Which of the following is least likely accurate regarding property #2 described in exhibit #1?
A.) Operating expense is borne by the owner.
B.) The lease term for the largerst tenant is three years.
C.) There is a significant amount of percentage rent linked to sales levels.
The solution in the book is B…and i understand why B is a relevant choice but how come C isnt also a valid choice?
It says least likely: The largest/anchor tenant will always have a long lease…to quote from CFAI text.:
"For example, in the United States, the length of leases for the smaller tenants in a shopping center are typically three to five years and are longer for larger “anchor” tenants, such as a department store"
A large anchor tenant with a high credit quality is always preferred for a ‘long term’ (10 plus yrs) stable cash flow. While many retail leases do have %rent linked to sales, its is not necessary to have such an arrangement.
Guys please check latest errata.