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 (MTM) 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 property purchaser will pay the seller an annual ground lease payment of $20,000.

-Each investor will purchase a 1/3 interest in the investment.

Provide your business partners with the following information:

1. Which commercial lease type identified in item 3 above would you recommend that may provide greater rental income by charging common area maintenance costs (CAM) to the RETAIL tenants.