Chp 9

Front 1

Small low-rise office buildings are usually constructed for

Back 1

The answer is the surrounding neighborhood. Many old homes are converted into offices for lawyers and accountants.

Front 2

Businesses that have relatively little customer contact would be the LEAST interested in buying an office building with

Back 2

The answer is a prestigious location. If few customers ride by or visit the site, a prestigious location is of small importance.

Front 3

Office rents are normally based upon

Back 3

The answer is price per square foot of usable space. Gross square footage in the building is reduced by the number of square feet in the lobby, stairwells, and other common areas, like restrooms.

Front 4

An office building tenant may generally sublease the rented space

Back 4

The answer is only with prior written permission from the landlord. Such permission is usually not to be unreasonably withheld.

Front 5

Building A has 100,000 square feet and rents for $2.1 million annually. It is 75% efficient. Building B has 100,000 square feet and rents for $2.4 million annually. If Building B is rented for the same amount per rentable square foot as Building A, what is its efficiency?

Back 5

The answer is 85.7%. Building A has 75,000 rentable square feet (100,000 × .75). Dividing the rent $2,100,000 by 75,000 square feet results in $28 per square foot per year. Divide the annual rent of $2,400,000 by $28 per square foot to get the number of square feet rented (85,714). 85,714 ÷ 100,000 = 85.7%.

Front 6

The primary tenant in your office building is a bank that occupies the first and second floor. Your vacancies are distributed on the third and fourth floors. In order to create a homogeneous tenancy, you might approach

Back 6

The answer is professional service tenants. Offices for attorneys and accountants would be homogeneous uses.

Front 7

Which is correct regarding a developer's ability to get financing on a new office building?

Back 7

The answer is the construction loan will not be funded until the developer meets the terms of a rental achievement clause. Under a rental achievement clause, these lenders require enough advance leases to be secured by the developer to meet at least the investment's fixed expenses.

Front 8

Which is NOT a recommended rental concession available from office building developers?

Back 8

The answer is decreasing the rent. Landlords often are precluded from reducing the rent by the terms and conditions of a mortgage loan.

Front 9

A common use of the escalation clause in a lease is

Back 9

The answer is a mechanism whereby increased utility costs can be passed on to tenants in the form of increased rent. The dramatic increase in utility costs has eliminated profits for many investors who failed to put an escalation clause in the lease.

Front 10

When tenants are grouped together by types of services offered (like a realty center that offers central receptionists, common electronic services, photocopying facilities, and other shared amenities) it is called a

Back 10

The answer is homogeneous tenancy. This central design enables a tenant to choose considerably smaller office space than would otherwise be necessary.

Front 11

The rental rate for an office property would be LEAST affected by

Back 11

The answer is the rent the landlord desires. While every landlord wants higher rents, the rental rate is a function of the market and the desirability of the property.

Front 12

A tax clause in a lease most commonly requires the

Back 12

The answer is tenant to pay for increases in property taxes. This has become a common clause in a lease, including those for relatively short time periods.

Front 13

Three doctors approach you to rent office space for a medical clinic. You discuss a long-term lease with a higher-than-average rent because

Back 13

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The answer is you anticipate extra expenses for build-out requirements. Doctors usually need extra plumbing and electrical power.

Front 14

Which is NOT an advantage of owning an office condominium?

Back 14

The answer is the ability to deduct rent as a business expense. Because owners can deduct interest, property taxes, association fees, maintenance, and depreciation, the owner forfeits the ability to deduct rent.

Front 15

When evaluating a low-rise building investment, the investor should keep in mind that

Back 15

The answer is profitable investments can be made in office units located on secondary streets. The location on secondary streets allows the landlord to charge lower rents.