Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I recently applied for a financial analyst position at a Real Estate Firm. and I received an assignment to complete within 2 days to qualify

I recently applied for a financial analyst position at a Real Estate Firm. and I received an assignment to complete within 2 days to qualify for the next process. Model Assignment:
Ridge Business Center
Ridge Business Center is a warehouse/office property in Charlotte. The property includes a well-maintained building totalling 50,000 sq ft in leasable area.
The property has been offered for sale by the current owner at asking price of $5 Million. As a Financial Analyst of XYZ Investors, you are expected to identify if the property will
be a good acquisition for the company. An investment must generate a minimum of 15% IRR for XYZ Investors.
Please build a financial model using the assumptions below to provide an answer to the Management. Required sheets have been provided.
Investment Assumptions
Acquisition Date 01-Jan-21
Holding Period : 5 yearstime for which the property is owned)
Sale Date: last day of 60th month
Terminal Cap Rate : 7.5%( This rate is used to determine Sale Price by the following formula: Sale Price=5th Year NOI/Terminal Cap Rate)
Cost of Sale: 2%(2% of Sale Earnings go to broker/lawyer)
Loan Assumptions
Loan Start Date01-Jan-21
Term of Loan5 years
LTV : 75%* of Price
Interest Rate4.0%
Loan Fees1%
Amortization Period25 years* Calculate monthly loan payments, you will need an amortization schedule
Rent Assumptions
1) Assume rents increase every year on first day of the calendar year
2) Rents shown are Annual rents on a per square feet basis. Convert them to monthly rents and actual $ as and when required.
3) NNN leases are triple net leases, tenant has to pay their proportionate share of CAM, taxes and insurance over and above the rent
4) Consider Suite 1006 as vacant for the entire duration of 5 years
Rent Roll ( As of 31 July, 2020)
SuiteLeased AreaStatusLease Start DateLease End DateAnnual Rent PSFRent Increase DateRent IncreaseLease Type
(sq. ft)(mm/dd/yy)(mm/dd/yy)(as of 31 July, 20)(mm/dd/yy)Annual (%)
100110,000Occupied03-01-1803-31-28$12.1501-01-213%NNN
100210,000Occupied06-01-1906-30-29$11.5001-01-213%NNN
100315,000Occupied01-01-2001-31-30$10.7501-01-213%NNN
10045,000Occupied03-01-1803-31-28$1201-01-215%NNN
100510,000Occupied06-01-1906-30-29$1201-01-215%NNN
10066,000Vacant
Total56,000 $10.32
Expense Assumptions
1) All expenses are paid by landlord
2) All expenses grow 2% annually
Expense Assumptions
Expense TypeAnnual Expense ($)
CAM $25,000
Taxes$75,000
Insurance$25,000
Utilities$20,000
Repairs$45,000
Total$1,90,000
Capital Expenditure
YearAnnual Amount
($ psf)
2021$2.00
2022$1.25
2023$1.00
2024$1.00
2025$1.00
Please refer to the excel sheet for the case study Ridge Business Center. Use functions of Excel wherever necessary, no macros should be used for the case study. Calculate Levered IRR on the investment using the data provided.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

Cases In Healthcare Finance

Authors: Louis Gapenski

5th Edition

1567936113, 978-1567936117

More Books

Students also viewed these Finance questions