Starshine City signed a lease agreement with South Coast Builders, Inc., under which South Coast will construct new office building for the city at a cost of OMR 12 million and lease it to the city for 30 years. The city agrees to make an initial payment of OMR 847,637 and annual payments in the same amount for the next 29 years. An assumed borrowing rate of 6 percent was used in calculating lease payments. Upon completion, the building had an appraised market value of OMR 13 million and an estimated life of 40 years.

Required: Using both the criterions of capital lease, determine whether Starshine City should consider this lease agreement a capital lease.