Question $3$

You are given the following information to estimate the value of this office building:

Owner$$s Annual Income Statement $2023$

Potential Gross Rent $$60,000$

Less: Operating & capital expenses

Power $$2,200$

Heat $1,700$

Janitor $4,600$

Water $3,700$

Maintenance $4,800$

Capital expenditures $2,800$

Management $3,000$

Vacancy and collection losses at $5\%$ of potential gross income.

a$)$ Calculate the NOI of this property for $2023.$

b$)$ Using a cap rate of $11\%,$ what is the estimated value of this property using the Direct

Capitalization method?

c$)$ Estimate the market value of the following small office building using the Discounted Cash

Flow method, given the following information:

$$ Holding period: $7$ years

$$ Assuming that NOI grows by $3\%$ per year in the first $4$ years, then $2\%$ per year

thereafter

$$ Terminal cap rate is estimated to be $10\%$

$$ Discount rate: $11\%$