00

NA

129,100

43,033.33

22,866.67

22,866.67

5

1,100,000.00

1,810,000.00

4,344,000.00

45,000.00

40,000.00

105,000.00

53,760.00

243,760.00

101,566.67

58,533.33

50,000.00

6

40,000.00

1,850,000.00

3,700,000.00

45,000.00

40,000.00

105,000.00

28,000.00

218,000.00

109,000.00

15,966.67

15,966.67

Modified Cumulative Method

YTD sales amount including current period sales will be used to calculate percent rent. This calculation method will always have one sales category. The following calculation shall be used when calculating percent rent:

Get the highest breakpoint that the total sales amount is reached. Apply the highest breakpoint to the entire sales amount that exceeds the first breakpoint. The YTD bill amount excluding current period will be deducted from the total bill amount to get current period's bill amount.

The YTD sales amount is equal to sum of sales amount from first period to current period. Note: The = YTD sales amount includes current period's sale amount.

If the Operator is Percent then:

  • If YTD Sales Amount is between First breakpoint range, then:

    First breakpoint's YTD Billable Amount = (YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint's YTD Bill Amount = (YTD Sales amount – First breakpoint's From amount) * Nth breakpoint's Percent

If the Operator is Amount, then:

  • If YTD Sales Amount is between First breakpoint range, then:

    First breakpoint's YTD billable Amount = First Breakpoint's Fixed Amount

  • If YTD sales amount is between Nth breakpoint range, then:

    Nth breakpoint YTD Billable Amount = Nth breakpoint's fixed amount

If the Operator is Both, then:

  • If YTD Sales Amount is between First breakpoint range, then:

    First Breakpoint's YTD Billable Amount = (YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent + First Breakpoint's Fixed Amount

  • If YTD sales amount is between Nth breakpoint range, then:

    Nth breakpoint YTD Billable Amount = (YTD Sales amount – First breakpoint's From amount) * Nth breakpoint's Percent + Nth breakpoint's fixed amount

Total YTD Billable amount = First breakpoint's YTD bill amount + .... +Nth Breakpoint YTD Bill Amount

Current period's billable amount = total YTD billable amount – previous YTD bill amount

If the total bill Amount is less than minimum fee, then the sales overage rent shall be Zero. If the total bill Amount is more than minimum fee, then deduct minimum fee from total bill amount to get sales overage rent. If the total bill amount for the current period is greater than maximum fee then the maximum fee should be charged to the tenant. In this case, percentage rent will be maximum fee less minimum fee.

When sales amount exceeds a breakpoint, then the breakpoint will have maximum billable amount and it is equal to: (Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent when operator is percentage

Breakpoint's fixed amount when operator is fixed: (Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent + Breakpoint's fixed amount when operator is Both

Modified Cumulative Calculation Example

Assume the minimum is 2,500 USD and the maximum is 50,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

200,000.00

600,000.00

Percent

9

600,000.01

1,000,000.00

Percent

8

1,000,000.01

1,500,000.00

Percent

7

1,500,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Sales reported by tenant:

Period (Monthly)

Sales Amount

Cumulative Sales

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

Rent for Current Period

Rent Amount

1

100,000.00

100,000.00

NA

NA

NA

NA

0

0

2,500.00

2

200,000.00

300,000.00

9,000.00

NA

NA

NA

9,000.00

6,500.00

6,500.00

3

60,000.00

360,000.00

14,400.00

NA

NA

NA

14,400.00

5,400.00

5,400.00

4

350,000.00

710.000.00

NA

40800.00

NA

NA

40,800.00

26,400.00

26,400.00

5

1,100,000.00

1,810,000.00

NA

NA

NA

64,400.00

64,400.00

23,600.00

23,600.00

6

40,000.00

1,850,000.00

NA

NA

NA

66,000.00

66,000.00

1,600.00

2,500.00

Partial Year Pro Rata Method

In a specialized billing reconciliation, property owners use the lease period as a cutoff date. Therefore, any tenant who moves in or out within the lease period can be charged a prorated share of the sales for the partial period. For calculating the prorated rent amount, the sales data for the period of one year beginning from lease commencement date will be considered. In the case of last period, the sales data for the period of one year ending on lease termination date will be used for calculating rent. System will use the following formula for calculating the rent amount:

