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For anchors and retail tenants with bargaining clout, the name of the game is drawing as many shoppers to the shopping center as possible. So, they’re apt to insist that the landlord refrain from renting to offices, educational facilities, and other non-retail tenants.
When negotiating a percentage rent lease, don’t be surprised if a retail tenant demands that you exclude bad debts from the formula for calculating gross sales. This is hardly an unreasonable demand. After all, why should the tenant have to pay percentage rent on customer receivables that it can’t collect? But if you’re not careful, giving in to this demand can cost you more than you bargain for.