chap 9 homework

8/7/2019 Chap 9 Homework

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Chap 9

Prob 1

Comparision of Leases

Common Terms

Term 5 years

Expenses $9.00 p.a.

Expense Growth $1.00 annually

Discount Rate 10%

CPI Forecast Growth 3% pa

Lease 1 - Net Lease

Rent $15.00 pa Rent

Steps $1.50 annually Average Rent $18.00

All Operating Expenses will be passed through Present Value $67.15Effective Rent $17.72

Lease 2 - CPI

Rent $16.00 pa

Steps CPI Average Rent $16.99

Present Value $64.04

Effective Rent $16.89

Lease 3 - Gross

Rent $30.00 pa Gross Rent

Operating Exp.

Net Rent

Average Rent $19.00

Present Value $72.74


Lease 4 - Gross with stop & cpi Gross Rent

Rent $22.00 pa

Expense Stop $9.00 base

Average Rent $14.36

Present Value $53.94Effective Rent $14.23

In order of least to most expensive

4, 2, 1, 3


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b) Gross Lease is the Riskiest Two risks with which to be concerned

operating expenses

Next Riskiest Gross Lease with stops is just Keeping up with inflation

like the net lease with fixed steps

they both protect against operating expenes increases

but not inflation

Least Risky

Net Lease with CPI

Protects against operating expense increases

Protects against Inflation

c) Riskiest Pays the most

But next riskiest Gross with stops pays too little

the both net leasses seem appropriately priced on a relative basis

so except fot the Gross lease with step which seems to cheap, the remainder are a su


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Year 1 Year 2 Year 3 Year 4 Year 5

$15.00 $16.50 $18.00 $19.50 $21.00

$16.00 $16.48 $16.97 $17.48 $18.01

$30.00 $30.00 $30.00 $30.00 $30.00

$(9.00) $(10.00) $(11.00) $(12.00) $(13.00)

$21.00 $20.00 $19.00 $18.00 $17.00

$22.00 $22.66 $23.34 $24.04 $24.76

$(9.00) $(10.00) $(11.00) $(12.00) $(13.00)

$- $1.00 $2.00 $3.00 $4.00

$13.00 $13.66 $14.34 $15.04 $15.76


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jective choice between risk and reward.


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Chap 9

Prob 2

Apex Atrium

Stories 10

Total sf 300,000

Unusable 45,000

Building Usable 255,000

Lobby 30,000

Building Rentable less Lobby 225,000

Seventh floor Usable 28,000 Rentable

Seventh floor Usable 25,000 Usable

Space for Lease 5,000 usable (carpetable)

a)

b) 1.12 Floor Load Factor

3,000 Common Area

c) 5,600 Rentable Area

$30.00 rent

$168,000 annual Rent for first Year

d) 1.13 Building Load Factor

1.27 Double Load6,347 Rentable

3,400 Common


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is so that their payments plus the Anchor payments will cover all the CAM charges.


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Chapter 9

Prob 6

Autm Leafs

Units

studios 40 5501 - bed 80 600

2 - bed 80 800

Total 200 Gross Potential Rent

Loss to Lease

lease terms 12 months Current @ Market Market Units

Under Market Studios

Underm market 1 -BRDM

$10 Rent Step up in 6 months Under Market 2 - BRDM

Total Loss to Lease

Undermarket Leases

Studios 10 500 3 months old VacanyOne Bedroom 20 580 2 months ago

two bedrooms 10 805 last month

Vacancies

Studios 4

1 - Bed 6

2 - Bed 6

Annual totals

Gross Potential Rent $1,620,000Loss to Lease $18,190

Vacancy $128,160

Net Rent $1,473,650

Recoveries $220,800 184 Occupied Units

Other Income $200,000

SubTotal $420,800

Total Income $1,894,450

Operating Expenses $883,200

Recurring Expenses/Maintenance $100,000Locator $10,000

Expenses $993,200

Net Operating Income (NOI) $901,250

Non-Recurring Expenses $250,000


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Net Cash Flow $651,250


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Month 8 Month 9 Month 10 Month 11 Month 12

$560 $560 $560 $560 $560$610 $610 $610 $610 $610

$810 $810 $810 $810 $810

$136,000 $136,000 $136,000 $136,000 $136,000

$1,440 $1,440 $1,440 $1,440 $1,440

600 600

600 600 600

50 50 50 50

$2,690 $2,690 $2,090 $1,490 $1,440

$10,760 $10,760 $10,760 $10,760 $10,760


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Lease Types and Rents

Discount Rate 10.0%

Inflation Rate: 3% 3%

CPI: 2% 3%

Year 1 Year 2 Year 31) Net Lease

Initial Rent $10.00 p.a.

Steps $1.00 annuallty $10.00 $11.00 $12.00

Average Rent $12.00

Net Present Value $44.77


2) Net Lease / Free Rent

Initial Rent $14.50

Free Rent 12 monthsRent Steps $1 annually $- $14.50 $15.50

Average Rent $12.80



3) Net Lease with CPI

Initial Rent $11.00

Steps CPI $11.00 $11.22 $11.56

Average Rent $11.68

Net Present Value $44.00Effective Rent $11.61

4) Gross Lease

Initial Rent $17.50 Gross Rent $17.50 $17.50 $17.50

Operating Expenses $4.00 Op Exp $(4.00) $(4.12) $(4.24)

Net Rent $13.50 $13.38 $13.26

Average Rent $13.25



5) Gross Rent /$4.00 Stop Gross Rent $17.50 $17.50 $17.50

Op Expenses $(4.00) $(4.12) $(4.24)

