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I rent the basement of a 10,810 square foot building. Should the value of the basement space be the same

I rent the basement of a 10,810 square foot basement. Should the value of the basement be the same as the value of the street level businesses when figuring out how much the % should be for triple net expenses?? Should the basement pay the same amount as the street level businesses??

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Answers (2)
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Kenny Davidson Real Estate
Arapahoe County, CO

If there is a history of rental income at an established rate to a non owner tenant or non arms length tenant, then yes. Income producing properties are valued by what revenue they generate. The rate
that can be obtained by a non affiliated or related party must be considered in the valuationl. A
building that is producing income in the basement should be worth more than one that does not
have a basement, or one that has a basement that does not generate income. Can you say "Cap Rate"
kenny d

Mar 24, 2010
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The BAF Group LLC

You ask a question that is not a black and white issue. The Landlord can ASK what ever he wants; he will get whatever the Tenant is willing to pay. If your area is in high demand, the Landlord may get what he wants. If the area has a lot of vacancies, the place can sit vacant until he either lowers his asing Rent, or finds someone desperate enough to pay that Rent, regardless of the space.

You don't say what you are using the space for. If it is Retail, and there is no public access or visibility, that is your negotiation point with trying to get him to lower the Rent. If it is office space and it is buit out like all of the other space in the building, then you probably should be paying similar rates. Those are the kinds of keys you need to use: Where the space is, really does not matter as much as how comparable it is to other space in the building, whether it meets your need, competitive Rents for other, similar spaces and overall market conditions.

As for NNN costs, you are probably stuck with a straight percentage. If you are using essentially the same services as other Tenants, you should be paying a comparable percentage. If there is snow and the Landlord has to shovel the snow as part of his NNN expenses, you share in those because you benefit as much as the rest of the Tenants for snow removal.

If I am missing the point, let me know.

Jan 28, 2010