A property has just been let on a 15 year lease with 5 year reviews....
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A property has just been let on a 15 year lease with 5 year reviews. Over the period until the first review rents are stepped from 7,500,000 in year one to 8,500,000 in year five in increments of 250,000. Thereafter rents return to market value. Estimate the effective rents implied by the stepped rent over the first five years of the lease and estimate the value of the property. Assume a target return of 5% and a yield of 3.5%. Also Explain why the stepped rent provides information as to the level of the current market rent
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