Exclusion (P) is the last item on a list of sixteen. It sits at the end of Section 8.2 of a lease made on 26 August 2010 between JLP-NASHUA NH LLC and DSW Shoe Warehouse, Inc., covering a 22,142 square foot building at 270 Daniel Webster Highway in Nashua, New Hampshire, in a shopping center called Webster Square. Fifteen of the sixteen exclusions are the ordinary furniture of a percentage rent clause: sales taxes, returns, bad checks, gift certificates until redeemed, employee discounts. Then:
(P) internet or catalog sales unless such sales are recorded on the point of sale/cash register system at the Premises; provided further with respect to internet and similar sale transactions for which payment is made from a kiosk, terminal or other mechanism located at or on the Premises, but for which the order is fulfilled elsewhere, fifty percent (50%) of such sales shall be included in Gross Sales.[1]
Half. Not in, not out. A customer standing in the Nashua store who orders a pair of shoes from a terminal, pays there, and has the box shipped to her house from a warehouse in Columbus has produced fifty cents of Gross Sales on the dollar.
I went looking for how often that compromise shows up in leases people actually signed, and found something more useful. I pulled five retail leases filed as exhibits with the SEC, each with a negotiated Gross Sales definition, each taking a different position on internet orders. Two of them collect percentage rent. The other three do not collect a dollar of it, and they still define Gross Sales in exhaustive detail, because in those leases the number does a different job.
What fifty percent is worth in Nashua#
The DSW lease prices the compromise. Minimum Rent for the first five Lease Years is $354,272 a year, $16.00 per square foot of the 22,142 square feet. Percentage Rent is 4% of Gross Sales above the Breakpoint, and the Breakpoint is defined as Minimum Rent divided by 4%.[2] That is a natural breakpoint, so at $16.00 per foot it sits at $8,856,800 of Gross Sales a year.
Above that line, the arithmetic of exclusion (P) is two cents. A dollar of ordinary in-store sale costs the tenant four cents of Percentage Rent. A dollar of kiosk-ordered, elsewhere-fulfilled sale enters Gross Sales at fifty cents and costs two cents. A dollar of internet sale that never touched the store register costs nothing at all.
So the clause creates three prices for the same pair of shoes depending on which machine rang it up. That is not an accident of drafting. It is the deal: the landlord captures the transaction where the store did the work of making the sale, gives up the transaction the store had no part in, and splits the one in the middle where the customer walked in but the goods never did.
Whether the split is right is a different question from whether it is clear, and this clause is unusually clear. The trigger is physical. Payment “from a kiosk, terminal or other mechanism located at or on the Premises” is a fact about where a device sits, which nobody has to argue about. Most of the definitions I read key off something softer, like where an order “originates,” and originate is a word that means whatever the parties need it to mean after the audit.
DSW’s own audit clause runs on fourteen days’ written notice, once in any twelve month period, at the tenant’s corporate office in Columbus rather than the store. If the audit shows Gross Sales understated by more than 3% for a Lease Year, the tenant pays the cost of the audit on top of the shortfall.[3] That 3% is the margin of error the landlord agreed to tolerate, and a store with a terminal in it can swing by more than 3% on the treatment of one line in the point of sale export. We have written before about the deadline that usually kills these rights before anyone exercises them, in CAM audit rights with a clock that expires first.
One more sentence in the same article is worth reading next to all of this:
Nothing contained herein shall be deemed to create, constitute or imply any obligation or duty upon Tenant to operate or conduct business operations of any type whatsoever upon the Premises.[3]
DSW owes no percentage rent if it sells nothing, and it is free to sell nothing. The landlord bargained for a share of sales from a tenant with no duty to make any, which is the normal retail bargain and the reason continuous operation clauses exist. That gap is the subject of going dark costs nothing without a continuous operation clause.
