Setting Up and Calculating Percent Rent

This chapter provides an overview of percent rent terms and discusses how to:

• Set up percent rent terms.

• Calculate percent rent amounts from incoming sales reports.

Understanding Percent Rent Terms

Percent rent enables you to negotiate a lower monthly base rent in exchange for a portion of your sales once the threshold is met. This lease method is appealing because you receive a lower monthly liability in months of lower sales. As the sales amount reaches a specified threshold (breakpoint), the percentage changes, thus altering the amount of the final rent amount. For a breakpoint, the rent can be a fixed amount, a percentage of sales, or a combination of fixed amount and percentage.

When multiple breakpoints are established, the system determines which breakpoint has been reached and adds its incremental percentage over and above the other breakpoints. For example, let's say the breakpoints are as follows:

• 0-1,000 (5%)

• 1,000.01-4,999.99 (4%)

• 5,000-99999999999.99 (3% + 1,000 USD)

If the sales amount is 1,500 USD, then the system takes the maximum of the prior breakpoint multiplied by that breakpoint percentage (or amount, or both depending on lease terms), adds the incremental amount over that breakpoint maximum, multiplied by the new breakpoint percentage.

In this example, the calculation is as follows: 1,000 * 5% + (1,500-1,000) * 4% = 70.

Using the previous example, if a lease had three breakpoints in percent rent setup, and the sales amount reached the third level (10,000), then the calculation is as follows: 1,000 * 5% + (4,999.99-1,000) * 4% + (10,000-4,999.99) *3% +1,000 = 360.

The tables provide additional examples of the percent rent calculation methodology:

Percent Rent Setup Data

Sales Breakpoints

Sales Data

You define the percentage breakpoints for the percent rent tier structure before signing the lease; once a lease is activated, any changes to this structure result in a signed lease amendment. You include percent rent terms on the lease and enter them into the system prior to lease activation. You set the various sales breakpoints (or tiers) for the lease under different sales categories. In the absence of actual reported data, you can enter or have the system attempt to estimate sales data. You enter the estimated information in the Sales Report worksheet and set the type to Estimated. The system uses past data to help determine an appropriate estimate.

Sales Estimation Methods

The Real Estate Management system provides you with three sales estimation methods to assist you in deciding the estimated sales data. Using this data helps you determine the monthly rent amount.

The three sales estimation methods are:

• Past 6 Period Average: The system takes an average of sales of all prior periods up to six months, assuming there is sales data for the last six months in the database.

  If data is not available for all six months, it takes only the average of whatever data is available up to the last six months. The system cannot provide an estimate if there is no data for the last six months.

• Same Period Last Year: The system takes an average of sales of the same period last year assuming there is sales data for the same period last year.

  For example, if the current sales report being estimated is period 2 of 2005, then the system looks for period 2 of 2004 to formulate an estimate. The system cannot provide an estimate if there is no data for the same period last year.

• Prior Period: The system takes the sales for the preceding period, assuming there is sales data for the preceding period. The system cannot provide an estimate if there is no data for the preceding period.

  Note. In addition to the sales estimation methods, the system also provides an adjustment factor that is a percentage field, at the lease level, to assist with altering the numbers to account for slower business, recession periods, inflation, and so on.

Adjustments to Estimated Rents

When you bill based on estimated sales, you'll likely need to make adjustments, effectively changing the actual billable rent amount. The system provides the ability to adjust the previously calculated and processed data, as well as the ability to adjust the prior entries posted to the various subsystems. This is called the sales report revision.

A change to previously processed calculated data is called an adjustment. Prior to the changes, you can enter the sales amounts to calculate and recalculate the billing amount any number of times. While making an adjustment, you select the sales type to indicate the changes that you are making. The sales type has no bearing on generating billing lines; it is informational only. The same billing lines are generated regardless of type and are updated at anytime throughout this process.

When you enter the new data, the system calculates the rent amount on the worksheet. However, the system also takes into account the last processed worksheet and compares the two to determine the amount of the adjustment. Although the data from worksheet to worksheet is compared to determine the net difference, doing so accurately over multiple iterations can be complicated. As a result, the system uses the last of the prior worksheets to determine the amount billed. The system creates a complete reversal of the bill, sending a negative bill entry to the same transaction code by sales category, and updates the bill with the new amounts. For example, the original worksheet has three sales categories and three bill lines generated for billing, each with a unique transaction code. During an adjustment process, three negative bill line entries are created for the full amount billed, along with three new bill lines for the new full amount to bill.

