Question

Consider a 27,000 SF shopping center where all tenants pay $20 per square foot, triple-net. Reimbursable operating expenses are $90,000 and nonreimbursable operating expenses are only a management fee that is 3.5% of PGI. Based on these assumptions, how much would the investor pay (net) for operating expenses?

a)$18,900
b)$15,750
c)$13,500
d)$9,450
e)$22,050

Answer 1

To calculate the investor's net operating expenses for the shopping center, we need to consider both the reimbursable and nonreimbursable expenses. The reimbursable operating expenses are based on the tenants' square footage, while the nonreimbursable expenses are a management fee. The investor would pay a total of $558,900 in operating expenses.

Step-by-step explanation:

To calculate the investor's net operating expenses for the shopping center, we need to consider both the reimbursable and nonreimbursable expenses. The reimbursable operating expenses are $90,000, which all tenants contribute to based on their square footage. This amounts to a total of $27,000 * $20 per square foot = $540,000. For nonreimbursable expenses, we need to calculate the management fee, which is 3.5% of the Potential Gross Income (PGI).

PGI is the total rent that could be collected if the shopping center were fully leased. In this case, since the rent is $20 per square foot and the square footage of the shopping center is 27,000, the PGI is $20 * 27,000 = $540,000.

Therefore, the management fee is $540,000 * 3.5% = $18,900. Adding the reimbursable and nonreimbursable expenses, the net operating expenses for the investor would be $540,000 + $18,900 = $558,900.