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An owner of the ATRIUM Tower Office Building is currently negotiating a five - year lease with ACME Consolidated Corporation for 2 0 , 0
An owner of the ATRIUM Tower Office Building is currently negotiating a fiveyear lease with ACME Consolidated Corporation for rentable square feet of office space. ACME would like a base rent of $ per square foot PSF with stepups of $ per year beginning one year from now.
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a What is the present value of cash flows to ATRIUM under the above lease terms? Assume a discount rate.
b The owner of ATRIUM believes that base rent of $ PSF in a is too low and wants to raise that amount to $ with the same $ stepups. However, now ATRIUM would provide ACME a $ moving allowance and $ 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 $ PSF with the $ 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 $ PSF for SF per year. If ATRIUM buys out ACMEs old lease, ACME will not require a moving allowance or TIs. What would be the net present value of this proposal to ATRIUM?
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