During class, we talked about using the perpetuity formula to value long-lived income producing assets. Assume a property has 100,000 SF. The existing Rent is $80/sf/yr. Operating expenses are $34/sf/yr. If a comparable property traded at $100M, what is a reasonable estimate of the implied cap rate?

1. 3.5%

2. 4.0%

3. 4.6%

4. 5.0%