Question

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?

Answer 1

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