Question
Can you answear question D,E,F You decide to buy an office building in Manhattan. This property has 27,500 sqr. ft of space that can be
Can you answear question D,E,F
You decide to buy an office building in Manhattan. This property has 27,500 sqr. ft of space that can be rented. It is also occupied by several tenants, with each one having a lease of different maturity. In the first year of ownership the (annual) rent is 42.5$/sqr. foot. The vacancy rate is given as 6.5%. It is expected that the property will incur estimated losses on 1.5% of the sqr. ft during the first year, because some of the tenants might default.
(a) Evaluate the PGI and the EGI of the property for the 1st year.
(b) Given that the operating expenses are expected to be 40 percent of the EGI of the property in the first year, evaluate the NOI of the property in the first year.
(c) Ideally, you would like to get a mortgage for this property. ABC bank can provide you with an IO mortgage at a 6.25% rate and you can make annual payments. The bank requires a 1.2 DCR ratio based off the NOI of the first year. Evaluate the largest annual PMT you can make based on the DCR requirement of the bank.
(d) Based on part (c) PMT and DCR requirement, what would be the largest amount of mortage the lender is willing to provide you?
(e) The seller is asking for the property an amount equal to $7,000,000. If ABC bank additionally has a max 70% LTV requirement, what is the largest mortgage based only on the LTV requirement?
(f) Given that the mortgage needs to satisfy both the LTV and the DCR ratio, what is eventually the largest amount of mortgage you can get from ABC bank?
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