Property Valuation
In Minnesota, the 'market rent' versus 'contract rent' distinction affects the value of a commercial property under lease because:
AContract rent is always higher than market rent
BIf contract rent is below market rent, the property may be undervalued on an as-is (leased fee) basis compared to its fee simple potential✓ Correct
CMarket rent and contract rent are always equal for appraisal purposes
DContract rent is the only relevant figure for commercial property valuation
Explanation
When a property has below-market (contract) rent locked in through a long-term lease, its current income-based value (leased fee value) may be lower than its fee simple value. This discount reflects the cost to the buyer of being locked into below-market rents.
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