Please prepare a financial model outlining the financial analysis of an investment into a Grade A office building.

Key questions:

What is the Project/Unlevered IRR and Equity/Levered IRR assuming debt financing is structured as:

10 Year non-amortizing bank loan, or

A series of 5 Year amortizing bank loans

What is the Companys WACC?

Investment highlights:

Acquisition price: AED 500 million

10 Year Lease in place with annual 3% escalation

Year 1 Net Operating Income: AED 40 million

Investment horizon: 10 years

Terminal yield: 8%

Funding assumptions:

10 Year, 100% Bullet Loan

Max leverage: 40% Loan to Value

All-in interest cost: 4%

5 Year, 75% Bullet Loan

Max leverage: 70% Loan to Value

All-in interest cost 5%

WACC assumptions:

Beta: 1.1

Equity Risk Premium: 6%

Risk Free Rate: 4%

Cost of Debt: 5%

Tax: 5%

Optimal LTV ratio: 40%