A Gross Sales definition in a lease with no percentage rent#
Dover Saddlery’s lease at Stonewood Village Shopping Center in Alpharetta, Georgia says this, in Section 3.2:
Landlord and Tenant hereby acknowledge and agree that Tenant shall have no obligation to pay Landlord Percentage Rent or a percentage of sale as percentage rent hereunder nor shall Tenant have the obligation to report its sales to Landlord unless specifically provided hereunder.[4]
No percentage rent. No sales reporting. And then Section 14.22 of the same lease spends roughly a page and a half defining Gross Sales, with four inclusion limbs and seventeen enumerated deductions. Among the inclusions:
Gross Sales shall include, subject to the following paragraph, sales, rents, receipts, and services (1) where the orders therefore originate in, at, or from the Premises, whether delivery or performance is made from the Premises or from some other place, (2) made or performed by mail, telephone, or telegraph orders received at the Premises, (3) made or performed from the Premises or received at the Premises via e-mail, internet or other electronic method or mode, performed or received via any website established by Landlord for the Shopping Center containing a link to Tenant’s website …[4]
Limb (3) is the interesting one, and it was drafted in 2008. Orders received at the premises by internet count. So do orders placed through a mall website the landlord builds, if that site links to the tenant’s own. The landlord reserved credit for traffic it might send to the tenant’s ecommerce storefront, in a lease where it collects no percentage rent.
The section ends:
No deductions from Gross Sales shall be made for any amounts not originally included in Tenant’s Gross Sales (including returns of internet purchases).[4]
That closes the asymmetry that makes buy-online-return-in-store a problem for whoever is measuring. The deductions list allows refunds to customers for goods “otherwise included in Gross Sales.” Without the final sentence, a store that never counted an online sale could still deduct the refund when the customer brought the saddle back to Alpharetta, and net its measured sales below what it actually sold.
So why does a lease with no percentage rent need any of this? Because of Section 4 of the addendum:
Early Termination. Notwithstanding any contrary provision contained within this Lease, including the obligation of Tenant to pay Minimum Rent and additional rent hereunder, should the total of Tenant’s Gross Sales (as that term is defined in Section 14.22 herein) for the fourth (4th) Lease Year of the Lease Term hereunder, not equal or exceed the sum of $3,500,000.00, as evidenced by an audited statement of Gross Sales, then Tenant may, upon thirty (30) days prior written notice to Landlord, given by certified mail, return receipt requested, terminate this Lease …[5]
The Gross Sales definition is the measuring stick for the tenant’s kick-out right. And the direction of everyone’s interest reverses. Here, every internet order swept into Gross Sales pushes the tenant closer to $3,500,000 and makes its escape hatch harder to reach. The broad inclusion language that a tenant would fight on a percentage rent deal is language that, in this lease, works against the tenant by keeping it in the center.
A tenant’s lease administrator who has internalized “exclude the internet from Gross Sales” as a house rule would negotiate exactly the wrong way here. A landlord who has internalized “include everything” happens to be right twice, for two unrelated reasons.
Six percent of Gross Sales while the dining room is closed#
The third lease is a Retail Lease dated May 2021 between SRT LA Retail, LLC and Intent to Dine, LLC, for the ground floor at 3705-3709 West Sunset Boulevard in Los Angeles. The phrase “Percentage Rent” does not appear in it. Gross Sales appears throughout, defined in Section 3.2.5:
The term “Gross Sales” means: the entire gross receipts of every kind and nature from sales and services made in, upon, or from the Premises … and all sales made or orders placed at or completed by delivery in or from the Premises, plus all charges made for services rendered in or from, or orders placed at, the Premises (including, without limitation, orders that are accepted or transmitted by means of electronic, telephonic, video, computer or other electronic or technology based system, regardless of whether the orders are accepted or filled at the Premises or accepted or filled by Tenant or its parent, subsidiary or affiliate at any other location) …[6]
“Regardless of whether the orders are accepted or filled at the Premises” is as broad as inclusion language gets, and the tail about a parent, subsidiary or affiliate filling the order at any other location closes the obvious route around it.
What the number buys is rent relief. Section 3.2.1 recites the Los Angeles County Safer At Home orders and defines a “Public Health Hardship Period” as any period when legal restrictions prohibit the tenant from operating at full indoor occupancy. During one, if the tenant is not in default and keeps operating during the required hours, it may pay Alternate Base Rent instead of Base Rent:
The term “Alternate Base Rent” means, for any month of the Lease Term during a Public Health Hardship Period, a monthly amount equal to the greater of (I) 6% of Gross Sales (defined below) for such month … or (II) the product of (x) the then-scheduled monthly installment of Base Rent due hereunder, and (y) the greater of (a) 25% or (b) a percentage equal to the legally permissible indoor seating capacity for the Premises then dictated by the applicable Governmental Authority over the legally permissible indoor seating capacity for the Premises immediately prior to such Public Health Hardship Period …[6]
A floor of 25% of base rent, scaling up with whatever seating capacity the county allows, and a 6% of Gross Sales test sitting above it. Monthly statements are due within twenty days of month end, and a late one costs $50 the first time in a calendar year and $100 after that.[6]
Read the definition and the formula together and the result is specific. The months when a restaurant’s sales are overwhelmingly delivery and pickup are precisely the months when this clause sets the rent. The broad inclusion language, drafted to catch orders filled anywhere by anyone affiliated with the tenant, has its largest effect in the one period where almost nothing is sold across a counter. A tenant negotiating that sentence in May 2021 as a percentage rent problem would have been reading it in the wrong chapter.
The clause also has a tail the tenant should have priced: if the tenant pays less than full Base Rent for more than twelve consecutive months, the landlord may require full Base Rent going forward by written notice.[6]
The two-prong exclusion, in a lender’s form#
The fourth document is not an executed lease. It is Exhibit J, “Form of Lease,” annexed to a Loan Agreement entered into 5 August 2015 among 731 Retail One LLC, 731 Commercial LLC and their lenders, covering the retail condominium at 731 Lexington Avenue in Manhattan. The tenant is “[TENANT ENTITY].” The Percentage Rent Rate is 8%, and the exclusion reads:
(x) internet or catalogue sales in either case to the extent that (i) payment for the items purchased does not occur at the Premises and (ii) any such sale is properly accounted for in the ordinary course of business as having occurred at a location other than the Premises.[7]
Two conditions, joined by “and,” so a sale leaves Gross Sales only if it clears both. Payment did not happen at the store, and the tenant’s own books, kept in the ordinary course, record the sale somewhere else. A kiosk purchase in the store fails the first prong and stays in. A sale rung through the store register and then booked to the ecommerce entity fails the first prong and stays in. A genuine web order shipped from a distribution center and recorded there drops out.
What makes this one worth reading is who approved it. This is the form the borrower agreed with its lenders to use when it leases the space, attached to a loan agreement with a schedule of Leasing Guidelines. The percentage rent mechanics in it are collateral terms. Prong (ii) does the work that matters to a lender: it ties the exclusion to the tenant’s ordinary-course accounting rather than to the tenant’s characterization at audit time, so the question becomes what the books said before the dispute started.
Everything, although said sales may be filled elsewhere#
The last one is the oldest and the broadest. A lease between Walt Disney World Co. as landlord and Build-A-Bear Workshop at Downtown Disney in Anaheim, filed with Build-A-Bear’s 2004 registration statement, defines Gross Sales in Section 1.1.47 as all revenues received by or paid to the tenant from whatever source arising out of business conducted on, in and from the premises, including:
… sales made by mail, telephone, internet or other method although said sales may be made or filled elsewhere, all revenues derived from telephone (including local, long-distance, public telephone booths, etc.) or other electronic service or interactive media (e.g., the Internet), all deposits not refunded to purchasers, and all orders taken on, in and from the Premises although said orders may be filled elsewhere.[8]
“Although said sales may be made or filled elsewhere” is the whole fight, settled in one subordinate clause in favor of the landlord. The percentage rent that sits on top of it is tiered, three brackets of Gross Sales with escalating rates, and all six numbers in the formula are redacted in the filing under a confidential treatment request, so I cannot tell you what the rates are or where the brackets break.[8] The definition is not redacted, which is the useful half anyway.
