1. Office Problem (Use the attached spreadsheets as a guide)

   Property: Office One, Anytown, U.S.A.

   Acquisition date: December 31, 1999

   Purchase Price: 2000 NOI @ 10% CAP RATE

   Deal Terms: 65% financed with debt, 9% interest-only, 10-year term

   35% equity ownership

   Base Year 1999: Rental Income $1,600,000

   Escalation Income $ 0

   Less: Janitorial & Cleaning $ 330,000

   Labor $ 215,250

   Utilities $ 60,000

   Management Fee $ 80,000

   Real Estate Taxes $ 80,000

   Assumptions: Vacancy Rate : 9%

   Growth Rates: Rental Income 5% Annually

   Janitorial & Cleaning 3% Annually

   Utilities 3% Annually

   Management Fee 3% Annually

In 2001, Labor and Real Estate Taxes escalate by 13.07 and 10%, respectively, and remain at those levels for the remainder of the holding period. Tenant pays the increase over the stated Base Year.

Sell on December 31, 2004

Selling Expenses- 5% of sale price (2005 NOI @ 10% Cap Rate)

Depreciable Basis = 80% of cost (calculate depreciation using straight-line method)

Owners Ordinary Tax Rate: 39.6%

Use Post-1997 capital gains & recapture tax rates (20% & 25% respectively)

REQUIRED:

9A) Pro-forma Analysis for both Pre-Tax and After- Tax scenarios