Use the following information for the next 3 problems

Leases are for the next 5 years and a rate of 5%

Net lease with steps. Rent will be $10/ square foot the first year and will increase by $1.50 per square foot each year until the end of the lease.

Net lease with CPI adjustments. The rent will be $12 /square foot the first year. After the first year, the rent will be increased by the amount of any increase in the CPI. The CPI is expected to increase 4% per year.

Gross lease. Rent will be $28/square foot each year with the lessor responsible for payment of all operating expense. Expenses are estimated to be $10 during the first year and increase by $1 per year thereafter.

Gross lease with expense stop and CPI adjustment. Rent will be $20 the first year and increase by the full amount of any change in the CPI after the first year with an expense stop at $10/square foot. The CPI and operating expenses are assumed to change by the same amount as outlined in II and III.

What is the effective rent to the owner (after expenses) for Net lease with CPI adjustments?

	a.	12.95/ square foot
	b.	14.22/ square foot
	c.	13.00/ square foot
	d.	56.06/ square foot

1 points

QUESTION 9

What is the effective rent to the owner (after expenses) for Gross lease with expense stop and CPI adjustment?

	a.	50.15/ square foot
	b.	11.58/ square foot
	c.	12.23/ square foot
	d.	11.67/ square foot

1 points

QUESTION 10

Which of the following is True?

	a.	For option III, the property owner has no unexpected change in operating expense risk.
	b.	For option I, the property owner has no unexpected change in operating expense risk.
	c.	For option I, the property owner has no inflation risk.
	d.	For option III, the property owner has no inflation risk.

Generally, the supply of space is:

	a.	Elastic in both the short run and the long run
	b.	Inelastic in both the short run and the long run
	c.	Relatively elastic in the short run, but inelastic in the long run
	d.	Relatively inelastic in the short run, but elastic in the long run