Because of a reset in its ground lease payments, the operating expenses of an office building increased by $400,000. Estimate the magnitude and the direction of the subsequent change in value.

Rent per Square Foot (annual): $18.00 Square Footage: 145,000

Vacancy and Bad Debt Allowance: 12% Capitalization Rate: 7%

Gross Income Multiplier (based on EGI): 11 Operating Expenses: $1,400,000

Purchase Price: $14,300,000 Annual Debt Service (mortgage pymts): $900,000

Land Value at purchase $2,200,000