1. Advanced Real Estate Forecasting Implementation Guide
  2. Understanding the Natural Breakpoint Calculation

Understanding the Natural Breakpoint Calculation

As an alternative to specifying the breakpoint amounts and corresponding percentages, you can have the system derive the breakpoint amount. To do this, you set up the sales overage rule to use a natural breakpoint. When you specify to use a natural breakpoint, the system does not display the fields for the computation method or the breakpoint amount, because it determines the breakpoint based on the annual revenue amounts that it locates and the breakpoint percentage that is specified on the sales overage rule. Because the system calculates one breakpoint amount, you can specify only one breakpoint percentage. The system retrieves the revenue amounts that it uses from different sources depending on whether the unit is leased:

  • If the unit is leased, the system retrieves the revenue amounts from the recurring billing information.

    The system uses the recurring bill code rule that is assigned to the unit or the building constants to identify the rent (revenue bill codes). The system sums the recurring billing amounts for all bill codes identified as rent. If the system cannot locate a recurring bill code rule or recurring billing information, it uses the market rate assigned to the assumption rule to calculate the revenue amount (based on the unit's area and the growth pattern).

  • If the unit is vacant, the system uses the market rate from the assumption rule to calculate the revenue amount by multiplying it by the area of the unit and adding the growth pattern.

    Note: If the sales overage information exists in JD Edwards EnterpriseOne Real Estate Management, the system uses it and does not use the sales overage rule from JD Edwards EnterpriseOne Advanced Real Estate Forecasting.

To determine the natural breakpoint, the system uses this formula: annual revenue amount ÷ breakpoint percentage

For example, if the annual rent amount is 96,000 and the breakpoint percentage is 25, the system calculates the natural breakpoint as 384,000 (96,000 ÷ .25). After the system calculates the natural breakpoint, it compares it against the accumulated sales for the period, to which it applies the growth pattern assigned to the sales overage rule to determine whether to compute a sales overage amount:

  • If the natural breakpoint amount is greater than the accumulated period sales plus the growth pattern, the system does not calculate a sales overage amount.

  • If the natural breakpoint is less than the accumulated period sales plus the growth pattern, the system calculates the sales overage (gross billing) amount: [(accumulated period sales) + (growth pattern) – (natural breakpoint) × (breakpoint percent)] – (prior gross billings) – (period recapture amount)