2.8 Tenant Risk
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2.8 Tenant Risk

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@StaunchTan

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Questions and Answers

How does a tenant's credit rating impact the value of a building?

  • It decreases the vacancy risk
  • It may make investors less willing to pay top dollar for the building (correct)
  • It increases the building's value
  • It has no impact on the building's value

    • What can mitigate the risk of vacancy in a building?

  • Investing in additional properties
  • Reducing the building's maintenance costs
  • Negotiating an extension of the tenant's lease (correct)
  • Increasing the rent for existing tenants

    • In what type of market condition are tenants less likely to be able to pay rent?

  • During market expansions
  • During market crashes or worsening market conditions (correct)
  • During stable market conditions
  • During high-demand market conditions

    • What impact does uncertainty about leasing a vacant building have on its value?

    <p>It reduces the value of the asset</p> Signup and view all the answers

    What is a potential consequence of a tenant's lease ending soon?

    <p>Increased vacancy risk</p> Signup and view all the answers

    What type of properties are experiencing high vacancy rates according to the text?

    <p>Malls and retail stores</p> Signup and view all the answers

    How can investors potentially reduce the impact of tenant risk when purchasing a building?

    <p>By negotiating lease extensions with tenants</p> Signup and view all the answers

    What happens to the value of a building if the tenant's credit rating is downgraded?

    <p>Investors are more likely to apply a higher discount rate to the cash flows</p> Signup and view all the answers

    What is a potential consequence of a building having a high vacancy rate?

    <p>Investors are less willing to pay top dollar for the building</p> Signup and view all the answers

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