Estimate the market value of the following small office building. The property has 10,500 sq. ft. of leasable space that was leased to a single tenant on January 1, four years ago. Terms of the lease call for rent payments of $9,525 per month for the first five years, and rent payments of $11,325 per month for the next five years. The tenant must pay all operating expenses.

During the remaining term of the lease, there will be no vacancy and collection losses; however, upon termination of the lease it is expected that the property will be vacant for three months. When the property is released under short-term leases, with tenants paying all expenses, a vacancy and collection loss allowance of 8 percent per year is anticipated.

The current market rental for properties of this type under triple net leases is $11 per sq. ft., and this rate has been increasing at a rate of 3 percent per year. The market discount rate for similar properties is about 11 percent, the going-in cap rate is about 9 percent, and terminal cap rates are typically 1 percentage point above going-in cap rates.

Required:

Prepare a spreadsheet showing the rental income, expense reimbursements, NOIs, and net proceeds from sale of the property at the end of an eight-year holding period. Then use the information provided to estimate the market value of the property. (Round your final answers to nearest whole dollar amount.)