Suppose it costs $17,500 per year in real estate taxes for a 5,500 SF leaseable area at the start of the lease. Expense inflation grows at 3% per year. The landlord uses an EXPENSE STOP. - What reimbursement does the landlord receive in year 3?

 

2. Suppose transactions are occurring at 5.45% cap rates. The 10-year treasury is transacting at a 4.25% yield.

- What is the risk premium paid to investors?

- How do the four influencers of cap rates affect the investors demanded return?

- If a transaction occurred at a 4.25%, the same as the treasury yield, why would an investor still want to invest the real estate opportunity? (HINT: Think of the Cash Flow).

3. Building is stabilized at $4.7M and the purchase price is $77.8M.

- What is the cap rate?

- What is the risk premium when the 10-year treasury is at 4.3%?