Question 4

[The information presented here applies to questions 4, 5, 6, 7, 8, and 9.] You are working on cash flow projections for a 32,000 square foot office building which is occupied by two tenants, A and B. The lease for tenant A, who occupies 20,000 square feet of space, is expiring in 5 years. You expect to receive the market rent in year 6, $42.00/sf, whether tenant A decides to renew or vacate. If tenant B will pay $40.00/sf to rent 12,000 square feet of space in year 6, what is the building's expected potential gross income for that year?

Question 5

Tenant A's lease expires in year 5 and you expect them to renew with probability .85. If they do not renew, you expect that it will take about 6 months to find a new tenant for the space. What is the effective gross income you expect to receive in year 6?

Question 6

What is the expected occupancy rate in year 6?

Question 7

The leases for both tenants are triple net; tenants pay property taxes, insurance, and maintenance. The owner is responsible for utilities and sewage. The expected annual cost for these services is $3.20/sf. What is the expected utility and sewage expense in year 6 if the expenses are 25% fixed?

Question 8

Given no other expenses, what is NOI for year 6 of ownership?

Question 9

What is the price you expect to receive for the building based on an 8% cap rate if you sell it in year 5?