You are the Landlord of a building with two tenants (A and B). Use the following information to calculate the (projected) Year 3 building operating expenses, assuming 100% gross leases ``in arreas'' for all tenants: Each tenant occupies 50% of net rentable space. Tenant A has a fixed lease for the next ten years, and Tenant B has a lease which expires at the end of year 2 (beginning of year 3). First year Operating Expenses are $1000, and are projected to increase 5% per year. Building expenses are 60% fixed, 40% variable. Assume that Tenant B has a 70% probability of exercising an extension option for year 3. If they do not renew, assume the space will be vacant for 3 months, and then occupied by a similar tenant (in terms of operating expenses).?

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To calculate the projected Year 3 building operating expenses we need to consider the expenses for b... View the full answer