This assignment is to create an analysis for purchasing a property, projecting rents, expense pass throughs, expenses, capital over a holding period through the sale. Below are is all the information that you need to do the calculations and determine the metrics behind the investment.

Market rent $32/sf for gross leases

$22/sf for net leases

Growth rate 2.5% annually for everything

Rent Roll

Tenant SF Rent/yr /sf Stop Lease Start Mo. Term Steps

Tenant A 25,000 $33.00 BY $9.40/sf 1 10 yrs 3%/year

Tenant B 30,000 $29.00 BY $8.50/sf 1 8 yrs $34/sf in yr 3

Tenant C 35,000 $22.00 Net 1 3 yrs N/A

Tenant 10,000 $30.00 BY $10.00/sf 13 10 yrs $36/sf in month 57

Total

Base year (BY) The tenant will pay for expenses that have risen to a level above their expense stop. Net leases have a stop of zero, so they pay all reimbursable expense. (Expense stop) x sf

Tenants A, B and D are modified gross with expenses passed through over a base year while tenant C is Net.

Vacancy/Credit Loss 5% of PGI

Expense Category Expense per foot

Taxes $ 5.00/sf

R&M $ 1.00/sf

Insurance $ 0.25/sf

Utilities $ 2.00/sf

Payroll $ 0.85/sf

Security $ 0.50/sf

G&A $ 0.40/sf

Total Reimbursable $10.00/sf

Non Reimbursable

Management 3% of EGI

Assume zero rollover possibility. Downtime (vacancy at end of lease) 6 months

Total Capital at rollover 25/sf growing at inflation

From the above information, you should be able to create a proforma.

Reversion 7.5%

Discount Rate 10.0%

Term 5 years

Amortization 30 years

Rate 4% rate

LTV 70%

Create a proforma for a five-year hold aggregating the cash flows from each lease.

Calculate

• Value
• Loan
• IRR
• Cash flow after debt Service
• Cash on Cash Return
• Debt service coverage Ratio
• Leveraged IRR
• Debt Yield
• Break-even ratio