3 4 You have been asked by an investor to evaluate a property which you anticipate will be leased to McDonalds. Based on comparable data, you project that the property will be leased to McDonalds for 25 years at market-oriented rent and under an absolute NNN expense structure. The building will be constructed in 2022, will be 5,500 square feet in size with one drive-through lane and is anticipated to cost $3.95 million to build. The property was formerly an Arby's (also in the Quick Service Retail (QSR) space) but has since been demolished. 5 6 7 8 9 10 11 Comp # 12 Lease Date 13 Rent/SF Your research indicates the presence of three comparable, single-tenant, absolute NNN retail (QSR) leases of similar size within the total 5-mile trade area. All of them have lease start dates of 5/1/2022. Although your property's lease is not anticipated to start until 7/1/2022, the market is not projected to materially move in either direction between those two dates. Your property's primary trade area (1 mile radius) is completely built out (with the exception of your property). There have been no new leases of QSR buildings in the last 5 years in that primary trade area despite the fact that the average household income for the primary trade area is the highest in the County at $120,000. 14 15 Economic Adjustments (Cumulative) 16 Lease Type (Opex) 17 18 19 Rent Concessions Market Conditions 20 Subtotal (%): 21 Subtotal ($/SF): 22 Due to the lack of available, vacant, developable land, you are only able to locate a site (your subject's site) where you can squeeze one drive-through lane in; although two are preferable. Despite the high average household income, demand for the McDouble, the McFlurry and McNuggets are in extremely high demand (neither Five Guys nor Chick-fil-A have penetrated this market) as the average household size is 5.6 people per household (said differently, lots of kids!). 23 Property Characteristics (Additive) 24 Location 25 Size 26 Age/Quality/Condition 27 Parking QUESTION #1: Utilizing the "Rent" tab, determine the proper adjustments for location as well as any differences in property characteristics (HINT: this is exactly like the Chick-fil-A example that I gave in class!!). The result will likely produce a range of adjusted rents. Conclude to what you think is a reasonable market rent for your property and tell me why your conclusion makes sense given the available data and subsequent adjustments. EXPLAIN your rationale. I'm not expecting a book... but get me there! 28 Drive-Through 29 Corporate Guarantee 30 Other 31 32 Subtotal (%): 33 Total ($/SF): 34 YOUR CONCLUDED MARKET RENT: 35 36 NOTE: There are five conditionally highlighted cells in the "Rent" tab that you have to fill in (highlighted in blue). Once you fill them in, the blue will disappear. Also, in the rent adjustment grid, the "Drive- Through" adjustment (cells B28, C28 and D28) are not shaded... that's because they are populated with a nested IF statement... the most important factor here is that you get the adjustment right (on a dollar per square foot basis-cell K23) and then utilize this data to opine on a reasonable conclusion of market rent! 37 38 39 40 A B Rental Adjustment Grid 1 2 5/1/2022 5/1/2022 $22.00 $24.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $22.00 0.0% $24.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $22.00 $24.00 D 3 5/1/2022 $21.00 0.0% 0.0% 0.0% 0.0% $21.00 0.0% 0.0% 0.0% 0.0% 0.0 % 0.0% 0.0% $21.00 E 3 4 You have been asked by an investor to evaluate a property which you anticipate will be leased to McDonalds. Based on comparable data, you project that the property will be leased to McDonalds for 25 years at market-oriented rent and under an absolute NNN expense structure. The building will be constructed in 2022, will be 5,500 square feet in size with one drive-through lane and is anticipated to cost $3.95 million to build. The property was formerly an Arby's (also in the Quick Service Retail (QSR) space) but has since been demolished. 5 6 7 8 9 10 11 Comp # 12 Lease Date 13 Rent/SF Your research indicates the presence of three comparable, single-tenant, absolute NNN retail (QSR) leases of similar size within the total 5-mile trade area. All of them have lease start dates of 5/1/2022. Although your property's lease is not anticipated to start until 7/1/2022, the market is not projected to materially move in either direction between those two dates. Your property's primary trade area (1 mile radius) is completely built out (with the exception of your property). There have been no new leases of QSR buildings in the last 5 years in that primary trade area despite the fact that the average household income for the primary trade area is the highest in the County at $120,000. 14 15 Economic Adjustments (Cumulative) 16 Lease Type (Opex) 17 18 19 Rent Concessions Market Conditions 20 Subtotal (%): 21 Subtotal ($/SF): 22 Due to the lack of available, vacant, developable land, you are only able to locate a site (your subject's site) where you can squeeze one drive-through lane in; although two are preferable. Despite the high average household income, demand for the McDouble, the McFlurry and McNuggets are in extremely high demand (neither Five Guys nor Chick-fil-A have penetrated this market) as the average household size is 5.6 people per household (said differently, lots of kids!). 23 Property Characteristics (Additive) 24 Location 25 Size 26 Age/Quality/Condition 27 Parking QUESTION #1: Utilizing the "Rent" tab, determine the proper adjustments for location as well as any differences in property characteristics (HINT: this is exactly like the Chick-fil-A example that I gave in class!!). The result will likely produce a range of adjusted rents. Conclude to what you think is a reasonable market rent for your property and tell me why your conclusion makes sense given the available data and subsequent adjustments. EXPLAIN your rationale. I'm not expecting a book... but get me there! 28 Drive-Through 29 Corporate Guarantee 30 Other 31 32 Subtotal (%): 33 Total ($/SF): 34 YOUR CONCLUDED MARKET RENT: 35 36 NOTE: There are five conditionally highlighted cells in the "Rent" tab that you have to fill in (highlighted in blue). Once you fill them in, the blue will disappear. Also, in the rent adjustment grid, the "Drive- Through" adjustment (cells B28, C28 and D28) are not shaded... that's because they are populated with a nested IF statement... the most important factor here is that you get the adjustment right (on a dollar per square foot basis-cell K23) and then utilize this data to opine on a reasonable conclusion of market rent! 37 38 39 40 A B Rental Adjustment Grid 1 2 5/1/2022 5/1/2022 $22.00 $24.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $22.00 0.0% $24.00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $22.00 $24.00 D 3 5/1/2022 $21.00 0.0% 0.0% 0.0% 0.0% $21.00 0.0% 0.0% 0.0% 0.0% 0.0 % 0.0% 0.0% $21.00 E