percentage lease


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percentage lease

A lease that requires rent payments based on a percentage of the gross sales of the tenant. It is common with retail leases and food and beverage leases. Most contain a minimum payment clause so that if gross sales drop below a certain level the rent will be the minimum payment rather than a percentage of sales.

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Many property managers are rethinking cost structures with percentage leases and fee changes, said Lauri Greenblatt Hines, CPM, president of Promus Commercial in San Diego.
The percentage lease without a guaranteed minimum is a product of the Depression," MacDougall wrote.
MacDougall said, "If you have a poorly located property or one erected in advance of shopping requirements, then a percentage lease without a minimum may be of assistance--but there is no excuse for it in a sound shopping zone.
Ask for a reasonable minimum monthly payment in addition to the percentage lease.
company recognized percentage lease revenue, net of property
1 million of deferred percentage lease revenue as a result of the acquisition of the leasehold interests in 47 of the company's hotels on July 1, 2002 from Interstate Hotels & Resorts, Inc.
62 Operating Results (in thousands) Revenue: Rooms $86,529 $87,553 Other hotel revenue 8,459 9,243 Percentage lease revenue 2,083 2,266 Interest and other income 1,137 999 Total revenue 98,208 100,061 Hotel operating expenses: Rooms 19,968 19,759 Other hotel operating expenses 6,277 6,519 Undistributed operating expenses: Property operating costs 18,616 17,983 Real estate taxes and property and casualty insurance 4,962 4,899 Other operating costs 13,238 12,964 Percentage lease expense 3,426 3,079 Depreciation and amortization 14,101 14,782 General and administrative 4,050 4,094 Lease/management agreement acquisition 1,300 -- Total expenses 85,938 84,079 Operating income $12,270 $15,982
The eight Silicon Valley hotels accounted for 16 percent and 21 percent of the company's percentage lease revenues for the 12 months ended September 30, 2003 and 2002, respectively.
Capital expenditures are calculated as 5% of room revenues in accordance with our percentage leases.

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