please complete a-c

You are an analyst with Perception Partners and have been asked to make pricing recommendations regarding the acquisition of Rose Garden Apartments. This project was built five years ago and contains 250 units in a suburban market area. The broker that brought the project to your attention indicates that the asking price will be $27,000,000. She has also provided the attached Information based on a market survey showing data from three sales of comparable apartment properties that have occurred in a one-mile radius of Rose Garden during the past six months (see table below) a ABC Acres Number of Units Units per acro Price Bedroom Bathroom: Rose Garden Comparable 1 Comparable 2 Comparable 3 5 6 7 le 14 10 8.75 12.5 258 200 175 250 17.9 20. 20. 20.0 $ 20,000,000 $ 16,625,000 $ 21,000,000 $ Rent / Number of Units $ Rent / Number of Units $ Rent / Number of Units $ Rent / Number of Units / SF: / SF: / SF: 7 SF: 830 / 75 / 780 820 / 60 / 77e 791 / 53 / 740 775 / 75 / 75e 850 / 50 / 810 835 / 40 / Bee 810 / 35 / 789 795 / 50 / 775 1,040 / 100 / 960 1,030 / 80/95 1,000 / 70 / 920 970 / 110 / 900 1,270 / 25 / 1,180 1,250 / 20 / 1,170 1,200 / 18 / 1,130 1,170 / 15 / 1,100 962 / X / 898 950 / x / 888 925 / x / 864 888.5 / */ 842 224,500 177,600 150,130 210, see 5% 5% 5% 5% 40% 40% 40% 45% $ 2,886,000 $ 2,280,000 $ 1,928, 076 $ 2,665,500 8.77 8.62 7.88 $ 1,645,000 $1,300,000 $ 1,099,000 $ 1,393,000 0.0650 0.0661 8.866 1 / 1 1 / 1.5 2 / 2 3 / 2 Weighted average Rentable area (SF) Vacancy Operating expense Gross rent GIM Net Income Cap rate Weighted Average monthly rent/unit Rent per square feet Price per unit Price per square feet Quality Location Parking spaces per unit Security gate Washer/dryer A/C Built-ins Covered parking Free cable TV Fireplaces Exercise room Swimming pool/B00 962 $12.855 $ 950 $12.838 $ 180,000 $ 112.61 Very good Desirable 1.75 Yes $918 $12.843 $ 95,000 $ 110.74 Average Desirable 1.60 Yes Yes Yes Yes No Yes Yes No Yes Excellent Excellent 2.ee Yes Yes Yes Yos Yes No NO No Yes $ 889 $12.663 $ 84,000 $ 99.76 Average Slightly less desirable 1.50 No Not in 1 / 1 Yes Yes No Yes No Yes Vos Yes Yes Yes Yes No No No Yes Perception believes that market returns (IRR) should be in a range of 8 percent (compounded annually) for this type of investment Perception (1) plans to own the property for five years and then sell it and (2) believes that rents will grow at 3 percent per year. Required: a. Should Rose Garden have a lower going-in cap rate than all other comparables? b. If Rose Garden is aqquired for $27,000,000, what would be the going-in cap rate at that price? How does this compare to cap rates for the comparables? What do you think may account for any differences? c. Perception believes that the sale price that it hopes to achieve at the end of year 5 should be based on the going-out, or terminal cap rate that will be 0.005 greater than the going-in cap rate. If Rose Garden is acquired for $27,000,000, would the 8 percent required return be achieved over the five-year period of ownership? Complete this question by entering your answers in the tabs below. Required A Required B Required You are an analyst with Perception Partners and have been asked to make pricing recommendations regarding the acquisition of Rose Garden Apartments. This project was built five years ago and contains 250 units in a suburban market area. The broker that brought the project to your attention indicates that the asking price will be $27,000,000. She has also provided the attached Information based on a market survey showing data from three sales of comparable apartment properties that have occurred in a one-mile radius of Rose Garden during the past six months (see table below) a ABC Acres Number of Units Units per acro Price Bedroom Bathroom: Rose Garden Comparable 1 Comparable 2 Comparable 3 5 6 7 le 14 10 8.75 12.5 258 200 175 250 17.9 20. 20. 20.0 $ 20,000,000 $ 16,625,000 $ 21,000,000 $ Rent / Number of Units $ Rent / Number of Units $ Rent / Number of Units $ Rent / Number of Units / SF: / SF: / SF: 7 SF: 830 / 75 / 780 820 / 60 / 77e 791 / 53 / 740 775 / 75 / 75e 850 / 50 / 810 835 / 40 / Bee 810 / 35 / 789 795 / 50 / 775 1,040 / 100 / 960 1,030 / 80/95 1,000 / 70 / 920 970 / 110 / 900 1,270 / 25 / 1,180 1,250 / 20 / 1,170 1,200 / 18 / 1,130 1,170 / 15 / 1,100 962 / X / 898 950 / x / 888 925 / x / 864 888.5 / */ 842 224,500 177,600 150,130 210, see 5% 5% 5% 5% 40% 40% 40% 45% $ 2,886,000 $ 2,280,000 $ 1,928, 076 $ 2,665,500 8.77 8.62 7.88 $ 1,645,000 $1,300,000 $ 1,099,000 $ 1,393,000 0.0650 0.0661 8.866 1 / 1 1 / 1.5 2 / 2 3 / 2 Weighted average Rentable area (SF) Vacancy Operating expense Gross rent GIM Net Income Cap rate Weighted Average monthly rent/unit Rent per square feet Price per unit Price per square feet Quality Location Parking spaces per unit Security gate Washer/dryer A/C Built-ins Covered parking Free cable TV Fireplaces Exercise room Swimming pool/B00 962 $12.855 $ 950 $12.838 $ 180,000 $ 112.61 Very good Desirable 1.75 Yes $918 $12.843 $ 95,000 $ 110.74 Average Desirable 1.60 Yes Yes Yes Yes No Yes Yes No Yes Excellent Excellent 2.ee Yes Yes Yes Yos Yes No NO No Yes $ 889 $12.663 $ 84,000 $ 99.76 Average Slightly less desirable 1.50 No Not in 1 / 1 Yes Yes No Yes No Yes Vos Yes Yes Yes Yes No No No Yes Perception believes that market returns (IRR) should be in a range of 8 percent (compounded annually) for this type of investment Perception (1) plans to own the property for five years and then sell it and (2) believes that rents will grow at 3 percent per year. Required: a. Should Rose Garden have a lower going-in cap rate than all other comparables? b. If Rose Garden is aqquired for $27,000,000, what would be the going-in cap rate at that price? How does this compare to cap rates for the comparables? What do you think may account for any differences? c. Perception believes that the sale price that it hopes to achieve at the end of year 5 should be based on the going-out, or terminal cap rate that will be 0.005 greater than the going-in cap rate. If Rose Garden is acquired for $27,000,000, would the 8 percent required return be achieved over the five-year period of ownership? Complete this question by entering your answers in the tabs below. Required A Required B Required