Problem 26

Intro

Downtown Capital LP is a real estate investment company that is interested in acquiring an office building (the target building). A similar office building in the same area (the comp building) recently sold for $58,000,000:

Comp building Target building

Value ($) 58,000,000

Square feet 58,000 45,000

Annual rent ($) 3,364,000 3,015,000

Annual maintenance cost ($) 812,000 720,000

Attempt 1/3 for 10 pts.

Part 1

What is a value of the target building based on a multiple of net operating income (in $)?

0+ decimals

Attempt 1/3 for 10 pts.

Part 2

What is the rental capitalization rate for the comp building?

3+ decimals

Attempt 1/3 for 10 pts.

Part 3

What is the value of the target building (in $)?

0+ decimals