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2.8 Tenant Risk

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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?

It reduces the value of the asset (B) Signup and view all the answers

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

Increased vacancy risk (C) Signup and view all the answers

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

Malls and retail stores (D) Signup and view all the answers

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

By negotiating lease extensions with tenants (A) Signup and view all the answers

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

Investors are more likely to apply a higher discount rate to the cash flows (A) Signup and view all the answers

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

Investors are less willing to pay top dollar for the building (C) Signup and view all the answers