An owner of the Atrium Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $15 per square foot with step-ups of $1 per year beginning one year from now. ATRIUM would provide ACME a $53,000 moving allowance and $130,000 in tenant improvements (TIs). What is the effective rent (per SF) assuming a discount rate of 10%?

An owner of the Atrium Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $15 per square foot with step-ups of $1 per year beginning one year from now. ATRIUM would provide ACME a $53,000 moving allowance and $130,000 in tenant improvements (TIs). What is the effective rent (per SF) assuming a discount rate of 10%?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $10 per square foot (PSF) with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10% discount rate.) b. The owner of ATRIUM believes that base rent of $10 PSF in (a) is too low and wants to raise that amount to $14 with the same $1 step-ups. However, now ATRIUM would provide ACME a $52,800 moving allowance and $128,000 in tenant improvements (TIs). What would be the present value of this alternative to ATRIUM? c. ACME informs ATRIUM that it is willing to consider a $13 PSF with the $1 annual stepups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $5 PSF for 20,000 SF per year. If…
An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corporation for 20,000 rentable square feet of office space. ACME would like a base rent of $11 per square foot (PSF) with step-ups of $1 per year beginning one year from now. Required: a. What is the present value of cash flows to ATRIUM under the above lease terms? (Assume a 10% discount rate.) b. The owner of ATRIUM believes that base rent of $11 PSF in (a) is too low and wants to raise that amount to $15 with the same $1 step-ups. However, now ATRIUM would provide ACME a $53,000 moving allowance and $130,000 in tenant improvements (Tls). What would be the present value of this alternative to ATRIUM? c. ACME informs ATRIUM that it is willing to consider a $14 PSF with the $1 annual stepups. However, under this proposal, ACME would require ATRIUM to buyout the one year remaining on its existing lease in another building. That lease is $6 PSF for 20,000 SF per year. If ATRIUM…
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A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Net lease with CPI adjustments. The rent will be $16 per square foot the first year. After the first year, the rent will be increased by the amount of any increase in the CPI. The CPI is expected to increase 4 percent per year. Calculate the effective rent to the owner (after expenses) for the lease using a 10 percent discount rate A. $21.48 B. $17.90 C. $16.11 D. $19.69
An owner of the Atrium Tower Office Building is currently negotiating a five-year lease with ACME Consolidated Corp. for 20,000 rentable square feet of space. ACME would like a base rent of $20 per square foot with step-ups of $1 per year beginning one year from now. Atrium would provide full service under the lease terms. The owner of Atrium Tower believes that the $20 lease is too low and is trying to negotiate $24 per square foot with the same step-ups. However, Atrium would provide ACME with a $50,000 move-in allowance and $100,000 in tenant improvements (TIs) if the lease at $24 PSF is signed.a. Assuming that Atrium’s owner believes that his required rate of return on investment should be 10 percent per year, is the $24 in rents per square foot combined with the move-in allowance and TIs justified?b. ACME informs Atrium that it has 1 year remaining on its existing 20,000-square-foot lease in an older building at $15 per square foot. ACME is willing to pay Atrium $23 per square…
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A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Net lease with CPI adjustments. The rent will be $17 per square foot the first year. After the first year, the rent will be increased by the amount of any increase in the CPI. The CPI is expected to increase 6 percent per year. Calculate the effective rent to the owner (after expenses) for the lease using a 11 percent discount rate. (Click to selectiv ****** (Click to select) $17.53 $23.38 $19.48 $21.43
One of the departments at Yolo Industries has entered into a 9 year lease for a piece of equipment. The annual payment under the lease will be $3,600, with payments being made at the beginning of each year. If the discount rate is 10%, the present value of the lease payments is closest to (Ignore income taxes.): Click here to view Exhibit 14B-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.) Multiple Choice $22,806 $10,07Y $22,105 $32,400
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