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In: Finance

The property you are appraising is a five-story office building. Each floor has 10,000 square feet...

The property you are appraising is a five-story office building. Each floor has 10,000 square feet of rentable space and is suitable for single occupancy. Two tenants have leases. Floor 3 is occupied under a five-year lease with three years remaining. The current rental is $128,600 per year. Floor 4 is occupied under a new five-year lease and the rent is $150,000 per year. Floors 1, 2, and 5 are vacant. The rent being paid for the fourth floor is considered current market rent. The first floor is expected to bring a rent premium of 15% because of its visibility and commercial potential. The fifth floor is expected to bring a 10% premium because of its view. There is a strong demand for the space available in this building. Rent levels in the next five years are expected to increase 8% on an annual compounding basis as they have in the last two years. All future leases will be for three-year terms.

What is the total rent projected in year 1?

1)

 $766,100

2)

 $728,000

3)

 $809,000

4)

 none of the above

Question 24

Based on the information in the above question (#23), what is the total rent projected for year 3?

1)

 $766,100

2)

 $728,000

3)

 $809,000

4)

 none of the above

Again, using the information in question #23, what is the total rent projected for year 5?

1)

 $766,100

2)

 $728,000

3)

 $809,000

4)

 none of the above

Solutions

Expert Solution

Peojected rent for year 1

1floor 15%primium form basic rent 172500
2nd floor consider basics rent 150000
3 rd floor 128600
4th at list floor assume basic rent 150000
5th floor 10 % primium form basic rent 165000
Toal 766100

Peojected rent for year 3

1floor 15%primium form basic rent 172500
2nd floor consider basics rent 150000
3 rd floor(128600*1.08*1.08) 150000
4th at list floor assume basic rent 150000
5th floor 10 % primium form basic rent 165000
Toal 787500

d none of above

Peojected rent for year 5

1floor 15%primium form basic rent (127500*1.08*1.08) 201204
2nd floor consider basics rent(15000*1.08*1.08) 174960
3 rd floor 150000
4th at list floor assume basic rent(150000*1.08*1.08) 174960
5th floor 10 % primium form basic rent(165000*1.08*1.08) 192456
Toal 893590

Option d none of these

jeff jeffy answered 2 years ago
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