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 1st year of ownership is $42.50/sq ft. The vacancy rate is 6.5%. You expect to incur collection losses (from tenant default) on 1.5% of the square feet during your first year.

You decide you want to take out a loan to finance the purchase of this property. It will be an IO loan at a rate of 6.25%, compounded annually, with annual payments. The lender will provide financing up to a minimum Debt Service Coverage Ratio (DSCR) of 1.2 based off of the 1^st year NOI.

What is the largest annual loan payment the lender will allow you to make based on the DSCR?

		537,652
		537,625
		537,265
		537,256

1 points

QUESTION 5

If you get a loan that corresponds to the largest annual loan payment the lender will allow you to make based on the DSCR (computed in part 4), what will be your Net Income (NI) in the first year?

		100,000
		105,125
		107,525
		110,625

1 points

QUESTION 6

What is the largest loan a lender is willing to provide you with based on question 4? (Assume this is an IO loan at 6.25%)

		8,602,000
		6,802,000
		537,625
		573,625