Contracts
The 'natural breakpoint' in a percentage lease is calculated by:
AThe tenant's net annual income
BDividing the base rent by the percentage rate✓ Correct
CMultiplying gross sales by the occupancy cost ratio
DDividing the property's NOI by the cap rate
Explanation
Natural breakpoint = Base Rent ÷ Percentage Rate. If base rent is $60,000 and the rate is 6%, the breakpoint = $60,000 ÷ 0.06 = $1,000,000. Percentage rent is due only on sales above this amount.
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