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You are an analyst with Perception Partners and have been asked to make pricing recommendations regarding the acquisition of Rose Garden Apartments. This project was

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You are an analyst with Perception Partners and have been asked to make pricing recommendations regarding the acquisition of Rose Garden Apartments. This project was buit five years ago and contains 250 units in a suburban market area. The broker that brought the project to your attention indicates that the asking price will be $27,000,000. She has also provided the attached information based on a market survey showing data from three sales of comparable apartment properties that have occurred in a one-mile radius of Rose Garden during the past six months (see table below). Perception (1) plans to own the property for five years and then sell it and (2) believes that rents will grow at 3 percent per year. Onnutendt Perception believes that market returns (IRR) should be in a range of 8 percent (compounded annually) for this type of investment. Perception (1) plans to own the property for flve years and then sell it and (2) believes that rents will grow at 3 percent per year. Required: a. Should Rose Garden have a lower going-in cap rate than all other comparables? b. If Rose Garden is acquired for $27,000,000, what would be the going-in cap rate at that price? How does this compare to cap rates for the comparables? What do you think may account for any differences? c. Perception believes that the sale price that it hopes to achieve at the end of year 5 should be based on the going-out, or terminal, cap rate that will be 0.005 greater than the going-in cap rate. If Rose Garden is acquired for $27,000,000, would the 8 percent required return be achieved over the five-year period of ownership? Complete this question by entering your answers in the tabs below. Should Rose Garden have a lower going-in cap rate than all other comparables? Should Rose Garden hove a kower poing-in cap rate than all other comparables

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