Chapter 9

Question 1

To attract anchor tenants, property owners tend to charge them lower rents. They make up for the lower rents by charging the anchor tenant higher CAM charges.

Answer 1

False

Question 2

Overage rent is rent that exceeds expenses.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

A gross lease is one in which the tenant only pays rent, and the owner of the property pays the operating expenses and provides all services.

Answer 4

True

Question 5

Consider the figure above. Point D represents:

Answer 5

equilibrium occupancy

Question 6

Consider the figure above. The difference between the existing stock of space and Point D represents:

Answer 6

vacancy

Question 7

Consider the figure above. If the demand for units increases, what would happen in equilibrium, holding everything else constant?

Answer 7

Market rent would increase; equilibrium occupancy would increase

Question 8

For which of the following reasons would a business prefer to own space rather than lease it?

Answer 8

The business demands specialized or unique facilities.

Question 9

A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year. Using a 10 percent discount rate, what is the effective rent over the three years?

Answer 9

20.94

Question 10

A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year, but is providing six months of free rent in the first year as a concession. Using a 10 percent discount rate, what is the effective rent over the three years?

Answer 10

17.28

Question 11

Which of the following is NOT considered to be an office or retail property?

Answer 11

Warehouse

Question 12

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

Answer 12

vacancy

Question 13

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

Answer 13

overage rent

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?

Answer 14

$5,400

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? (Assume no additional expenses during the month of vacancy)

Answer 15

$7,500

Question 16

Income after deducting loss of rents due to vacancy and nonpayment of rents, as well as any concessions, is referred to as:

Answer 16

effective gross income

Question 17

A 1,000-square-foot office space is leased at $15.00 per 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 per square foot, and yearly expenses per 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 percent, what is the effective rent per square foot?

Answer 17

9.50

Question 18

Which of the following does the term “anchor tenant” usually refer to?

Answer 18

A department store in a mall

Question 19

Which of the following describes the function of an expense stop in a lease?

Answer 19

Expenses above the stop are paid by the tenant

Question 20

Which of the following is TRUE for a net lease?

Answer 20

All expenses are paid by the tenant

Question 21

Which of the following tends to lower effective rents?

Answer 21

Concessions

Question 22

Which of the following does the term “in-line tenants” refer to?

Answer 22

Smaller stores in a mall that are not anchor tenants

Question 23

Which of the following is FALSE regarding cap rates?

Answer 23

Rising interest rates generally tend to lower cap rates.

Question 24

The price a potential tenant must pay to lease a specific type of real estate under the current economic conditions is:

Answer 24

market rent.

Question 25

A manufacturing business is contracting to lease a large, open building and is seeking to add partition walls and a large air conditioning unit in order to accommodate its specific needs. What type of lease is the building owner likely to want to agree to?

Answer 25

Triple net lease