Escalations $- $0.12 $0.24

Net Rent $13.50 $13.50 $13.50

Average Rent $13.50


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3% 3%

4% 5%


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s, or just electric, etc


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Home Suite Home on the Range Apartments

In six months

(for 7th month) Month 1

Units # of Units Rents Step Ups

1 - bed 100 $1,000 $75 $1,000

2 - bed 50 $1,300 $100 $1,300

Total 200 Gross Potential Rent $165,000

Lease Terms 12 months Loss to Leases 1250

500

Undermarket 1 Year Leases Total Loss to Lease 1750

One Bedroom 25 950 9 months ago Vacancy $8,250

two bedrooms 10 1250 3 months ago

Note: Other Leases all roll after the 6th Month to Market Rent

Vacancies 5% 10 units 1 Year CashRecoveries 200 per occupied unit

Operating expenses 600 per occupied unit Gross Potential Rent

Loss to Lease

Occupied Units 190 Vacancy

Net Rental Income

Other Income $1,250 per occupied unit

Recoveries

Other Income

SubTotal

Total Income / Effective Gross Income

Operating Expenses

Net Operating Income (NOI)

Recurring Expenses

Non-Recurring Expenses

Net Cash Flow


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Month 9 Month 10 Month 11 Month 12

$1,075 $1,075 $1,075 $1,075

$1,400 $1,400 $1,400 $1,400

$177,500 $177,500 $177,500 $177,500

1500

1500 0 0 0

$8,875 $8,875 $8,875 $8,875

t Method)

These are items required to maintain the value of the property.

These are items that increase the value of the property,

or are major expenditures such as a roof replacement.


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Office Load Factors Floor Load Factor - Floor Rentable / Floo

Builing Load Factor - Total Rentable / Tot

OfficesFloors

Suites: A B C

6 5,000 5,000 5,000

5 23,000

4 23,000

3 23,000

2 10,000 5,000

1 10,000 5,000

Rent (1) Floor Load Factor Building Load Fact Rentable SFSuite 6A $25.00 1.15 1.035 5,951

Suite 5A $25.00 1.00 1.035 23,805

Whole Building Tenant $25.00 1 1 133,000

1) Rentable Square feet are the usable sf plus an allocation of common areas.

-- Unusable spae are elevators, walls, columbs, utilities, etc

-- Marginal common areas might be those which would not be common i

-- Lobby, common area, but not if one tenant leased the entire building.


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r Usable

l Usable

Lobbies Elevator Bathrooms Utilities Usable Rentable Gross

D E F

5,000 3,000 2,000 20,000 23,000 25,000

2,000 23,000 23,000 25,000

2,000 23,000 23,000 25,000

2,000 23,000 23,000 25,000

6,500 1,500 2,000 16,500 18,000 25,000

5,000 1,500 1,500 2,000 23,000 23,000 25,000

128,500 133,000 150,000 Totals

Base Rent Rent per Usable SF$148,784 $29.76

$595,136 $25.88

$3,325,000 $25.00


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all be usable for a single tenant occupying the whole building thus Usable = Rentable.


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Chapter 9

Effective Rents

Data Input Box:

Inerest Rate 10% Adjustments

Year 1 Rents Step Amount 1

Net Lease with Steps 10 Percent CPI Adj. 1

Net with CPI Adjustment 11 Yr 2 CPI 0.02

Gross Lease 17.5 CPI Growth 0.01

Gross with Exp. Stop 15.5 Yr 1 Expenses 4

Gross with Exp. Stop &CPI 14.5 Expense Growth 0.5

Year 2 Rents Expense Stop 4

Net Lease with Free Rent 14.5

NET LEASE with STEPS:

Year 1 2 3 4 5

Net Rent $10.00 11.00 12.00 13.00 14.00

Average Rent $12.00

Present Value 44.77

Effective Rent 11.81

NET LEASE with FREE RENT:

Year 1 2 3 4 5Net Rent 0 14.50 15.50 16.50 17.50

Average Rent 12.80

Present Value 45.76


NET LEASE with CPI ADJUSTMENT:

Year 1 2 3 4 5

Expected CPI - 2.00% 3.00% 4.00% 5.00%

Net Rent 11.00 11.22 11.56 12.02 12.62

Average Rent 11.68

Present Value 44.00Effective Rent 11.61

GROSS LEASE:

Year 1 2 3 4 5

Gross Rent 17.50 17.50 17.50 17.50 17.50

Less Expenses 4.00 4.50 5.00 5.50 6.00

Spreadsheet Limitations: Net Lease with free rent has begins payment year two.


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Net Rent 13.50 13.00 12.50 12.00 11.50

Average Rent 12.50 12.50

Present Value 47.74


GROSS LEASE with EXPENSE STOP:

Year 1 2 3 4 5

Gross Rent 15.50 15.50 15.50 15.50 15.50

Less Expenses 4.00 4.50 5.00 5.50 6.00

Plus Reimburse 0.00 0.50 1.00 1.50 2.00

Net Rent 11.50 11.50 11.50 11.50 11.50

Average Rent 11.50

Present Value 43.59


GROSS LEASE with EXPENSE STOP and CPI ADJUSTMENT:

Year 1 2 3 4 5

Expected CPI - 2.00% 3.00% 4.00% 5.00%

Gross Rent 14.50 14.79 15.23 15.84 16.64

Less Expenses 4.00 4.50 5.00 5.50 6.00

Plus Reimburse 0.00 0.50 1.00 1.50 2.00

Net Rent 10.50 10.79 11.23 11.84 12.64

Average Rent 11.40

Present Value 42.84



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per year

per year

per year


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chap 9 homework

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