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 $$19$ per square foot $($PSF$)$ with step$-$ups of $$1$ per year beginning one year from now.

Required:

a$.$ What is the effective rent per square foot under the above lease terms? $($Assume a $10\%$ discount rate.$)$

b$.$ The owner of ATRIUM believes that base rent of $$19$ PSF in $($a$)$ is too low and wants to raise that amount to $$23$ with the same $$1$ step$-$ups. However, now ATRIUM would provide ACME a $$51,000$ moving allowance and $$110,000$ 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 $$22$ PSF with the $$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 $$14$ 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?

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