Retail leases · Uncategorized

Let’s eat, Grandma! Let’s eat Grandma!

i-see-you-have-a-missing-comma

A comma can change the meaning of a sentence fairly drastically. And, for lease administration purposes, it can have an unexpected impact on cash flow. The clause below was from a center we worked on last week:

comma

“Tenant’s Proportionate Share” shall be equal to the number of rentable square feet included in the Premises divided by the total number of square feet included in the Building multiplied by ninety-five (95%) percent.

Yes. We do have the order of operation. If you were lucky or unlucky enough to have Sr. Julia Mary for seventh grade pre-algebra, you might have learned “Please Excuse My Dear Aunt Sally.” Parentheses – do what is in the parantheses first. Exponent – apply the exponents next. Then Multiply and Divide. Finally, Add and Subtract.

Why bring up Sr. Julia Mary (affectionately, by some, known as Scary Mary)? Because (1) if we take the premises divided by the center square footage and then multiply by 95%, we get a completely different answer than (2) taking the square footage divided by (the center square footage x 95). Take, for example, a 10,000 sf premises in a 100,000 sf shopping center. The straight prorate share would be 10,000/100,000 = 10%. But, we have a 95% factor to apply. In example 1 – we get 9.5% – 10,000/100,000 = 10%; 10% x 95% = 9.5%. In example 2, we get 10.53% – 100,000 x 95% = 95,000; 10,000/95,000 = 10.53%. That’s almost an 11% difference.

This one needs a letter agreement to correct it!

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