LESSEE & LESSOR INTERESTS - QUESTIONS

1 Determine the unencumbered market values of the following properties:



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:


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