Question

What is the effective rent for the following lease of 10,000 square feet utilizing the straight-line method?

Rent: $45 PSF/ year

Lease Term: 5 Years

Free Rent: 3 Months, one at the each of lease year until burned off

Tenant Improvements (TIs): $25.00 per square foot above what they market normally provides

Moving Cost Credit: $5,000 off First Months Rent

[Enter Answer in the following format $XX.XX with appropriate rounding]

Show work Please

Answer 1

Rent = 45 PSF / year = 45 PSF / 12 months = $ 3.75 PSF per month

Free Rent: 3 Months = 3.75 x 3 = 11.25 PSF

Tenant improvement allowance = 25 PSF

Moving cost credit = 5,000 = 5,000 / 10,000 = 0.5 PSF

Hence, total cost to landlord = Free rent + tenant improvement allowance + Moving cost credit = 11.25 + 25 + 0.5 = 36.75 PSF

Term = 5 years

Hence, total cost to landlord = 36.75 / 5 = $ 7.35 PSF / Year

Hence, the the effective rent = Rent - total cost to landlord = 45 - 7.35 = $ 37.65 PSF / year