Glossary of Useful Retail Leasing Terms
In the following section, we have defined some of the most commonly used terms in the real estate industry, as referenced in the previous sections of this leasing tool kit. Read on to familiarize yourself with these terms as you progress through your leasing journey.
P&L
The Profit and Loss statement (P&L) is a financial document that summarizes revenues, costs, and expenses incurred during a given time period (quarterly/yearly). This document provides information about a company’s ability or inability to generate profit by increasing revenue, reducing costs, or both.
A Profit and Loss statement is also referred to as an income statement, a statement of profit and loss, an income and expense statement, or a statement of financial results.
A Profit and Loss statement is also referred to as an income statement, a statement of profit and loss, an income and expense statement, or a statement of financial results.
Percentage Rent
An alternative form of rent paid by a tenant that is based on the tenant’s gross sales from a given premises.
This form of rent is often in addition or in lieu of traditional base rent. The most typical % rent structure is an arbitrary or market percentage of sales paid over a natural breakpoint, the point at which the tenant is paying said percentage of sales in base rent. The “breakpoint” is not always a simple formula as demonstrated below and can be structured, like the % of sales, in many forms.
Basic example: Tenant is paying $50,000 in annual base rent and 5% in percentage rent over a natural breakpoint. The tenant does $1,200,000 in sales for the year. They pay 5% of every dollar over the natural breakpoint of $1,000,000 ($50,000 / .05), so $1,200,000-$1,000,000 = $200,000 x .05 = $10,000 in Percentage Rent. If the tenant does not reach the breakpoint, natural or fixed, they do not pay Percentage Rent.
This form of rent is often in addition or in lieu of traditional base rent. The most typical % rent structure is an arbitrary or market percentage of sales paid over a natural breakpoint, the point at which the tenant is paying said percentage of sales in base rent. The “breakpoint” is not always a simple formula as demonstrated below and can be structured, like the % of sales, in many forms.
Basic example: Tenant is paying $50,000 in annual base rent and 5% in percentage rent over a natural breakpoint. The tenant does $1,200,000 in sales for the year. They pay 5% of every dollar over the natural breakpoint of $1,000,000 ($50,000 / .05), so $1,200,000-$1,000,000 = $200,000 x .05 = $10,000 in Percentage Rent. If the tenant does not reach the breakpoint, natural or fixed, they do not pay Percentage Rent.
Permit Set or Construction Drawings
A permit set is the minimal set of drawings required by the local jurisdiction in order to obtain a construction permit. The permit set typically includes floor plans, elevations, MEP sections, and a site plan.
