Suppose the Lease on a Certain Space Will Expire in One

question 15

Multiple Choice

Suppose the lease on a certain space will expire in one year The end of Year 1) . 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, plus $5.00/SF in leasing broker commissions to attract a new tenant, and even then you expect 6 months of vacancy. What expected cash flow forecast should you put in year 2 of your pro forma for this space, if you expect triple-net market rents on new leases in year 2 to be $20/SF?

• A) $22.50/SF
• B) $15.00/SF
• C) - $2.50/SF
• D) - $7.50/SF
• E) - $20.00/SF

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Definitions:

Cohesion

The degree to which members of a group stick together and remain united in the pursuit of common goals.

Critical Evaluator

A person or role involved in assessing the validity, quality, or importance of something through careful consideration and judgment.

Groupthink

A psychological phenomenon that occurs within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Leader's Role

The set of responsibilities and functions carried out by an individual in a leadership position to guide, motivate, and manage a team or organization towards achieving its objectives.