Argus Exercise

Donovan Plaza is a 35,000 square foot office building. Analyze six (6) years of data beginning January, 2020.

Inflation

Recoveries and Inflation will be done on a fiscal basis.

General Inflation Rate: 3.00% every year, starting in 2021

Market Inflation Rate: 4.00% in 2021 and 2022, 3.00% thereafter

Expense Inflation Rate: 3.00% every year, starting in 2021

Revenue

Donovan Plaza offers Car Wash Services to the tenants that park in the parking garage for a fee. This miscellaneous revenue can generate an additional $12,375 per month if the building is 100.0% occupied. However, if no one is in the building no revenue is generated.

Within the Parking Garage, there are Reserved Spaces that Donovan Plaza earns additional Parking Revenue from. Donovan Plaza charges $100.00 per space per month and they have 75 parking spaces that can be reserved. Just like the Car Wash Services, if the building isnt occupied, this revenue with not generate any income.

Both revenues will grow the General Inflation Rate.

Operating Expenses

All Operating Expenses are 100.0% Fixed, except for the Janitorial expense. 75.0% of the Janitorial expense is variable. All Operating Expenses grow with Expense Inflation Rate, unless otherwise stated. The annual totals and timing of the expenses are as follows:

Real Estate Taxes: $125,000 paid in October of each year; Growing at a rate of 2.00%

Insurance: $55,000

Janitorial: $0.27 per Rentable Area (Building Area) per month

Common Area Maintenance: $1.78 per Occupied Area (Building Area)

Repairs & Maintenance: $2,190 per Month; Growing at a rate of 3.50%

Donovan Plaza has a non-recoverable Operating Expense in the form of a Management Fee. This fee is 3.0% of the Effective Gross Revenue.

Capital Expenses

Donovan Plaza plans on having two (2) Capital Expenses on the books. The first expense will be a Replacement Reserve Account to handle any unforeseen structural repairs that may come up. This account will be entered as $0.20 per Rentable Area (Building Area) per year. This expense will grow with the Expense Inflation Rate.

The second Capital Expense will be for a known Roof Repair expense that will occur in April of 2024. Donovan Plaza found a contract company to give them a quote of $43,750. This amount already took into account inflation and represents what the cost would be in 2024.

Both Capital Expenses are considered 100.0% Fixed.

Market Leasing - Donovan Profile

Term Length: 5 Years

Renewal Probability: 85.0%

Months Vacant: 6 months

New Market Rent: $22.00 / SF / Year

Renew Market Rent: $20.00 / SF / Year

Fixed Steps: 5.0% Increase Each Lease Anniversary

New Free Rent: 1st Month of Each Lease Year (Include 100% of Base Rent and Fixed Steps)

Renew Free Rent: No Free Rent

Recovery: Base Year Stop

New Tenant Improvements: $10.00 / Area

Renew Tenant Improvements: $5.50 / Area

New Leasing Commissions: 6.0% Fixed

Renew Leasing Commissions: 3.0% Fixed

Leasing Commission Payment: 50.0% paid Month 10 Year -1 and 50.0% paid on Month 1 Year 1

Rent Roll

All tenants have a Contract Lease Status and are Office Lease Types. They will have the Donovan Profile applied as the Market Leasing profile, and will roll to Market, unless otherwise noted.

Conor & Conor Law Associates

Area: 12,500 SF

Available and Start Date: August 8, 2018

Term: July 31, 2023

Base Rent: $253,125 / Annually

Fixed Steps: Increasing by $6,500 / Year

Free Rent: 1st Month of Each Lease Year (Include 100% of Base Rent and Fixed Steps)

Recovery: $5.00 Stop Amount / Area

Upon Expiration: Renew

Rays Realty Corporation

Area: 8,100 SF

Available and Start Date: September 22, 2017

Term: 3 Years and 6 Months

Base Rent: $152,785 / Annually

Fixed Steps: Increasing by 2.5% per year

Free Rent: 1st Month of Each Lease Year (Include 100% of Base Rent and Fixed Steps)

Recovery: Net of all expenses; Gross Up to 95.0%

Abbys Publishing

Area: 9,220 SF

Available Date: Analysis Begin

Start Date: June 1, 2020

Term: 5 Years

Base Rent: 95.0% of Market; Fixed Step increases of $0.25 / SF / Year for each of the 2nd and 3rd lease year anniversaries and increasing $0.50 / SF / Year for the remainder of the lease year anniversaries

Free Rent: 1st Month of Each Lease Year (Include 100% of Base Rent and Fixed Steps)

Recovery: Base Year Stop

Donovan Capital

Area: 5,180 SF

Available and Start Date: March 1, 2019

Term: 5 Years

Base Rent: $21.00 / SF / Year

Fixed Steps: Increasing 4.0% each Lease Year Anniversary

Free Rent: 1st Month of Each Lease Year (Include 100% of Base Rent and Fixed Steps)

Recovery: Insurance Fixed Amount of $0.10 / SF / Year; Growing with the General Inflation Rate Janitorial Net share with a 3.0% Cap Common Area Maintenance Net Real Estate Taxes - $1.00 Stop Amount / Area

Upon Expiration: Vacate; 3 Months Vacant Override

General Vacancy

For conservative purposes, assume a Vacancy Allowance equivalent to 5.0% on Total Tenant Revenue. The calculation will be on a monthly basis. Ensure that Gross-up Revenue by Absorption & Turnover and Reduce General Vacancy Result by Absorption & Turnover are selected. Conor & Conor Law Associates will be excluded from the 5.0% rate and so will all of their subsequent rollover leases.

Investment and Valuation

For resale, capitalize the year of sale at a 6.5% terminal cap. Apply a $25,750 legal fee as a selling cost adjustment.

$2,250,000 will be borrowed to purchase the $7,500,000 building. The mortgage will begin on the Analysis Begin date and amortize for 360 months. There is a variable interest rate applied to the loan. For the first year, there will be 0.00% interest, in the second year interest will be 5.25%, in years three through five it will be 6.00%, and for the remaining years it will be 7.50%.

Use an annual present value discount rate of 11.00%.

QUESTION 1

What is is the Net Tenant Cash Flow for Conor & Conor Law Associates in Year 3?

This is a single choice question. Selections are automatically selected as you use arrow to move.

333,484 2,087,564 1,409,203 243,841

QUESTION 2

What range of values does the Unleveraged Present Value using a P.V of Cash Flow at 12.00% fall between?

This is a single choice question. Selections are automatically selected as you use arrow to move.

7,222,000 - 7,227,000 7,389,000 - 7,394,000 6,333,000 - 6,338,000 7,059,000 - 7,064,000

QUESTION 3

What is the Total Cash Flow Available for Distribution for the entire project?

This is a single choice question. Selections are automatically selected as you use arrow to move.

534,000 - 539,000 2,859,000 - 2,864,000 3,736,000 - 3,741,000 541,000 - 546,000

QUESTION 4

What is the NOI in Year 1?

This is a single choice question. Selections are automatically selected as you use arrow to move.

585,570 602,616 581,340 575,370