The parenthetical about public telephone booths dates the clause. It was written for a world where “interactive media (e.g., the Internet)” needed a worked example. It is also, of the five, the definition most likely to survive the next change in how retail sells things, because it never describes a channel it can only describe a sale and then refuses to care where the goods came from.
Five leases, five answers, and no default#
Lined up by date, the five run: Disney in 2004 capturing everything regardless of where orders are filled; Dover Saddlery in 2008 capturing orders received at the premises plus orders from a landlord-built mall site, and blocking internet-return deductions; DSW in 2010 excluding internet sales unless the store register rang them and splitting kiosk sales fifty-fifty; the 731 Lexington lender form in 2015 excluding internet sales only on a two-prong test; and Intent to Dine in 2021 capturing orders filled by an affiliate at any other location.
That is five different answers to one question, and no two of them produce the same number from the same month of trading. The two 2017 and 2018 papers the International Council of Shopping Centers published on exactly this problem cite no case law, which matters: practitioners presenting the question to their own bar had no decision to point at.[9] The 2018 workshop materials put the landlord’s drafting instruction plainly, that inclusion language “should be as broad as possible and not limited in scope based on the current tenant’s business model,” and decompose a retail transaction into five elements, presentation, selection, tender of payment, fulfillment and return, any one of which a definition might key on.[9] Five elements and five leases is a coincidence, but it is the right way to read these clauses: each one picks a different element and bills on it.
I looked for a survey putting a number on what share of retail leases now capture omnichannel sales and did not find one. The absence is itself informative. Five executed leases saying five different things is better evidence that there is no market default than a percentage would be.
The one thing all five agree on is that the definition is where the money is. The rate gets negotiated in an hour. The definition gets negotiated in an email thread nobody reads twice, and then measures something for the next twenty years.
What does your Gross Sales definition actually measure?#
If you have more than a handful of retail leases, the useful question is not what your percentage rent rate is. It is which of your leases use a Gross Sales number for something other than percentage rent, and whether anyone checked that the definition was written for that job.
This is the sort of thing Acrebase is built to find. It reads a portfolio of executed leases and pulls the clause-level detail out: which definitions reach internet orders and on what trigger, which ones bar deductions for returns that were never counted as sales, which leases hang a kick-out right or a rent-relief formula off the same defined term, and which ones leave “originate” undefined. The test in DSW’s exclusion (P) is the location of a payment terminal. The test in the 731 Lexington form is the tenant’s ordinary-course accounting. Those produce different answers from identical sales data, and the difference does not show up in any rent roll.
Acrebase also keeps a team’s approved clause library and negotiation playbook, which is where this gets fixed rather than found. If your house position is that Gross Sales includes orders placed at the premises regardless of where they are filled, that returns of uncounted sales are never deductible, and that any definition feeding a kick-out threshold or a relief formula gets reviewed against that use and not against the percentage rent article, then that position should look the same in every lease your team signs. Its AI reads how your earlier negotiations went, so when a tenant asks to carve internet sales out of Gross Sales and the same lease measures its own termination right with that number, the flag arrives with the fallback your team accepted last time. Related clauses we have covered: percentage rent follows the gross sales definition, not where the goods ship from, going dark costs nothing without a continuous operation clause, and Old Navy’s co-tenancy clause counts open stores, Guess’s counts signed leases.
If you are a landlord, write the trigger as a physical or accounting fact rather than a characterization. “Payment is made from a kiosk, terminal or other mechanism located at or on the Premises” is checkable from a floor plan. “Orders originating at the Premises” is checkable from nothing. Put Dover’s last sentence in every definition you own, because the deduction for a return the sale never produced is the quietest leak in the clause and it costs one line to close. Then go find every other provision in your form that uses the defined term, since the sentence you negotiate to raise percentage rent by two cents on the dollar may also be the sentence that keeps a tenant from exercising a kick-out, and you want to know which effect is larger before you trade the language away.
