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LEASING MATH

59. Your base rent in year 1 of a 5-year lease is $23 PSF, with 4% annual increases starting year 3. What is the rent at the end of the term?

60. You rent a 5,000 SF space with a base rent of $25 PSF NNN, plus $6.50 PSF for passthrough expenses. What is the total monthly rent, not including taxes?

61. You are doing a deal with a prospect. The size of the space is 2,000 SF, the rent is $25 PSF NNN, plus $5 for passthrough expenses. You are offering $30,000 in TIA. What would your effective rent be in a PSF number if you were to amortize the TIA over the term of the lease? (Interest is not a factor)

62. If Walgreens were paying $10 PSF NNN on 15,000 SF and agreed to pay 5% over the "natural breakpoint" for percentage rent, what would the natural breakpoint be?

63. While negotiating with a restaurant, you discover that most restaurants remain profitable as long as their occupancy costs are no more than 12% of total sales. Your rent is $25 PSF plus $6.75 in passthrough expenses for 2,000 SF. With the information given above, how much in sales does the restaurant need to generate to justify your rent?

64. If a shopping center is generating $1,000,000 in Net Operating Income and is sold for $14,000,000, what is the CAP Rate?

65. You find a shoe store for your shopping center. They are currently paying $8,000 per month for rent and passthrough expenses, and their sales are $1,000,000 a year. The combined rent and passthrough expenses at your shopping center are $9,000 per month. If the average pair of shoes sells for $100, assuming the markup is 100%, how many more pairs of shoes per day would the shoe store need to sell to justify the additional rent?

66. You are leasing a Publix-anchored shopping center with a GLA of 100,000 SF. Publix leases 40,000 SF. For the purposes of passthrough expenses, what will be the multiplier for a 2,000 SF space if the passthroughs are calculated with anchor exclusion?

67. Using the example above, if the total shopping center expenses are $500,000 per year and Publix pays $5,000 per month towards passthrough expenses, how much will the passthrough expenses be for a 2,000 SF space if the passthroughs are calculated with anchor exclusion? Non-anchor exclusion?

68. You are about to renew a tenant. They are currently paying $18 PSF base rent on 2,000 SF. If you are able to increase their rent to $24 PSF, how much value have you added to the shopping center at that point in time assuming a Cap Rate of 9%?

69. You purchased a shopping center for $20,000,000 at a 7% cap. What is your NOI?

Answer :

Final Answer:

1. Rent at the End of Term (Year 5): $26.44 PSF

2. Total Monthly Rent (excluding taxes): $11,083.33

3. Effective Rent (amortizing TIA): $28.25 PSF

4. Natural Breakpoint for Walgreens: $13.16 PSF

5. Required Sales for Justifying Rent: $800,000

6. CAP Rate for Shopping Center Sale: 7.14%

7. Additional Pairs of Shoes per Day: 10 pairs

8. Passthrough Multiplier for 2,000 SF Space: 0.5

9. Passthrough Expenses (Anchor Exclusion): $25,000 per year

10. Value Added to Shopping Center: $108,000 per year

11. NOI for Shopping Center Purchase: $1,400,000

Explanation:

1. The base rent increases by 4% annually starting year 3. Using the formula for compound interest, the rent at the end of the term is calculated as $26.44 PSF.

2. Total monthly rent is calculated by adding base rent and passthrough expenses. Given a 5,000 SF space, the total monthly rent is $11,083.33.

3. The effective rent is found by amortizing the Tenant Improvement Allowance (TIA) over the lease term. This results in an effective rent of $28.25 PSF.

4. The natural breakpoint for percentage rent is calculated as $13.16 PSF for Walgreens.

5. To justify the rent based on the 12% occupancy cost rule for restaurants, the required annual sales are $800,000.

6. The CAP rate for a shopping center sale is determined by dividing Net Operating Income (NOI) by the purchase price, resulting in a 7.14% rate.

7. To justify additional rent, the shoe store needs to sell 10 more pairs of shoes per day.

8. The passthrough multiplier for a 2,000 SF space with anchor exclusion is 0.5.

9. Using anchor exclusion, passthrough expenses for the 2,000 SF space are $25,000 per year.

10. Renewing a Tenant at $24 PSF adds $108,000 per year in value to the shopping center, assuming a 9% CAP rate.

11. The Net Operating Income (NOI) for a shopping center purchased at a 7% cap is $1,400,000.

Learn more about: Walgreens

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