  • First period = Rent calculated as per breakpoints * (Next period begin date – Lease Commencement date) / (Number of days in the year)

  • Last period = Rent calculated as per breakpoints * (Lease Termination date - previous period End Date) / (Number of days in the year)

If the prorate first and last period Partial Year Proration flag is checked on the Percent Rent Terms page, then first and last period percentage rent will be calculated by this method. Rent calculated as per breakpoint will be as per the calculation method selected on the lease. The partial year prorata feature can be used only with annual calendars. In the formula mentioned above, by default, if the partial year proration checkbox is checked then the number of days in the denominator would be same as actual number of days in the year (365/366). If on financial terms page the user has selected the 360 days proration method, then in that case the denominator value in formula mentioned above will be 360.

Partial Year Pro Rata Calculation Example

Assume the minimum is 2,500 USD and the maximum is 50,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

200,000.00

600,000.00

Percent

9

600,000.01

1,000,000.00

Percent

8

1,000,000.01

1,500,000.00

Percent

7

1,500,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Sales reported by tenant:

Period (Yearly)

Sales Amount

Annualized Sales

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

De-Annualized Bill Amount

Rent Amount

Proration Ratio

Final Rent

2006

1,200,000.00

1,200,000.00

36,000.00

32,000.00

14,000.00

NA

82,000.00

82,000.00

6,833.33

0.59

4,006.39

2007

2,400,000.00

2,400,000.00

36,000.00

32,000.00

35,000.00

36,000.00

139,000.00

139,000.00

11,583.33

1

11,583.33

2008

720,000.00

720,000.00

36,000.00

9,600.00

NA

NA

45,600.00

45,600.00

3,800.00

1

3,800.00

2009

4,200,000.00

4,200,000.00

36,000.00

32,000.00

35,000.00

108,000.00

211,000.00

211,000.00

17,583.33

1

17,583.33

2010

14,400,000.00

14,400,000.00

36,000.00

32,000.00

35,000.00

516,000.00

619,000.00

619,000.00

50,000.00

1

50,000 .00

2011

480,000.00

480,000.00

25,200.00

NA

NA

NA

25,500.00

25,500.00

2,100.00

0.58

1,219.72

Lease Pro Rata Method

This method uses two levels of breakpoints: Lease level and Sales reporting categories level. Lease level breakpoints will be used to calculate total bill amount on total sales of all categories. Category level breakpoints will be used to distribute bill amount by category.

YTD sales amount that includes current period sales will be used to calculate percent rent. Sales amount will be sum of all sales categories' sales amount. The sales amount shall be annualized by multiplying the no. of periods in a calendar year divided by no. of sales periods included in YTD sales.

Lease level breakpoints will be applied to annualized cumulative sales to calculate percent rent amount. The rent amount will be de-annualized by dividing calculated rent by the no. of periods in a calendar year and then multiplying the same by number of sales periods included in YTD sales. To calculate current period bill amount, the previous periods YTD bill amount will be reduced from the amount calculated inn the step above.

If rent amount for the current period is less than the minimum fee then minimum fee will be charged to tenant as percentage rent. If rent amount for the current period is greater than maximum fee then maximum fee will be charged as percentage rent.

This method does not categorize the rent as minimum and percentage rent. For this method, the total rent amount will be distributed by categories.

To prorate the total bill amount among the categories:

  • YTD sales amount for the category will be used for calculation.

  • The category's sales amount will be annualized by multiplying the no. of periods in a calendar year divided by no. of sales periods included in YTD sales.

  • Category level breakpoints will be applied to annualized cumulative sales to get the category's bill amount. This calculation will be performed for all categories.

  • The total rent amount will be distributed among sales categories using ratio of amount calculated in step above. If none of the category has reached its breakpoint then the rent amount will be distributed in ratio of cumulative sales for all categories.

Get the total sales amount by summing up all sales categories sales.

Calculate the YTD (Year-To-Date) sales by summing up all sales from first period to current period.

Annualize the YTD sales. Annualized YTD sales = YTD sales * (Total periods in fiscal year / No. periods in YTD sales).

