Problem $9-3$

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 $$20$ per square foot $($PSF$)$ with step$-$ups of $$1$ per year beginning one year from now.

Required:

a$.$ What is the effective rent per square foot under the above lease terms?

b$.$ The owner of ATRIUM believes that base rent of $$20$ PSF in $($a$)$ is too low and wants to raise that

amount to $$24$ with the same $$1$ step$-$ups. However, now ATRIUM would provide ACME a $$50,000$

moving allowance and $$100,000$ in tenant improvements $($TIs$).$ What would be the effect rent per

square foot under this alternative to ATRIUM?

c$.$ ACME informs ATRIUM that it is willing to consider a $$23$ PSF with the $$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 $$15$ PSF for $20,000$ SF per year. If ATRIUM buys out

ACME's old lease, ACME will not require a moving allowance or Tls$.$ What would be the effective rent

per square foot of this proposal to ATRIUM?