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Ridge Business Center Ridge Business Center is a warehouse / office property in Charlotte. The property includes a well - maintained building totalling 5 0

Ridge Business Center
Ridge Business Center is a warehouse/office property in Charlotte. The property includes a well-maintained building totalling 50,000 sq ft in leasable area.
The property has been offered for sale by the current owner at asking price of $5 Million. As a Financial Analyst of XYZ Investors, you are expected to identify if the property will
be a good acquisition for the company. An investment must generate a minimum of 15% IRR for XYZ Investors.
Please build a financial model using the assumptions below to provide an answer to the Management. Required sheets have been provided.
Investment Assumptions
Acquisition Date 01-Jan-21
Holding Period 5 years * time for which the property is owned
Sale Date last day of 60th month
Terminal Cap Rate 7.5%* This rate is used to determine Sale Price by the following formula: Sale Price=5th Year NOI/Terminal Cap Rate
Cost of Sale 2%*2% of Sale Earnings go to broker/lawyer
Loan Assumptions
Loan Start Date 01-Jan-21
Term of Loan 5 years
LTV 75%* of Price
Interest Rate 4.0%
Loan Fees 1%
Amortization Period 25 years * Calculate monthly loan payments, you will need an amortization schedule
Rent Assumptions
1) Assume rents increase every year on first day of the calendar year
2) Rents shown are Annual rents on a per square feet basis. Convert them to monthly rents and actual $ as and when required.
3) NNN leases are triple net leases, tenant has to pay their proportionate share of CAM, taxes and insurance over and above the rent
4) Consider Suite 1006 as vacant for the entire duration of 5 years
Rent Roll ( As of 31 July, 2020)
Suite Leased Area Status Lease Start Date Lease End Date Annual Rent PSF Rent Increase Date Rent Increase Lease Type
(sq. ft)(mm/dd/yy)(mm/dd/yy)(as of 31 July, 20)(mm/dd/yy) Annual (%)
100110,000 Occupied 03-01-1803-31-28 $12.1501-01-213% NNN
100210,000 Occupied 06-01-1906-30-29 $11.5001-01-213% NNN
100315,000 Occupied 01-01-2001-31-30 $10.7501-01-213% NNN
10045,000 Occupied 03-01-1803-31-28 $1201-01-215% NNN
100510,000 Occupied 06-01-1906-30-29 $1201-01-215% NNN
10066,000 Vacant
Total 56,000 $10.32
Expense Assumptions
1) All expenses are paid by landlord
2) All expenses grow 2% annually
Expense Assumptions
Expense Type Annual Expense ($)
CAM $25,000
Taxes $75,000
Insurance $25,000
Utilities $20,000
Repairs $45,000
Total $1,90,000
Capital Expenditure
Year Annual Amount
($ psf)
2021 $2.00
2022 $1.25
2023 $1.00
2024 $1.00
2025 $1.00
Qs 1. Please refer to the excel sheet for the case study Ridge Business Center. Use functions of Excel wherever necessary, no macros should be used for the case study. Calculate Levered IRR on the investment using the data provided.
Answer:
Qs 2. Investor A & B both invested $100,000 in a private investment and were promised 10% IRR.
- A received $15,000 in Year 1 and $5000 in Year 2
- B received $10,000 in Year 1 and $10,000 in Year 2
Both of them exited the investment at the end of 2nd year. Even though both got 10% IRR on their investments, what could be the possible reason for Bs unhappiness?
Answer:
Qs 3. Bond yields are inversely related to Interest Rates. What is the explanation for this relationship?
Answer:
Qs 4. What is DSCR? Why is it important to lenders?
Answer:
Qs 5. Our client is a real estate private equity company that focuses on multifamily acquisitions. A property we are looking at has a net operating income (NOI) of $567,678. The asking price is $10,650,567.
What is the cap rate?
Answer:
Qs 6. Describe what a promote structure

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