Deck 9: Income-Producing Properties: Leases, Rents, and the Market for Space

Question 1

Which of the following tends to lower effective rents?

A) Percentage rent
B) Step up provisions
C) Concessions
D) CPI adjustment

Answer 1

Concessions

Question 2

Which of the following leads to rent premiums?

A) Apartments on periphery of site,higher floors with no elevators
B) Second or third levels in multi-level malls
C) Middle floors in office building
D) Apartments on higher floors with elevators

Answer 2

Apartments on higher floors with elevators

Question 3

Which of the following is TRUE for a net lease?

A) All expenses are paid for by the owner
B) All expenses are paid for by the tenant
C) All expenses are paid by the lender
D) All expenses are paid by the investor

Answer 3

All expenses are paid for by the tenant

Question 4

Which does the term "in-line tenants" refer to?

A) Smaller stores in a mall that are not anchor tenants
B) Tenants who's sales are inline with estimates
C) Tenants who pay their rents on a timely basis
D) Stores that are located inside the mall including anchors

Question 5

A 1,000 square foot office space is leased at $15.00/square foot during the first year with $2.00 step-up provisions each of the following years.The lease is gross with an expense stop set at $6.65/square foot,and yearly expenses/square foot are as follows: $6.00,$6.65,and $7.05.The lease provides for two months of free rent at the end of the lease term.If the lease term is three years and the discount rate is 10%,what is the effective rent/square foot?

A) $9.38
B) $9.50
C) $10.22
D) $10.46

Question 6

The difference between the existing stock of space and the equilibrium occupancy is know as the:

A) supply
B) demand
C) equilibrium
D) vacancy

Question 7

Which of the following properties is NOT a type of commercial property?

A) Single-tenant office building
B) Regional shopping center
C) Warehouse
D) Office/showroom

Question 8

The supply of space is:

A) inelastic in both the short run and the long run.
B) elastic in both the short run and the long run.
C) relatively inelastic in the short run,and highly elastic in the long run.
D) relatively elastic in the short run,and highly inelastic in the long run.

Question 9

Overage rent is rent that exceeds expenses.

Question 10

The term "percentage rent" refers to rent paid as a percent of space leased.

Question 11

Which does the term anchor tenant usually refer to?

A) Someone who leases space at a marina
B) The largest tenant in an office building
C) A department stores in a mall
D) The tenants who pay the highest rent in a mall

Question 12

What is does an expense stop do in a lease?

A) Stops expenses from increasing
B) Expenses above the stop are paid by the owner
C) Expenses above the stop are paid by the tenant
D) Expenses below the stop are paid for by the tenant

Question 13

Income after deducting vacancy that is available to pay expenses is referred to as

A) Potential gross income
B) Effective gross income
C) Net operating income
D) Before tax cash flow

Question 14

Expenses for a 1,000 square foot office space are $6.00 per square foot.The lease specifies an expense stop of $5.40.What is the total expense paid by the landlord?

A) $5,400
B) $6,000
C) $600
D) $0

Question 15

A 1,500 square foot office space is leased at $12.00 square foot.The space is vacant one month out of the year.Office expenses are $6.50 per square foot and an expense stop is set at $6.00 per square foot.What is the annual net operating income?

A) $7,500
B) $6,750
C) $15,750
D) $8,250

Question 16

The dollar amount by which total rent exceeds base rent under a percentage lease for retail is referred to as

A) overage rent
B) excess rent
C) percentage rent
D) marginal rent

Question 17

A clause in a non anchor tenant's lease requiring the presence of an anchor tenant is referred to as a

A) Non-compete clause
B) Co-tenancy clause
C) Joint tenancy clause
D) Anchor clause

Question 18

Which is not true about Cap rates?

A) Excess supply tends to drive cap rates up
B) Rising interest rates generally tends to lower cap rates
C) Excess demand and falling interest rates results in lower cap rates
D) Excess demand leads to lower cap rates

Question 19

A clause which requires a tenent in retail space to achieve a certain level of sales of the lease will be terminated is referred to as a

A) Kickout clause
B) Termination clause
C) Option clause
D) Santa clause

Question 20

A gross lease is where tenants pay all expenses.

Question 21

A gross lease is riskier for the lessor than a net lease.

Question 22

The use of a CPI index in a lease contract shifts risk to the tenant.

Question 23

Expense stops protect the lessee from unexpected changes in market rents.

Question 24

The term "usable area" is typically synonymous with "leaseable area."

Question 25

If a lease has free rent earlier in its term,its default risk might be considered slightly higher.

Question 26

CPI adjustments are used to adjust rents by all or part of the increase in the Consumer Price Index.

Question 27

Net operating income is the income after deduction of mortgage payments.