Real Estate Principles Study Set 1

Business

Quiz 22 :

Leases and Property Types

Quiz 22 :

Leases and Property Types

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Assume a retail tenant is paying a base rent of $120,000 per year (or $10,000 per month). In addition, the tenant must pay 7 percent of gross store sales in excess of $143,000 per month as percentage rent. If the store produces $170,000 in gross sales in a month, what is the percentage rent in that month What is the total rent due
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• In order to determine the percentage in rent, subtract the gross sales from $143,000 the month to find the difference and multiply it with 7%:
img Therefore, the percentage month for the month is $1,890.
• In order to determine the total rent due, add the percentage for the month to the base rent:
img Therefore, the total rent due for the month is $11,890.

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Which of the following statements regarding tenant improvements (TIs) is the least true in the context of commercial real estate leases
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B. Tenants can generally negotiate higher TIs for existing space than for space in a newly developed project.

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When the tenant pays a base rent plus some or all of the operating expenses of a property, the result is a:
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B. Net Lease.

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Lease provisions that grant the tenant the right, but not the obligation, to do something generally result in:
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Existing leases:
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The typical anchor tenant in a neighborhood shopping center is a:
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Describe the most common methods used to specify rent changes over time for a commercial lease.
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In shopping center leases, rents are typically quoted on the basis of what type of area occupied by the tenant
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Assume a small office building has a total usable area of 40,000 square feet and 5,000 square feet of common area. Tenant Z occupies 6,000 square feet of usable area. What is Tenant Z's rentable area
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What factors tend to make both owners and tenants prefer longer-term leases, all else being equal
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Assume the owners of a midsize office building recover all operating expenses from their tenants except management and administrative expenses. The total rentable area of the office building is 100,000 square feet. The total amount of operating expenses recoverable from tenants in the current year is $700,000. Tenant B occupies 10,000 square feet of the building and has an expense stop of $5.50 per square foot. How much of the building's reimbursable operating expenses will the owners recover from Tenant B
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A prospective tenant has presented two lease proposals to the owner of an office building. The first alternative has a five-year term and a contract rental rate of $16.00 per square foot in the first year of the lease. The rental rate then steps up 3 percent per year over the remainder of the lease term. So, for example, the rental rate in year 2 (months 13-24) would be $16.48. The second lease alternative is also a five- year lease with an initial contract rate of $16.00 per square foot. However, the rental rate on this lease is indexed to inflation with the adjustment made at the beginning of each year based on the actual rate of inflation in the previous year. The owner of the office property projects that inflation will run at a rate of 3 percent per year over the five-year lease term. a. What are the owner's projected payments over the five year term for the two alternatives b. Which option is the owner likely to prefer and why
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With an expense stop clause:
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As a tenant, you wish to turn over all rights and responsibilities of your unexpired lease term to a new tenant. By doing so, you are:
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A lease in which the tenant pays a rent based in part on the sales of the tenant's business is known as a:
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The tenant is responsible for paying property taxes and insurance in a:
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Why might a tenant prefer a lease with a higher effective rent than an alternative lease with a lower effective rent
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