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You are a tenant evaluating two different lease options with differing maturities. The landlord has offered a lower first-year rate if you sign a five-year
You are a tenant evaluating two different lease options with differing maturities. The landlord has offered a lower first-year rate if you sign a five-year lease rather than a three-year lease. Calculate effective rent and choose a lease using a 7% discount rate.
Lease A: Net lease for three years. Rent is a flat $25/sqft. Expenses are $7/sqft in the first year and expected to increase by $1 every year.
Lease B: Gross lease for 5 years. Rent is $26/sqft the first year and then increases to $35/sqft in years 2-3 and $37/sqft in years 4-5.
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