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Create an Excel and show formulas that answer the questions below given the case study

Case Study:

Transaction Summary

You are the senior acquisitions associate at a New York-based private equity fund with a core investment focus. You have reached an agreement to purchase a well-located, 185,000 square foot office building in a solid suburban market. It was built in 2017 and has no additional leasing since the pre-development leases were signed. The submarket is quite desirable with no new supply coming on-line, yet economic growth is uncertain.

Income Summary

It is currently leased to three tenants on a gross (full-service) basis: Tenant #1 occupies 50,000 square feet at $29 per square foot annually through 12/2029, Tenant #2 occupies 80,000 square feet at $28 through 12/2030, and Tenant #3 occupies 36,500 square feet at $32 per square foot through 12/2031. Other/ancillary income has added another $4 per total sf of revenue annually, which you dont see changing after acquisition. Operating expenses have consistently been $14 per total sf annually but you expect to immediately reduce this by 14.3% at the time of closing. On a run-rate basis (stabilized), capital expenditures, leasing commissions, and tenant improvements are expected to cost you $0.65 per total sf annually. There is no growth expected from this investment (flat revenue, flat expenses, flat cap ex, TIs/LCs).

Capitalization Summary

You are purchasing this building for $227.00 per total square foot. You have lined-up a 10-year mortgage financing of 70% LTV at an interest rate of 6.5% with a 30-year amortization schedule (payments calculated monthly but paid annually, for modeling purposes). You have also lined up a 5-year mezzanine loan (treat as a second mortgage) for an additional 10% of the purchase price at an interest-only rate of 11.00%. Assume zero transaction costs for the sale/disposition of this investment.

Investment Strategy

You are purchasing the building on January 1, 2020 and plan on selling the building at the end of the year 2023. You believe your exit capitalization rate will be 75 basis points lower than your going-in capitalization rate.

4. A. Assuming that buildings are bought and sold based on NOI, what is the exit price of your investment in December 2023? B. What is your loan balance at the time of sale? C. What are your net investment proceeds from this sale?