Assume that you are looking to purchase and finance a $5,461,540 stand-alone retail building with Walgreens as a tenant. The building is 14,820 square feet with a lot size of 1.16 acres. It was built in 2008. It is priced at $369 per square foot of building space, with an annual NOI of $355,000 and a 6.50% cap rate. It has over 10 years remaining on a Corporate NNN Lease. Store sales have been increasing over the past 3 years. Daily traffic counts exceed 15,000+ vehicles per day. Within a 5-mile radius the population is 16,275 with an average household income of $80,168. The property is located at 326 West Lincoln Avenue, Fergus Falls, MN 56537.

1. If you pay 100% of the asking price and obtain an 80% Loan-To-Value ratio loan on this property, calculate the monthly payments based on a 30- year amortization and a 7% interest rate on the loan. Multiply the monthly payment by 12. What is the annual mortgage payment for this loan?

2. Assume that are charged 5% on the loan amount as loan origination fees paid upfront at the beginning of the loan term. Assume that you pay off the loan at the end of 5 years. What is your effective cost of borrowing (%) on this loan?

3. Ignoring Question # 2, calculate the amount of prepayment penalty on Question # 1 assuming the loan is prepaid at the end of month 30 with a prepayment penalty rate of 4% on the outstanding mortgage balance.

4. What is the DSCR (Debt Service Coverage Ratio) in Year 1 of the loan in Question # 1?

5. What is the annual BTCF ($) in Year 1 of the loan in Question # 1? 6. What is the annual BTROE (%) in Year 1 of the loan in Question # 1?

7. What is the annual rent per square foot of leasable square footage for this property assuming that Gross Potential Income is the same as Net Operating Income because it is an absolute NNN (triple-net) lease agreement? 8. If you hold the property for 5 years, at what sale price would you need to achieve at the end of year 5 if you require an IRR of 15% on your equity investment? (Hint: Your annual cash flows will be the BTCF.) 9. What would your terminal (exit) cap rate be for Question # 8?