Question

In: Finance

Suppose that you have been offered a 10-year lease with the following terms: 30,000 square feet...

Suppose that you have been offered a 10-year lease with the following terms:

30,000 square feet of space Year 1 rent is $15 per square foot per year. Rent will escalate at 2.5% per year.

Year 1 operating expenses are expected to be $3 per square foot per year. Operating expenses are expected to escalate at a rate of 3% per year. The landlord will provide a tenant improvement allowance of $20 per square foot. The landlord is offering the following concessions: Years 1 and 2 will be rent-free. What is the effective rent for this lease? Assume a discount rate of 8% per year.

Solutions

Expert Solution

We need to calculate the equivalent annual annuity to get the effective rent

We first chalk out the cash-flows

Hence, effective rent = $393801.63

jeff jeffy answered 2 years ago
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