1. Imagine you in charge of the complete property taxation process for a township in Illinois. You are observing four types of real estate property Property A: Market Value $ 400,000 (40 units) Property B: Market Value $ 750,000 (20 units) Property C: Market Value $ 2,000,000 (5 units) Property D: Market Value $ 340,000 (100 units) You would like to define the assessment value as 10% of the market value. The Equalization Factor for your township is 3.3. You are in the fortunate position that only your township is levying a property tax, so you do not have to worry about property taxes from any other entity. You receive the information that the township has a total budget of $2,000,000. Through various non-property tax related channels, it earns $1,300,000. The township itself owns 2 units of property C type (the administrative building and one used for community gatherings) and three of Property C type (it uses one property as a school, one as a kindergarten, and one for educational events for adults). There are no additional property tax exempted units of real estate. (30 Points) a) Calculate the property tax levy the township has to raise. (2 Points) b) Calculate the assessed value for each type of property. (8 Points) c) Calculate the tax rate the township will have to raise (hint: do not forget about exemptions) (8 Points)d) Please calculate the Millage rate for this example. (2 Points) e) How much property taxes are owners of each type of real estate paying? (4 Points) f) You notice that there is one veteran living in your township. You think that it is appropriate to thank her for her service. You therefore decide that this person should receive a veteran exemption of $50,000. The person is living in a type A property. Please calculate the new effective tax rate for this person. (6 Points)2. You are an appraiser, and your task is to appraise an office building. You are deciding to use the income method. The building has three floors. The ground floor features a big shopping area of 6,000 sq ft. The second floor is divided in seven offices of 800 sq ft. each and one utilities room of 400 sq. ft. (you use it for housekeeping supply, etc and are not able to offer it on the rental market), whereas the third floor houses two big office areas of 3,000 sq. ft. each. The market rent is $8/month per square foot for the office space, while the complete first level is rented to a major supermarket chain at $30,000/month in a multiyear contract extending over the next 10 years. Expenses for various insurances, property management, and standard maintenance add up to $30,000 per month, while 10% of gross profit are set aside for major renovations in the future. A parking lot surrounds the building, and the supermarket pays a fee of $3,000 per month to use it. You expect that each unit within the second and third floor will be vacant once throughout the upcoming year for one month. You further know from experience that approximately 3% of payable rent is not paid on average. (30 Points) a. Calculate the PGI (on a yearly basis) (3 Points) b. Calculate the EGI (on a yearly basis) [If you have no result from a), you may use $1,500,000 to continue] (6 Points) c. Calculate NOI (on a yearly basis) [If you have no result from b), you may use $1,400,000 to continue] (4 Points)d. Which additional information would you need to calculate from NOI the value of the property through direct capitalization with the help of cap rates? Please describe how you would calculate the cap rate in reality and indicate the necessary information. (6 Points) e. Assume that you had all information described in d) and calculated a cap rate of exactly 0.09. Please calculate the value of the building. [If you have no result from c), you may use $1,000,000 to continue] (3 Points) f. You are expecting that market rates will increase by 3% per year and the contract with the shop on the ground floor is automatically adapting to changes in market rent increases. As every unit is vacant for one month per year, you can assume that each renter stays for only 11 months and market rents are used every year. Costs are growing proportionally with rent increases. You expect an internal interest rate of 5%. Investors in the area are typically holding properties for three years and the cap rate from e is expected to remain constant over time. Calculate the value through the discounted cash flow analysis. (6 Points) g. You assume both approaches to be equally valid. Which value would you communicate as the appraised value? [If you have no result from e), you may use $11,000,000, if you have no result from f) you can use $13,000,000 to continue] (2 Points)