1. Build a proforma using the information provided in the following scenario. You plan to sell the property at the end of year 3. Round numbers to one decimal only.

You have found an investment opportunity to purchase a property of 30,000 net square

feet zoned for retail in an upcoming location.

• Monthly retail rents in that area are$5 per square foot and you expect they will grow by 4% every year.
• Annual expenses are $30 per net square foot escalating at 5% per year.
• The expected vacancy rate is 12% for the first two years and 9% for the following two years.
• You expect to incur capital expenses of $60,000 in year 2 and $80,000 in year 4.
• The loan-to-value (LTV) is 65%, the original loan amount is $5,000,000, paid over 25 years. The annual mortgage interest rate is 5%.
• Property taxes are fixed for the first three years at $150,000 and will increase by 2% in year 4.
• Your annual discount rate is 11%.