Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I need this problem answered, but the answers need to be formatted to fit into the excel template The Background: You are the CFO of

I need this problem answered, but the answers need to be formatted to fit into the excel template image text in transcribed
image text in transcribed
image text in transcribed
The Background: You are the CFO of ABC Inc. Your company has $100 million in its pension fund. You plan to deploy your $100 million. You call your broker, and she suggests an upcoming office acquisition deal for TLC Tower. TLC Tower Details: TLC Tower is and office space with an expected offer price of $183 per square feet (sf). The building has a rentable square footage (rsf) area of 310.000. A bank has already leased 50% of the building at a full-service annual rental rate of $32/rsf for 10 years. The rent will increase by 3% every 2 years. Operating expenses are $17/ sf. The market rent for a full service 5-year lease for this building is $35/rsf. Tenant improvements and leasing commission are $18 and 8% respectively. This building is expected to trade at a 9% cap rate based on the forward 12 months' NOI. Assume that half of the remaining space will be leased after 8 months of purchase at the market rates and the remaining half will be leased at the same rate after 15 months of purchase. The building required immediate capex of $300,000 and an additional $55,000 annually on deferred capex for 3 years. It has a parking ratio of 3 stalls/1000 sf with a parking rate of $110/ month. Using the information above answer the following: 1. Assuming a holding period of 5 years after which the building will be sold off, find the unleveraged IRR. 10 2. Assuming that the project will be financed through 65% loan of 25 years with 4% interest rate, 1 point origination fee and 1 point exit fee on the outstanding loan balance. What is the leveraged IRR? 10 3. Based on your analysis and your real estate knowledge, what are the other factors to be evaluated to make the decision to buy (not buy) the building? 5 Hint: All the expenses and prices are annual unless stated otherwise. Horingriens cole sior Hetbrivila ans perrguid Mrsspeifet caterion Whieien coswione

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

What is the meaning and definition of E-Business?

Answered: 1 week ago