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 $60$th month

Terminal Cap Rate $7\mathrm{.}5\%*$ This rate is used to determine Sale Price by the following formula: Sale Price$=5$th 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 $4\mathrm{.}0\%$

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\mathrm{.}1501-01-213\%$ NNN

$100210,000$ Occupied $06-01-1906-30-29$ $$11\mathrm{.}5001-01-213\%$ NNN

$100315,000$ Occupied $01-01-2001-31-30$ $$10\mathrm{.}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\mathrm{.}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\mathrm{.}00$

$2022$ $$1\mathrm{.}25$

$2023$ $$1\mathrm{.}00$

$2024$ $$1\mathrm{.}00$

$2025$ $$1\mathrm{.}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.

Help me calculate : IRR