If the Operator is Percent then:

  • If annualized YTD Sales Amount is between First breakpoint range, then:

    First breakpoint Billable Amount = (Annualized YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent

  • If annualized YTD sales amount is between second breakpoint range, then:

    Second breakpoint's Billable Amount = (Annualized YTD Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent

  • If annualized YTD sales amount is between Nth breakpoint range, then:

    Nth breakpoint's Billable Amount = (Annualized YTD Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent)

If the Operator is Amount, then:

  • If annualized YTD Sales Amount is between First breakpoint range, then:

    Bill Amount = First Breakpoint's Fixed Amount

  • If annualized YTD sales amount is between second breakpoint range, then:

    Bill Amount = (First Breakpoint maximum Bill Amount + Second Breakpoint's Fixed Amount)

  • If annualized YTD sales amount is between Nth breakpoint range, then:

    Bill Amount = (First breakpoint's maximum bill amount + Second breakpoint's maximum bill amount +….+(n-1) breakpoint's maximum bill amount + Nth breakpoint's fixed amount)

If the Operator is Both, then:

  • If Sales Amount is between First breakpoint range, then:

    First breakpoint's Billable Amount = (Annualized YTD Sales amount – First breakpoint's from amount) * First breakpoint's Percent) + First Breakpoint's Fixed Amount

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's Billable Amount = (Annualized YTD Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent + Second Breakpoint's Fixed Amount)

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint Billable Amount = (Annualized YTD Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent + Nth breakpoint's fixed amount

Total annualized YTD Billable amount = First breakpoint's billable amount + Second breakpoint's billable amount +…. + Nth Breakpoint Billable Amount

De-annualize the above value to get YTD billable amount. YTD billable amount = Total annualized YTD billable amount * (No. periods in YTD sales / Total periods in fiscal year)

Subtract the Previous period YTD bill amount to get the current Total Bill amount.

Prorate the Total bill amount among all the sales categories using the following method:

  • Calculate the YTD (Year-To-Date) sales by summing up a category's sales from first period to current period.

  • Annualize the category YTD sales. Annualized YTD category sales = category YTD sales * (Total periods / No. periods in YTD sales).

Apply the category level breakpoints:

If the Operator is Percent then:

  • If annualized YTD category Sales Amount is between First breakpoint range, then:

    First breakpoint Billable Amount = (Annualized YTD category Sales amount – First breakpoint's from amount) * First breakpoint's Percent

  • If annualized YTD category sales amount is between second breakpoint range, then:

    Second breakpoint's Billable Amount = (Annualized YTD category Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent

  • If annualized YTD category sales amount is between Nth breakpoint range, then:

    Nth breakpoint's Billable Amount = (Annualized YTD category Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent)

If the Operator is Amount, then:

  • If annualized YTD category Sales Amount is between First breakpoint range, then:

    First Breakpoint's category Billable Amount = First Breakpoint's Fixed Amount

  • If annualized YTD category sales amount is between second breakpoint range, then:

    Second Breakpoint's category Billable Amount = Second Breakpoint's Fixed Amount

  • If annualized YTD sales amount is between Nth breakpoint range, then:

    Nth breakpoint's category Bill Amount = Nth breakpoint's fixed amount

If the Operator is Both, then:

  • If annualized YTD category Sales Amount is between First breakpoint range, then:

    First breakpoint's category Billable Amount = (Annualized YTD category Sales amount – First breakpoint's from amount) * First breakpoint's Percent) + First Breakpoint's Fixed Amount

  • If sales amount is between second breakpoint range, then:

    Second breakpoint's category Billable Amount = (Annualized YTD category Sales Amount – Second Breakpoint's From Amount) * Second breakpoint's Percent + Second Breakpoint's Fixed Amount)

  • If sales amount is between Nth breakpoint range, then:

    Nth breakpoint Billable Amount = (Annualized YTD Sales amount – Nth breakpoint's from amount) * Nth breakpoint's Percent + Nth breakpoint's fixed amount

Annualized YTD category Billable amount = First breakpoint's category billable amount + Second breakpoint's category billable amount +…. + Nth Breakpoint category Billable Amount

Category's bill amount = Total billable amount * Annualized YTD category Billable amount / sum of all sales categories annualized YTD category billable amount.

