for Problems 17, 18 and 19, Pick 2 of these three. (Write S…
for Problems 17, 18 and 19, Pick 2 of these three. (Write Skip for the one you do not want graded). A retail lease for 12,000 square feet of rentable space is being negotiated for a THREE-year term. Option A calls for a base rent of $25 per square foot for the coming year with step-ups of $1 per year each year thereafter. CAM charges are expected to be $3 for the coming year and are forecasted to increase by 5 percent at the end of each year thereafter. Option B calls for a lower base rent of $23 per square foot with the same step-ups and CAM charges, but the tenant must pay overage rents based on a percentage lease clause. The clause specifies that the tenant must pay 25 percent on gross sales over a breakpoint level of $920,000 per year. The owner believes that the tenant’s gross sales will be $850,000 during the first year but should increase at a rate of 10 percent per year each year thereafter. a. If the property owner believes that a 15 percent rate of return should be earned annually on this real estate investment, which option is best for the property owner? b. What if sales are expected to increase by 8 percent per year Which would the TENNENT Chose?