Income Valuation Assignment

You have been assigned to value an income generating property. This building is currently 100% occupied and contains 14,500 SF of rentable area. The leases are included for you to extract the actual data and determine what the value these leases will create for the owner's 5-year hold period. We will assume your hold period begins on January 1, 2021 and runs through December 31, 2025. Once you have found the buildings NOI for all 5 years, you will need to use the NOI of year 6 to calculate the value.

A cap rate of 4.8 has been historical in this market and is what the investors would like you to use.

Estimate the Net Operating Income of the following building based on the following information: (Be sure to include PGI of each property, as well as the EGI and NOI for the entire property)

The building is currently at a 100% occupancy level with the following information on the lease:

Suite 100: 3,000 SF space, Monthly rent fixed at $2,375/month for first 2 years, then $2,600/month for next 2 years, then $2,750/month for next 3 years, finally $3,000/month for last year.

Reimburses for Utilities at $1/SF/Year

Suite 200: 2,500 SF; This is a retail lease, and this tenant is responsible for paying a fixed base rent of $13/SF plus a 10% Sales Rent. Assume the sales reached were $750,000 and a breakpoint has been established as $500,000 (meaning the tenant will only pay the % of rent over what they sell above the breakpoint). Each year, assume the tenant's sales grow by $25,000 and the breakpoint remains the same. Be sure to include both the base rent and the percentage rent in your PGI answer.

No required reimbursements

Suite 300: 4,000 SF, Year 1 begins @ $17/SF and will increase based on the CPI-U. Please use this information on the CPI-U to find the average change in 2021 to apply as the increase for 2022 and assume a 1% year over year increase for the remaining hold period.

Reimbursements of their net share on utilities, taxes, insurance, maintenance, and garbage. (*to find net share, determine the percent of the building this tenant occupies and multiple the expense by that amount)

Consumer Price Index Historical Tables for US. City Average CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U) (not seasonally adjusted) 3.0 1.7 1.5 0.8 0.7 2. 1 2. 1 1.9 2.3 1.4 4.6 2021 PGI Suite 100 Suite 200 Suite 300 Suite 400 Total PGI Vacancy/Collection Loss Miscellaneous Income EGI Operating Expenses Fixed Variable Total Operating Expenses Capital Expenditures Total Capital Expenditures NOI Direct Capitalization Value