If the total bill Amount is less than minimum fee, then the minimum rent will be charged as percentage rent. If the total bill Amount is greater than maximum then maximum fee will be charged as percentage rent.

When sales amount exceeds a breakpoint, then the breakpoint will have maximum billable amount and it shall equal to: (Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent when operator is percentage

Breakpoint's fixed amount when operator is fixed: (Breakpoint's To amount - Breakpoint's From amount) * Breakpoint's percent + Breakpoint's fixed amount when operator is Both

Lease Pro Rata Calculation Examples

Assume the minimum is 2,500 USD and the maximum is 50,000 USD.

Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

500,000.00

1,000,000.00

Percent

9

1,000,000.01

1,500,000.00

Percent

8

1,500,000.01

1,500,000.00

Percent

7

3,000,000.01

99,999,999,999,999,900,000,000.00

Percent

4

Method details:

  • Tenant will report sales at agreed frequency.

  • Billing for percent rent will be as per calendar defined on the percent rent term page.

  • Even though sales are reported category wise the breakpoints will be applied to annualized cumulative total sales figure.

  • For calculating cumulative and annualized sales, all reported/estimated sales report in current year will be considered.

  • Breakpoints will be applied to annualized sales.

  • Percent rent amount charged for previous period will be reduced from the calculated amount.

Sales reported by tenant:

Period (Monthly)

Sales Amount

Cumulative Sales

Annualized Cumulative Sales

1st Breakpoint

2nd Breakpoint

3rd Breakpoint

4th Breakpoint

Percent Rent

De-annualized Percent Rent

Rent for Current Period

Rent Amount

1

100,000.00

100,000.00

1,200,000.00

45,000.00

16,000.00

NA

NA

61,000.00

5,083.33

5,083.33

5,083.33

2

200,000.00

300,000.00

1,800,000.00

45,000.00

40,000.00

21,000.00

NA

106,000.00

17,666.67

12,583.33

12,583.33

3

60,000.00

360,000.00

1,440,000.00

45,000.00

35,200.00

NA

NA

80,200.00

20,050.00

2,383.33

2,500.00

4

350,000.00

710.000.00

2,130,000.00

45,000.00

40,000.00

44,100.00

NA

129,100.00

43,033.33

22,866.67

22,866.67

5

1,100,000.00

1,810,000.00

4,344,000.00

45,000.00

40,000.00

105,000.00

53760.00

243,760.00

101,566.67

58,533.33

50,000.00

6

40,000.00

1,850,000.00

3,700,000.00

45,000.00

40,000.00

105,000.00

28,000.00

218,000.00

109,000.00

15,966.67

15,966.67

For the following sales categories assume that the percent rent amount for the period will be distributed in ration of amount calculated category wise on sales category breakpoint and if in any period none of the categories exceed first breakpoint then percent rent for the period will be distributed in ratio of sales.

Food breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

400,000.00

500,000.00

Percent

6

500,000.01

99,999,999,999,999,900,000,000.00

Percent

3

Beverages Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

300,000.00

600,000.00

Percent

5

600,000.01

99,999,999,999,999,900,000,000.00

Percent

3

Liquor Breakpoints:

From Breakpoint

To Breakpoint

Operator

Percent

700,000.00

1,000,000.00

Percent

9

1,000,000,01

99,999,999,999,999,900,000,000.00

Percent

5

Period 1 percent rent = 5,083.33

Period rent details:

Category

Cumulative Sales and Sales Amount

Annualized Sales

Percent Rent

Distributed Rent

Food

30,000

360,000

0

1,525

Beverages

20,000

240,000

0

1016.67

Liquor

50,000

600,000

0

2,541.67

Totals

100,000

1,200,000

0

 

Period 2 percent rent = 12,583.33

Period rent details:

Category

Cumulative Sales

Sales Amount

Annualized Sales

Percent Rent

Distributed Rent

Food

60,000

30,000

360,000

0

0

Beverages

50,000

30,000

300,000

0

0

Liquor

190,000

140,000

1,140,000

39,600

12,583.33

Totals

300,000

 

1,800,000

39,600

 

Period 3 percent rent = 2,500

Period rent details:

