1. An institutional investor is looking in the Miami market to purchase a Class A office building in the downtown area where prevailing cap rates are very compressed. Currently, cap rates are in the 4.0% to 4.5% range for trophy assets, depending on location and other attributes for class A office buildings. Give this information, and given the financials listed below, what should the buyer offer if they hope to submit a competitive bid?

Gross revenue = $2,500,000

Other Income = $500,000

Operating expenses = $1,275,000

Offer amount $__________________

Please give an explanation, thank you!