Suppose the lease on a certain space will by Prof. Tod McGrath @MIT

Question 11 / 31: Suppose the lease on a certain space will expire at the beginning of 2001. 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 2001 of your pro-forma for this space, if you expect triple-net market rents on new leases in 2001 to be $20/SF?

A $17.50/SF

B $15.00/SF

C zero

D - $10.00/SF (e) Insufficient information provided to answer the question.

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Real Estate Finance & Investment Midterm Exam 2003

Author:

Prof.Tod McGrathProfessor

MIT Massachusetts Institute of Technology

USA

Access: Public Peer Review

Attribution: Geltner, David, and Tod McGrath. 11.431J Real Estate Finance and Investment, Fall 2006. (MIT OpenCourseWare: Massachusetts Institute of Technology), http://ocw.mit.edu/courses/urban-studies-and-planning/11-431j-real-estate-finance-and-investment-fall-2006 (Accessed 1 May, 2014). License: Creative Commons BY-NC-SA

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