Use the following information about a net lease to answer this question. Measurement7,500 rentable square feet Base
Question:
Use the following information about a net lease to answer this question.
Measurement7,500 rentable square feet
Base rent$12 per square foot annually
Operating expenses$22,500 per year
Taxes$15,000 per year
Cost of tenant improvements$20,000
Parking$2,000 per month (fixed over the life of the lease)
Cost of old lease buyout$20,000
Moving costs$10,000
Tenant-improvement allowance$2 per square foot
Free-rent First two months free (base rent only, not parking)
Moving allowance$7,500
Assume that the described lease has a term of five years. The consumer price index is 3 percent per year. Taxes and expenses escalate yearly at the consumer price index starting in year two. Rent escalates at 4 percent per year on the base rent only. The user’s discount rate is 11 percent.
What is the total effective rent?
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher