**LESSEE
& LESSOR INTERESTS - QUESTIONS**

**1
Determine the unencumbered market values of the following properties:**

**Remainder of
Lease Term: 15 years**
**Lease rental:
120 000 pa**
**Market rental:
200 000 pa**
**Interest rate:
9 % pa**

**Remainder
of Lease term: 5 years**
**Lease rental:
100 000 pa**
**Market rental:
200 000 pa**
**Interest rate:
9.% pa**

**Remainder
of lease term: 1 year**
**Lease rental:
90 000 pa**
**Market rental:
200 000 pa**
**Interest rate:
9% pa**

**2
The unencumbered value of an investment property is $10 000 000. **

**It
is subject to a lease with 5 years remaining and a profit rental of
$40 000 pa.**

**Using
10.5% pa what are the lessee's and lessor's interests?**

**3
The rent being paid under a lease with 5 years remaining is $100 000
pa.**

**The
property has recently sold for $1 500 000.**

**Using
12% pa determine the lessee's interest.**

**4
An investment property is subject to a lease with 5 years to run and
an annual rent of $150 000 pa. If the market rent is $150 000 pa
determine the lessee's interest, the lessor's interest and
unencumbered market value.**

**Use
9.5% pa.**

**5
An investment property has recently sold for $1500 000. The market
rent is $150 000 pa and the lease rent is $90 000 pa. **

**Determine
the capitalization rate if the lease has 4 years to run.**

**6
Discuss the advantages and disadvantages of the reversionary and
shortfall methods for the valuation of a CBD investment property.**

**7
Determine the reversionary capitalization rate from the following
information:**

**Sale price:
1500 000**
**Residue of
lease period: 2 years**
**Net annual
income under the lease: 100000 pa**
**Net annual
income under market rent: 120 000 pa.**

**Use
10% pa as the discount rate in the short run.**