Commercial Real Estate Analysis and Investments | 3rd Edition

Chapter 30, Problem 12SQ

Problem

Calculate the ALV of the following leases from the landlords perspective, assuming the tenant faces a 10% borrowing rate:

a. 5-year net lease, $15/SF, 1 year free rent up front

b. 5-year net lease, starting at $10/SF, with step-ups of $1 each year

c. 5-year net lease, starting at $10/SF, CPI adjustments every year equal to 50% of the change in the CPI. CPI change (inflation) is expected to be 5% per year.

d. 5-year gross lease, $20/SF, expenses expected to be $8/SF initially, growing at 3% per year

e. 5-year gross lease, $20/SF, expense stop at $8/SF, expenses expected to grow at 3% per year

f. 6-year net lease, $15/SF, tenant improvements paid by landlord at beginning in the amount of $20/SF