Question

A property has one tenant that has a ten year lease for 10,000 square feet. The...

A property has one tenant that has a ten year lease for 10,000 square feet. The rent in year 1-3 is \$10 per square ft. gross. In year 4-7 the rent is \$15. In year 8-10 the rent is \$20. Under GAAP, what is the annual straight line rent?

Total area = 10000 sq feet, Rent per sq ft in year 1 to 3 = \$10 per sq ft, Rent per sq ft in year 4 to 7 = \$15 per sq ft, Rent per sq ft in year 8 to 10 = \$20 per sq ft,

Total rent for year 1 to 3 = 3 x Total area x Rent per sq ft in year 1 to 3 = 3 x 10000 x 10 = \$300000

Total rent for year 4 to 7 = 4 x Total area x Rent per sq ft in year 4 to 7 = 4 x 10000 x 15 = \$600000

Total rent for year 8 to 10 = 3 x Total area x Rent per sq ft in year 8 to 10 = 3 x 10000 x 20 = \$600000

Total rent for year 1 to 10 = Total rent for year 1 to 3 + Total rent for year 4 to 7 + Total rent for year 8 to 10

= 300000 + 600000 + 600000 = 1500000

Annual straight line rent = Total rent for year 1 to 10 / No of years = 1500000 / 10 = 150000

Therefore annual straight line rent = \$150000

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