If a property has 70% occupancy and reimbursable expenses are grossed up to 100%, what will the operating expense be if the CAM expense is $30,000?

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To understand why the operating expense would be calculated as $26,400 under the conditions provided, it's important to consider what it means to gross up reimbursable expenses to 100% occupancy when actual occupancy is 70%.

In this case, the Common Area Maintenance (CAM) expense given is $30,000, which represents the expenses as they currently stand with a 70% occupancy. When these expenses are grossed up to reflect 100% occupancy, the calculation needs to account for the lower occupancy rate to predict what the expenses would be if the property were fully occupied.

The gross-up factor can be calculated as follows:

  1. Calculate the Gross-Up Factor: Since the property is only 70% occupied, the gross-up factor is 100% / 70% = 1.4286 (approximately).

  2. Grossed-Up Operating Expense Calculation: Now, to find the operating expense grossed up to 100% occupancy, you multiply the current CAM expenses by the gross-up factor:

  • $30,000 * 1.4286 = $42,857 (this is what the CAM expenses would be if fully occupied).

However, if the question is specifically asking for the operating expense at the

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