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Building A has a small local retail tenant on the ground floor occupying 10 000 sq.ft. and 50 apartments above. If the small local tenant

Building A has a small local retail tenant on the ground floor occupying 10 000 sq.ft. and 50 apartments above. If the small local tenant vacates and is replaced with a AAA tenant (eg. Dollarama), how will the building's cap rate be affected if the retail rent is now lower?

a. Cap rate will equal IRR

b. Cap rate stays the same

c. Cap rate decreases

d. Cap rate increases

e. Cap rate will be 0

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