Commercial Real Estate

Common information for all the questions in this HW$.$ You want to purchase an office building in Brooklyn. The property contains $27,500$ square feet of rentable space and is currently occupied by multiple tenants each with differing maturities on their respective leases. No lease is currently shorter than $1$ year.

The annual rent in the $1$st year of ownership is $$42\mathrm{.}50/$sq ft$.$

The vacancy rate is $6\mathrm{.}5\%.$

You expect to incur collection losses $($from tenant default$)$ on $1\mathrm{.}5\%$ of the square feet during your first year.

What is the Potential Gross Income $($PGI$)$ for the first year?

$1,075,250$

$1,168,750$

$27,500$

$675,000$