On the Sales Reporting Adjustments page, the latest worksheet appears as display-only until you click the Enter Adjustments button. The worksheet is then available for changes, and a new version is saved to the table with a new Adjustment ID. You can view all past adjustments, but adjust only one. No adjustments can take place if the latest worksheet has not yet been processed.

Prerequisites

Before setting up percent rent terms, you must set up the following:

• Detail calendars for percent rent schedules.

• Calendar ID selection for the business unit.

• Sales categories.

• Transaction routing codes.

• Accounting rules.

Setting Up Percent Rent Terms

This section discusses how to set up percent rent terms.

Pages Used to Set Up Percent Rent Terms

Entering Percent Rent Terms

Access the Financial Terms - Percent Rent page.

Sales Estimation Method	Select a sales estimation method. The system uses this method for estimating the sales, in the absence of a sales report. The options are 6 Period, Last Year, and Prior.
Sales Adjustment Factor	Select a sales adjustment factor. This percentage field assists with altering the numbers to account for slower business, recession periods, inflation, and so on. Set the adjustment factor to 1.0 if you do not want any adjustment done to the sales estimation.
Minimum Fee	Enter the minimum amount to be charged for the entire percent rent. If the minimum is not met, the amount is increased to the minimum level. Note. The increased minimum amount is spread across the sales categories in the ratio of calculated bill amount.
Maximum Fee	Enter the maximum amount to be charged to the entire percent rent. If the maximum is exceeded, the amount is reduced to the maximum level. Note. The adjusted amount is spread across the sales categories in the ratio of the calculated bill amount.
Add Sales Category	Click to add an additional sales category in the group box.
Calculate Breakpoints	Click to calculate breakpoints. If you have multiple breakpoints, the system calculates the To Breakpoint from the data entered into the From Breakpoint.

Sales Reporting Categories

Breakpoints

Calculating Percent Rent

This section provides an overview of sales reporting and percent rent calculation and discusses how to:

• Search for sales reports.

• Find missing sales reports.

• Create new sales reports.

• Import sales reports.

Understanding Sales Reporting and Percent Rent Calculation

When setting the percent rent terms in a lease, the sales reports form the basis that the system uses to calculate rent. After you set the percent rent terms and activate the lease, you begin working with the tenant sales reports to periodically generate the rent invoices.

You collate, enter, and revise all reported sales figures for the past period in the Percent Rent Worksheet. This worksheet enables you to enter estimated or actual figures, and the system calculates the appropriate rent amount, taking into consideration the percentage breakpoints and base rent setup. The system uses the percent and fixed amount selection and enters a fixed amount for every breakpoint row.

Note. If the tenant reports sales in a different frequency than billing, you must collate and convert this data to match the billing frequency outside of the system prior to using this worksheet.

The system defaults the categories that are set up in the lease. You cannot add any additional rows for categories because they have to be set up on the lease to exist on the worksheet to provide validations.

You can isolate missing sales reports. Missing sales report are displayed irrespective of the lease status. For the missing reports, you can enter estimated information. Based on the sales estimation method and the adjustment factor that you selected while setting up the percent rent terms, you can estimate the sales.

After bringing the data from the estimation tools into the worksheet, the system enables you to adjust the calculated data. If the system is unable to generate an estimate, it displays a warning indicating the reason. Once you are satisfied with the estimate, you can click Create Pending Invoice in the worksheet and initiate the transfer to Billing or Payables for further processing. As in normal sales reporting, the system saves the estimates along with a date and time and user ID stamp to the database for historical purposes.

Note. Missing sales report are displayed irrespective of ease status.

Importing Sales Reports

Before you can import sales reports, you must understanding how to setup the URL path for attachments and configuring the sales report file format.

The URL path for RE_ATTACHMENTS is maintained by the customer. You must have write permissions to the specified path. FTP/HTTP protocols can be used to upload the Sales Report files. (Navigation: Main Menu > PeopleTools > Utilities > URLs). For FTP, the syntax is: ftp://user:pass@systemname/dir1/dir2

The New File Layout: RE_SLSRPT_FILE is created using RE_SLSRPT record. Some of the field values are populated from the lease and some of values are calculated, they are deleted and additional fields that are manually added.

The structure of the file layout is:

The file layout uses the .CSV format and is mapped to the sales report file received. The file contains eight fields to map the sales report data received and rest of the information to create a sales report is retrieved from corresponding lease.