If you are a tenant, three things. First, before you argue about the Gross Sales definition, read every clause in the lease that uses the term, because a definition that costs you percentage rent may be the one that measures the sales floor you need to fall below to get out, and in that second role you want it broad. Second, if your point of sale system rings up online orders for the store that fulfilled them, your reported Gross Sales already include them under most of the definitions above, whatever your lease negotiator believed; find out what your export actually does before the landlord’s auditor does, and note that DSW’s lease charges the tenant for the audit at a 3% understatement, which is a threshold a single misclassified transaction type can clear. Third, if you agree to a split like the fifty percent in Nashua, make sure the system can produce that number as a report, because a clause that requires a category your point of sale cannot segregate turns every annual statement into an estimate you have signed an officer’s certificate about.
Footnotes
[1] Lease Agreement made as of 26 August 2010 between JLP-NASHUA NH LLC, a New Hampshire limited liability company, as Landlord, and DSW SHOE WAREHOUSE, INC., a Missouri corporation, as Tenant, covering a building of approximately 22,142 square feet of floor area at 270 Daniel Webster Highway, Nashua, Hillsborough County, New Hampshire, in a shopping center known as Webster Square comprising approximately 22 acres. Filed as Exhibit 10.1 to DSW Inc.’s Form 10-Q filed 1 December 2010. Section 8.2 defines Gross Sales as “the aggregate amount, expressed in dollars, of all sales or rental or manufacture or production of merchandise and all services, income and other receipts whatsoever of all business conducted in, at or from any part of the Premises,” sweeps in sales by sublessees, concessionaires and licensees “whether the receipts be obtained at the Premises or elsewhere,” and then excludes items (A) through (P). Exclusion (P) is quoted in full. The count of sixteen exclusions is the lettering (A) through (P) in the clause itself. Landlord’s notice address is Schottenstein Property Group, 4300 East 5th Avenue, Columbus, Ohio. https://www.sec.gov/Archives/edgar/data/1319947/000114036110047671/ex10_1.htm
[2] Same lease, Sections 1.11, 1.12 and 1.13. Minimum Rent runs $354,272.00 a year at $16.00 per square foot of GLA from the Rent Commencement Date through Lease Year 5, $376,414.00 at $17.00 for Lease Years 6 through 10, $398,556.00 at $18.00 for 11 through 15 and $420,698.00 at $19.00 for 16 through 20. Percentage Rent is “four percent (4%) of Tenant’s Gross Sales made in the Premises during each Lease Year (or partial Lease Year) in excess of the Breakpoint,” and the Breakpoint is “an amount computed by dividing the Minimum Rent payable by Tenant for a Lease Year … by four percent (4%).” The $8,856,800 figure is my arithmetic from the first-period Minimum Rent, and it moves with each rent step and with any permitted offset or abatement, which the Breakpoint definition expressly adds back. The two cents and four cents per dollar are mine. Percentage Rent is payable within ninety days after each Lease Year end with a signed statement of Gross Sales, under Section 8.1. The CAM Charge for the initial period is $1.84 per square foot per annum under Section 1.14. https://www.sec.gov/Archives/edgar/data/1319947/000114036110047671/ex10_1.htm
[3] Same lease, Section 8.3, “Landlord’s Audit”: fourteen days’ written notice, no more than once in every twelve month period, during normal business hours at the tenant’s corporate office, and if the audit “reveals that Tenant has understated its Gross Sales by more than three percent (3%) for any Lease Year resulting in an underpayment of Percentage Rent,” the tenant pays the additional Percentage Rent plus the reasonable cost of the audit within thirty days of demand with supporting invoices. The same section disclaims any representation that Percentage Rent will be paid in any year and contains the quoted sentence about no duty to operate. It also binds the landlord to hold Gross Sales statements in strict confidence, with four carve-outs: a bona fide prospective sale of the premises, trial of an action or arbitration between the parties, a mortgagee or prospective mortgagee, and a duly served subpoena. That a store with an in-premises terminal can swing by more than 3% on the classification of one transaction type is my judgment, not a figure from the lease. Section 6.5, “Sales Termination Right,” is marked “Intentionally omitted,” so this lease has no sales-based kick-out of its own. https://www.sec.gov/Archives/edgar/data/1319947/000114036110047671/ex10_1.htm
