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FIN 371 Case Study 333 Bush Street - Overview Due: By 7 pm, Thurs, May 17, 2018. Send via email to both Jim Area and Nancy Gille AND bring a he of the 'Q&A' and '10-Year Proforma' worksheets to class. Basic Overview: You work as a financial analyst for Tishman Speyer, the new owner of 333 Bush Str investment strategy is to make improvements to the buillding and sign long-term leases with high tenants consistent with a "core" investment. The current vacant space in the building includes 89,0 feet that was vacated following the bankruptcy of lawfirm Sedgwick, LLP in early 2018. The plan is the investment for approximately 7' years. You must evaluate two alternative leasing opportunities, described as follows: A) Iwncn (www.mtcntv) Is Interested In Ieasmg the entire 89,0 (6 square feet. I hey have submitted a pr- a 5-year term. Proposed annual rent is $751'square foot (full-service) with NO increases, but with three(3) free rent. Capital expenses would include $75lsquare foot for tenant improvements, and $15 per square f: lease commission. B) Tishman Speyer also has a proposal from WeWork (www.wework.com) to lease this space at 5870/qu (full service) annual rent with $1/square foot annual increases for a lease term of ten (10) years, with NO fl WeWork has asked for a tenant improvement allowance of $1 OOlsquare foot and lease commissions woul $1 Bisquare foot. Summary of prospective tenant lease terms: Twutc WeWor tam_iL- WWI-law Isa-nmm magnumn1 rd copy em. The @4B'>B77%- FIN 371 Case Study 333 Bush Street - Q & A Due: By 7 pm, Thurs.,May 17, 2018. Send via email to Jim Arce and Nancy Gille AND bring a hard copy of 'Q&A' and '10-Year Proforma' worksheets to class. NO LATE WORK WILL BE ACCEPTED. Studenwame |:| Studentml:| QUESTIONS: Using the 10-year lease analysis form provided, which proposed lease has the highest Level Pay? Tenant. Lave. pay. $42.49 To which of these tenants do you recommend leasing the 89,076 square feet of vacant space? Tenant Why? Provide at least 3 non-economic reasons taken into account in making your decision. 1) WeWork provides a longer lease term than Twitch; 2) WeWork doesn't ask for free rent which may serve as a rent trial; 3) WeWork asks for higher tenant improvement allowance which means WeWork may focus more on tenenat experience What is one change to the proposed lease terms or investment strategy that migt cause you to recommend the OTHER prospective tenant? Why? If the lease term of Twitch is changed from 7 years to 5 years, the level pay will be changed to $53.09, which will be higher than WeWork's $42.49. In this case, I might choose Twitch. What is the unleveraged IRR based on each of the proposed tenant leases? (Enter the nancial infonhationrent, free rent, tenant improvements and leasing commissions into the 10-Year Proformas provided. Assume a purchase price of $375 million and a sale at end of Year 7 based on residual cap rate of 6.25%. Note: IRR templates are provided at the bottom of 10Year Profonhas. IRR: 7.24% Twitch 10.20% WeWork What is the IRR if the investment is leveragedupon acquisition (Year 0) with a 65% LTV loan based on $375 million purchase price) at 4.5% interest only? IRR: 11.59% Twitch 16.99% WeWork FIN 371 case Study 333 Bush Street - Lease Analysis Tll'l LHEE ANALYSIS (RENT INCREASE IN SEW] "an [Easily Dunmissmn' spam-19 Ely-mas {575.001 515.153 (515 75; {515.00} (515.75] 515.75) (515.75; (515 75) (51375] (51575: cm; 553 25 S (""5751 @575) $1515: (349.501 s59 25 $5925 sans - 41:15 CONFIDENTIAL F'NETLCase Smdy Splmg 2018 FIN 371 Case Study 333 Bush Street Lease Analysis WIWDI'k LEASE ANALYSIS {RENT INCREASES IN IDJIII] Mac. 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