Suppose the lease on a certain space will expire at the beginning of 2008. You believe that the probability of the existing tenant renewing is 50 percent. If he renews, you will need to spend only an estimated $5.00/SF to upgrade his space. If he does not renew, it will take $25.00/SF to modernize the space, even then you expect 6 months of vacancy. What expected cash flow forecast should you put in year 2008 of your pro-forma for this space, if you expect triple-net market rents on new leases in 2008 to be $20/SF?
A) $17.50/SF
B) $15.00/SF
C) zero = .5(20-5)+.5(10-25).
D) - $10.00/SF

Question

Suppose the lease on a certain space will expire at the beginning of 2008. You believe that the probability of the existing tenant renewing is 50 percent. If he renews, you will need to spend only an estimated $5.00/SF to upgrade his space. If he does not renew, it will take $25.00/SF to modernize the space, even then you expect 6 months of vacancy. What expected cash flow forecast should you put in year 2008 of your pro-forma for this space, if you expect triple-net market rents on new leases in 2008 to be $20/SF?
A) $17.50/SF
B) $15.00/SF
C) zero = .5(20-5)+.5(10-25). 
D) - $10.00/SF

Quizplus · Accepted Answer

The Answer of Suppose the lease on a certain space will expire at the beginning of 2008. You believe that the probability of the existing tenant renewing is 50 percent. If he renews, you will need to spend only an estimated $5.00/SF to upgrade his space. If he does not renew, it will take $25.00/SF to modernize the space, even then you expect 6 months of vacancy. What expected cash flow forecast should you put in year 2008 of your pro-forma for this space, if you expect triple-net market rents on new leases in 2008 to be $20/SF?
A) $17.50/SF
B) $15.00/SF
C) zero = .5(20-5)+.5(10-25). 
D) - $10.00/SF

Suppose the Lease on a Certain Space Will Expire at the Beginning