Q1

Q2

You are considering the purchase of an old office building. The property is currently zoned for commercial use, but you believe a change of zoning can be achieved with some effort. You consider three uses for te property: 1) perform some minor renovations and leave the property as an office; 2) converst the current structure into apartments with significant renovation; 3 ) demolish the current structure and build a gas station in its place. Your research has lead you to the following estimates with regard to these three scenarios. You are considering the purchase of a commercial office property. Currently, the property is partially vacant and in need of repairs. If you purchase the property, you will refurbish some of the vacant units and assume new leases will be signed over the next couple of years. Your pro forma estimates of the property's net operating income (NOI) net of capital expenditure are as follows: NO Given these estimates of future NOI, estimate the market value of the property assuming a discount rate of 7% and a sale of the property at the end of Year 5 at an exit ("going out") cap rate of 3%