Question
An A grade freehold retail centre has just been completed in January 2017 in the PTA CBD. In order to attract tenants to the shop,
An A grade freehold retail centre has just been completed in January 2017 in the PTA CBD. In order to attract tenants to the shop, the owners decided to introduce the centre to market with a rent 25% below the current market rent. Currently, with all the 14 shops, the centre produces a total monthly income of R 1,500,000.00. There are 2 more years left on the lease of all the current tenants. With the reversion to full market rent in view and factoring in all outgoings of 35% into the rental income, calculate the capital value of the centre with a 10% interest rate if the centre were to be sold today.
Hint:
- ERV = 25% on top of current rent.
- Capitalise the net rental income
- Assume a rate of 8% for the term period
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