You and two business partners are considering the purchase of the following commercial investment property:

Commercial Property:

• Estimated purchase price: $600,000 (building only)
• Type of property: Mixed-use.
• Units: 3 residential second-floor Apts. (A) 1,500 sq. ft., (B) 1,250 sq. ft., and (C) 850 sq. ft.
• 3 retail ground floor Units, with separate entrances, 1,200 sq. ft. each.

Lease Information:

• Residential Apartments: All residential units are rented.
• Retail Units-annual rental revenues: Each Retail Unit is under a month-to-month gross lease.

Other Information:

• The property is subject to a 50 years ground lease (all property interests reverts to the seller at the end of the ground lease). The business partners with pay the ground lease landlord an annual ground lease payment of $20,000.
• Each business partner will purchase a 1/3 interest in the investment.

Provide your business partners with the following information:

1. For the retail tenants, identify the commercial lease types that may be used for the three retail tenants.

2.Based on your analysis in item 1 above, provide a recommendation of a lease type that should be used for the three retail tenants that will maximize retail rental revenues.

3.One of the retail tenants will eventually need more space and may need to move to a different property within the next 12-24 months. This tenant is expected to ask for a provision in the lease that will allow the sublet or assignment of the premises. Describe the differences between a sublet and an assignment lease provision. Provide a recommendation as to which provision is most beneficial to the business partners.