An office building has three floors of rentable space with a single tenant on each floor. The first floor has 20,000 square feet of rentable space and is currently renting for $15 per square foot. Three years remain on the lease. The lease has an expense stop at $4 per square foot. The second floor has 15,000 square feet of rentable space and is leasing for $15.50 per square foot and has four years remaining on the lease. This lease has an expense stop at $4.50 per square foot. The third floor has 15,000 square feet of leasable space and a lease just signed for the next five years at a rental rate of $17 per square foot, which is the current market rate. The expense stop is a $5 per square foot, which is what expenses per square foot are estimated to be during the next year (excluding management). Management expenses are expected to be 5% of effective gross income and are not included in the expense stop (management expenses are also not reimbursable). Each lease also has a CPI adjustment that provides for the base rent to increase at half the increase in the CPI. The CPI is projected to increase 3% per year. Estimated operating expenses for the next year include the following:

Property Taxes	100,000
Insurance	10,000
Utilities	75,000
Janitorial	25,000
Maintenance	$40,000
Total	$250,000

All expenses are projected to increase 3% per year. The market rental rate at which leases are expected to be renewed is also projected to increase 3% per year. Assume that when the lease is renewed, it is renewed at the market rate prevailing at the time and then the rent increases at half of the CPI for the remainder of the lease term. When a lease is renewed, it will have an expense stop equal to operating expenses per square foot during the first year of the lease. To account for any time that may be necessary to find new tenants after current leases expire and new leases are made, vacancy is estimated to be 10% of Potential Gross Income for the last two years (Years 4 and 5).

1. Project the expense reimbursements for the next five years
2. Project the effective gross income
3. Project NOI for the next five years
4. Assuming the property is purchased for $5,000,000, what is going-in cap rate?

Assume that going-out cap rate is 1.5% higher than the going-in cap rate. What is the resale value, if you apply the year of sale NOI (year 5) and what is unleveraged IRR?