An office building has three floors of rentable space with a single tenant on each floor....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 at $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 percent of effective gross income and are not included in the expense stop. Each lease also has a CPI adjustment that provides for the base rent to increase at half the increase in the CPI. The CPI ispage 383 projected to increase 3 percent per year. Estimated operating expenses for the next year include the following: Property taxes Insurance Utilities Janitorial Maintenance Total $100,000 10,000 75,000 25,000 40,000 $250,000 All expenses are projected to increase 3 percent per year. The market rental rate at which leases are expected to be renewed is also projected to increase 3 percent per year. 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 percent of EGI for the last two years (years 4 and 5). a. Develop a profoma and cash flow spreadsheet for the next five years from the information provided. b. Project the effective gross income (EG/) for the next five years. c. Project the expense reimbursements for the next five years. d. Project the net operating income (NOI) for the next five years. e. How much does the NOI increase (average compound rate) over the five years? f. What is the Break even point? g. Assuming the property is purchased for $5 million, what is the overall capitalization rate (goingin rate)? h. What is the NPV and IRR? 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 at $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 percent of effective gross income and are not included in the expense stop. Each lease also has a CPI adjustment that provides for the base rent to increase at half the increase in the CPI. The CPI ispage 383 projected to increase 3 percent per year. Estimated operating expenses for the next year include the following: Property taxes Insurance Utilities Janitorial Maintenance Total $100,000 10,000 75,000 25,000 40,000 $250,000 All expenses are projected to increase 3 percent per year. The market rental rate at which leases are expected to be renewed is also projected to increase 3 percent per year. 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 percent of EGI for the last two years (years 4 and 5). a. Develop a profoma and cash flow spreadsheet for the next five years from the information provided. b. Project the effective gross income (EG/) for the next five years. c. Project the expense reimbursements for the next five years. d. Project the net operating income (NOI) for the next five years. e. How much does the NOI increase (average compound rate) over the five years? f. What is the Break even point? g. Assuming the property is purchased for $5 million, what is the overall capitalization rate (goingin rate)? h. What is the NPV and IRR?
Expert Answer:
Answer rating: 100% (QA)
Answer b Projected Effective Gross Income EGI for the n... View the full answer
Related Book For
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
Posted Date:
Students also viewed these finance questions
-
What is total CAPEX for The Lone Star Brewing Co. in Year 3? Lone Star Brewing Co. Selected Financial Information Year 2 Year 3 Revenue $62,000 $69,000 Depreciation 6,700 7,300 PP&E 45,000 50,000 O...
-
An office building has three floors of rentable space with a single tenant on each floor. The first floor has 20,360 square feet of rentable space and is currently renting for $15 per square foot....
-
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....
-
Make a Marketing Plan for business during the Covid 19 Pandemic as it is today. Position yourself as an entrepreneur looking to open a new business or expand your existing business. Use assumptions...
-
Consider the following table in which 500 respondents have been classified based on product use and income. a.Does this table indicate concomitant variation between product use and income? b.Describe...
-
Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost...
-
Comparison of common-size financials (Learning Objective 3) Select a company and obtain its financial statements. Convert the income statement and the balance sheet to common size and compare the...
-
The manager of the Commander Hotel near City Stadium believes that how well the local Blue Sox professional baseball team is playing has an impact on the occupancy rate at the hotel during the summer...
-
Following the steps below, use logarithmic differentiation to determine the derivative of the function f(x)= (1+2x)1/x sin(x) a. Take the natural log of both sides and use properties of logarithms to...
-
The accounts of Bolton Travel at December 31, 2017, are listed below in alphabetical order: Required 1. Prepare the company's classified balance sheet in report format at December 31, 2017. All...
-
Read the case study Apply Lean Six Sigma in a Financial Services Firms and address the following questions: How was the lean effort at the financial services firm structured organizationally? What...
-
Your client just turned 25 years old today, and she is planning to retire when she turns 60. She will be depositing $10,000 every year into her bank account. The first deposit will be one year from...
-
What must be the price of a $1,000 bond with a 5.8% couponrate, annualcoupons, and 15 years to maturity if YTM is 7.8 % APR?
-
What are the differences between the income statement and the cash flow statement? Explain with a practical example of each list.
-
Discuss the interdisciplinary nature of civil engineering research and practice, highlighting the integration of concepts from fields such as materials science, computer science, and urban planning...
-
1. Being that credit unions(LGFCU) are cooperative organizations, explain the significance of that and how it applies to the products, services and programs your Credit Union provides to its members....
-
Una empresa compr hace 12 aos una mquina computarizada por unvalor de P 758 852. Como la vida til de la mquina era de 20 aos,los fondos se reservan segn un mtodo de depreciacin de 1 answer
-
l ask this second time correnct answer is 38,01 can we look pls Consider a non-conducting rod of length 8.8 m having a uniform charge density 4.5 nC/m. Find the electric potential at P, a...
-
Transaction Analysis Amanda Weisman opened a home health care business under the name Home Care Inc. During its first month of operations, the business had the following transactions: a. Issued...
-
Transaction Analysis and Business Activities OBJECTIVE 3 The accountant for Huron Corporation has collected the following information: a. Huron purchased a tract of land from Jacobsen Real Estate for...
-
Transaction Analysis} During December, Cynthiana Refrigeration Service engaged in the following transactions: a. On December 3, Cynthiana sold a one-year service contract to Cub Foods for \(\$ 12 ;...
Study smarter with the SolutionInn App