[4] Lease between Stonewood Partners, LLC, as Landlord, and Dover Saddlery Retail, Inc., as Tenant, for premises at Stonewood Village Shopping Center, Alpharetta, Georgia, filed as Exhibit 10.64 to Dover Saddlery, Inc.’s Form 10-K filed 31 March 2008. Section 3.2 on Percentage Rent, Section 14.22(a) defining Gross Sales, and the closing sentence of 14.22 are quoted. The definition opens on “the actual sales prices of all goods, wares, and merchandise sold, all revenues and income derived from the Premises and the actual charges for all services performed by Tenant or by any subtenant, licensee, or concessionaire or others in, at, or from the Premises, whether for cash, credit, or otherwise, without reserve for inability to collect,” and then runs four inclusion limbs and seventeen numbered deductions, among them refunds “on transactions, otherwise included in Gross Sales, not in excess of the original selling price,” sales taxes, bulk and wholesale transfers, layaway and finance charges, workroom and alteration charges, gift certificates until treated as a sale, employee discounts and senior citizen discounts. The counts of four limbs and seventeen deductions are from the clause’s own numbering. Reading limb (3) as reserving credit for traffic sent through a landlord-built mall site is my reading of the words “via any website established by Landlord for the Shopping Center containing a link to Tenant’s website.” https://www.sec.gov/Archives/edgar/data/1071625/000095013508002181/b68192dsexv10w64.htm
[5] Same lease, Section 4 of the addendum, quoted in part. The termination notice must be given within ninety days after the end of the fourth Lease Year and by certified mail, return receipt requested, and the threshold is evidenced “by an audited statement of Gross Sales,” which means the tenant pays for an audit to prove it underperformed. The lease separately provides at Section 14.5 that a holdover with the landlord’s written consent runs at 150% of the expiring rate and a holdover without consent at twice the rent and other charges as liquidated damages. That the inclusion language cuts against the tenant in its kick-out role, and that a house rule of excluding internet sales from Gross Sales would therefore be the wrong instruction in this lease, is my reading rather than anything the lease says. https://www.sec.gov/Archives/edgar/data/1071625/000095013508002181/b68192dsexv10w64.htm
[6] Retail Lease dated May 2021 between SRT LA RETAIL, LLC, a Delaware limited liability company, as Landlord, and INTENT TO DINE, LLC, a Delaware limited liability company, as Tenant, covering the first floor of the building at 3705-3709 West Sunset Boulevard, Los Angeles, California, with a guaranty from 1334 Partners, L.P. Filed as Exhibit 10.3 to Strategic Realty Trust, Inc.’s Form 10-K filed 25 March 2022. The day of the month is left blank in the guaranty’s recital of the lease date in this exhibit. Sections 3.2.1, 3.2.2 and 3.2.5 are the source for the Public Health Hardship Period definition, the Alternate Base Rent Conditions and formula, the Gross Sales definition, the twenty day monthly statement deadline, the $50 and $100 late charges, and the landlord’s right to reinstate full Base Rent by notice after twelve consecutive months of reduced payment. Relief runs until the earlier of twelve months after the Hardship Period begins or the end of the Hardship Period, and Additional Rent including Tenant’s Share of Direct Costs stays payable in full throughout. A search of the exhibit returned no occurrence of the phrase “Percentage Rent.” Gross Sales is reduced by returns accepted for full credit and by sales taxes remitted to a governmental agency, among other items. The observation that the broad inclusion language has its largest effect in the months when a restaurant sells mostly by delivery and pickup is mine. https://www.sec.gov/Archives/edgar/data/1446371/000144637122000011/leaseagreementwithintent.htm
