Chapter 9 Flashcards
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.
False
Overage rent is rent that exceeds expenses.
False
The term “percentage rent” refers to rent paid as a percent of space leased.
False
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.
True
Consider the figure above. Point D represents:
equilibrium occupancy
Consider the figure above. The difference between the existing stock of space and Point D represents:
vacancy
Consider the figure above. If the demand for units increases, what would happen in equilibrium, holding everything else constant?
Market rent would increase; equilibrium occupancy would increase
For which of the following reasons would a business prefer to own space rather than lease it?
The business demands specialized or unique facilities.
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?
20.94
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?
17.28
Which of the following is NOT considered to be an office or retail property?
Warehouse
The difference between the existing stock of space and the equilibrium occupancy is known as:
vacancy
The dollar amount by which total rent exceeds base rent under a percentage lease for retail is referred to as:
overage rent
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?
$5,400
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)
$7,500
Income after deducting loss of rents due to vacancy and nonpayment of rents, as well as any concessions, is referred to as:
effective gross income
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?
9.50
Which of the following does the term “anchor tenant” usually refer to?
A department store in a mall
Which of the following describes the function of an expense stop in a lease?
Expenses above the stop are paid by the tenant
Which of the following is TRUE for a net lease?
All expenses are paid by the tenant
Which of the following tends to lower effective rents?
Concessions
Which of the following does the term “in-line tenants” refer to?
Smaller stores in a mall that are not anchor tenants
Which of the following is FALSE regarding cap rates?
Rising interest rates generally tend to lower cap rates.
The price a potential tenant must pay to lease a specific type of real estate under the current economic conditions is:
market rent.