The sales report must be in .CSV format. The file must contain the following data and order of fields must not be changed.

Effects of Lease Amendments on Sales Reportin

When you change a percent rent term setup because of a lease amendment, these changes are reflected during the update of a pending sales report. The changes result in an adjustment to the sales report. The recalculation is done automatically. The following occurs when a lease amendment is created:

• If you want to add a category, do so when updating a pending or adjusting sales report.

• If you delete a category, the category becomes display-only to prevent changes.

  If the amendment is done for a sales revision, the amendment creates only a negative amount for the deleted category.

• The amendment to the minimum/maximum fee and sales adjustment factor impacts the total rent.

Pages Used to Report Sales and Calculate Percent Rent

Searching Sales Reports

Access the Sales Reports page.

Filter search results by entering specific values in the fields in the Search Criteria group box. You must enter the business unit. If you enter only a business unit, the search returns all missing sales reports for all leases within that business unit. All Active and Holdover leases that match the search criteria are listed.

Calendar	Select the default detail calendar ID. A detail calendar is set up ahead of time and is used by several PeopleSoft applications. The calendar provides a set structure to the periods and facilitates the system's ability to search for missing sales reports. The calendar provides the start and end dates of each period so that the system can keep track of sales reports and assist with locating missing sales.
Date Range: From Year	Select the year to define the start of the date range for the search criteria.
To Year	Select the year to define the end of the date range for the search criteria.
From Period	Enter the starting period to be included in the search criteria. The periods match the dates created for this detail calendar.
To Period	Select the last period to be included the search criteria. The periods match the dates created for this detail calendar.
Find Missing Sales Reports	Click to view the missing sales reports.
Create New Report	Click to create a new sales report.
Import Sales Report	Click to import reported sales data reported from a .CVS file.

Finding Missing Sales Reports

Access the Report Sales - Find Missing Sales Reports page.

Include Estimated Sales	Select to search for missing sales reports. Normally, searching for missing sales reports only searches for periods that have no data; selecting this box handles any estimated sales reports as missing sales because the tenant did not provide the data.
Find Existing Sales Reports	Select to return to the search page to open existing sales reports.
Generate Estimated Sales	Click to generate a new estimated sales report for the selected lease. Estimates are based on the calculation method defined at the business unit level (such as Past 6 Period Average).
Last Report Date	Displays the last date entered for a sales report for this lease.
Report Type	Select the Missing or Estimated report type.

Creating New Sales Reports and Calculating Percent Rent

Access the Report Sales - Create New Sales Reports page.

Sales Period	Displays the date range for this sales report.
Fiscal Year	Displays the year to which this accounting period refers.
Accounting Period	Displays the accounting period for this sales report.
Revision	Displays the latest revision number. Shows the number of adjustments for this period.
Type	Select the type of sales reporting figures being entered. You can change the type with an amendment if more accurate numbers are determined. The type enables you to classify the sales report by the values defined. The system delivers four values that you can use interchangeably. You can use any combination of these values: Estimated: The estimated figure is either generated by the system or entered on behalf of tenant estimates. When the system generates a sales estimate, this value is automatically defaulted on the estimated row. Reported: The figure is reported by tenant, but with possibly no documentation. Actual: The tenant provides documentation of the actual figures. Audited: The tenant provided an audited report or the landlord sent an auditor in to audit the figures. Note. If you change the type from Estimated to any of the other values, you cannot change it back to Estimated.
Sales Amount	Enter the sales reported by tenant.
Converted Sales Amount	Displays the sales amount converted back to the base currency of the lease.
Calculate	Click to calculate the bill amount based on the converted sales amount and the breakpoint using percent, amount, or both. You can enter different sales amounts to calculate and recalculate the billing amount until the calculated bill amounts are acceptable to you.
Bill Amount	Displays the amount to be billed or the amount to be paid depending on the type of lease that you are using. The system calculates the amount from the percent rent terms.
Create Pending Invoice or Create Pending Payment	Click to calculate the rent and submit the bill amount to the transaction queue for approval. The system changes the status from Pending to Processed. If the transaction is rejected in the billing transaction queue, the status of the sales report changes from Processed back to Pending.

Importing Percent Rent Sales Reports

Access the Report Sales - Sales Report page.

Attached File	Enter the percent rent sales report file extension.
Lookup File	Browse through your files to locate the percent sales report.
Import Sales Report	Click to begin uploading of sales report.