[7] Exhibit J, “Form of Lease,” annexed to the Loan Agreement entered into as of 5 August 2015 among 731 RETAIL ONE LLC and 731 COMMERCIAL LLC, jointly and severally as Borrower, and the lenders party thereto, filed as Exhibit 10.3 to Alexander’s, Inc.’s Form 10-Q filed 2 November 2015. The retail condominium is at 731 Lexington Avenue, New York. The tenant in the form is “[TENANT ENTITY]”; this is a form annexed to a loan agreement and not an executed lease, and I make no claim that any tenant signed it. The Percentage Rent Rate is defined as “eight percent (8%)” and the Sales Year runs each 1 January to 31 December, with a short first Sales Year if the Rent Commencement Date is not 1 January. Exclusion (x) is quoted in full; the exclusions run (a) through (x) and include transfers of merchandise between the premises and other stores of the tenant or an affiliate, bulk or wholesale transfers out of the ordinary course, delivery charges and fees paid to third parties, gift certificates until redeemed at the premises, bad debts, and receipts for fittings and alterations provided only for customer convenience as an incidental use. The Loan Agreement includes a Schedule 2, “Leasing Guidelines.” That prong (ii) shifts the question to what the tenant’s ordinary-course books said before a dispute arose, and that this is the prong a lender cares about, is my reading. https://www.sec.gov/Archives/edgar/data/3499/000000349915000025/exhibit103.htm
[8] Lease between Walt Disney World Co., as Landlord, and Build-A-Bear Workshop, Inc., as Tenant, for premises at Downtown Disney, Anaheim, Orange County, California, filed as Exhibit 10.27 to Build-A-Bear Workshop’s Form S-1/A filed 5 October 2004 (the same exhibit appears in the S-1/A filed 10 September 2004). Section 1.1.47 defines “GROSS SALES” and is quoted in part. Section 3.2.1 sets Percentage Rent as the sum of three tiers, stated in the filing as “(i) * of its annual Gross Sales which exceed * but are less than * , (ii) * of its annual Gross Sales which exceed * but are less than * and (iii) * of its annual Gross Sales in excess of * ,” where each asterisk marks redacted text under the registrant’s confidential treatment request, with omitted portions filed separately with the SEC. So the rates and bracket boundaries are not available to me and I assert nothing about them. The lease defines a “SALES THRESHOLD” by reference to Section 1.5 and an “OUTSIDE OPENING DATE” of the later of 1 November 2001 or 120 days after delivery of the Shell Premises. Credit sales, including sales paid for with Disney Dollars, are treated as sales for the full price in cash in the month made. That the definition is more durable than the channel-specific ones because it refuses to care where goods are filled from is my judgment. https://www.sec.gov/Archives/edgar/data/1113809/000095013704008286/c86750a4exv10w27.txt
[9] International Council of Shopping Centers, 2017 Canadian Shopping Centre Law Conference, “Percentage Rent and Online Sales,” by Konstantine Chatzidimos and Caterina White, which sets out the landlord’s opening position, the tenant’s mirror position and a three-condition compromise, and cites no decided case on the question: https://www.icsc.com/uploads/default/Friday_26_Percentage_Rent_and_Online_-_Chatzidimos__White.pdf . And ICSC, 2018 U.S. Shopping Center Law Conference, Workshop 5, 24 October 2018, Orlando, “Measuring Omnichannel/Internet/E-commerce Gross Sales to Customers You Can’t See,” by Kenneth S. Lamy of The Lamy Group and David T. Graham of Chico’s FAS, the source for the quoted drafting instruction and the five-element decomposition of a retail transaction into presentation, selection, tender of payment, fulfillment and return: https://www.icsc.com/uploads/education/2018LC_Materials_WS5.pdf . Neither paper is a survey of lease terms, and I did not find one. My statement that these two papers cite no case law is based on reading them; it is not a statement that no such case exists anywhere, and unpublished and state trial court decisions are outside what I searched.
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