Category

Cumulative Sales

Sales Amount

Annualized Sales

Percent Rent

Distributed Rent

Food

75,000

15,000

300,000

0

0

Beverages

75,000

25,000

300,000

0

0

Liquor

210,000

20,000

840,000

12,600

0

Totals

360,000

 

1,440,000

12,600

2,500

Period 4 percent rent = 22,866.67

Period rent details:

Category

Cumulative Sales

Sales Amount

Annualized Sales

Percent Rent

Distributed Rent

Food

180,000

105,000

540,000

7,200

3,380.70

Beverages

130,000

55,000

390,000

4,500

2,112.94

Liquor

400,000

190,000

1,200,000

37,000

17,373.03

Totals

710,000

 

2,130,000

48,700

 

Period 5 percent rent = 50,000

Period rent details:

Category

Cumulative Sales

Sales Amount

Annualized Sales

Percent Rent

Distributed Rent

Food

600,000

420,000

1,440,000

34,200

12,787.92

Beverages

410,000

280,000

984,000

26,520

9,916.24

Liquor

800,000

400,000

1,920,000

73,000

27,295.84

Totals

1,810,000

 

4,344,000

133,720

 

Period 6 percent rent = 15,966.67

Period rent details:

Category

Cumulative Sales

Sales Amount

Annualized Sales

Percent Rent

Distributed Rent

Food

610,000

10,000

1,220,000

27,600

4,065.31

Beverages

430,000

20,000

860,000

22,800

3,358.30

Liquor

810,000

10,000

1,620,000

58,000

8,543.05

Totals

1,850,000

 

3,700,000

108,400

 

Sales Estimation Methods

The PeopleSoft Real Estate Management system provides you with three sales estimation methods to assist you in deciding the estimated sales data. Using this data helps you determine the monthly rent amount.

The three sales estimation methods are:

  • Past 6 Period Average: The system takes an average of sales of all prior periods up to six months, assuming there is sales data for the last six months in the database.

    If data is not available for all six months, it takes only the average of whatever data is available up to the last six months. The system cannot provide an estimate if there is no data for the last six months.

  • Same Period Last Year: The system takes the sales from the same period last year assuming there is sales data for the same period last year.

    For example, if the current sales report being estimated is period 2 of 2005, then the system looks for period 2 of 2004 to formulate an estimate. The system cannot provide an estimate if there is no data for the same period last year.

  • Prior Period: The system takes the sales for the preceding period, assuming there is sales data for the preceding period. The system cannot provide an estimate if there is no data for the preceding period.

    Note: In addition to the sales estimation methods, the system also provides an adjustment factor that is a percentage field, at the lease level, to assist with altering the numbers to account for slower business, recession periods, inflation, and so on.

Adjustments to Estimated Rents

When you bill based on estimated sales, you will likely need to make adjustments, effectively changing the actual billable rent amount. The system provides the ability to adjust the previously calculated and processed data, as well as the ability to adjust the prior entries posted to the various subsystems. This is called the sales report revision.

A change to previously processed calculated data is called an adjustment. You can change sales report data any number of times before the transactions are processed. While making an adjustment, you select the sales type to indicate the changes that you are making. The sales type has no bearing on generating billing lines; it is informational only. The same billing lines are generated regardless of type and are updated at any time throughout this process.

When you enter the new data, the system calculates the rent amount on the worksheet. However, the system also takes into account the last processed worksheet and compares the two to determine the amount of the adjustment. Although the data from worksheet to worksheet is compared to determine the net difference, doing so accurately over multiple iterations can be complicated. As a result, the system uses the last of the prior worksheets to determine the amount billed. The system creates a complete reversal of the bill, sending a negative bill entry to the same transaction code by sales category, and updates the bill with the new amounts. For example, the original worksheet has three sales categories and three bill lines generated for billing, each with a unique transaction code. During an adjustment process, three negative bill line entries are created for the full amount billed, along with three new bill lines for the new full amount to bill.

On the Sales Report Details page for processed reports, the latest worksheet appears as display-only until you click the Update Report button. The worksheet is then available for changes, and a new version is saved to the table with a new revision number. You can view all past adjustments, but adjust only the latest one.