You are an investor and have the opportunity to purchase a commercial building in a productive business environment.The asking price is $10,000,000 and you are able to secure financing in the form of a 15 year fully amortizing fixed payment mortgage for 70% of the asking price.This mortgage has monthly payments and monthly compounding periods with an annual interest rate of 8.5% with the entire balance due in 5 years or at the time of sale, whichever occurs sooner.

The building contains 200,000 square feet of leasable space and is situated on a 10 Acre lot.Rent in the area for comparable commercial space is $9.00 per square foot.Land prices in the area for lots in the 10 Acre range are $210,000 per acre.In addition, the following information and assumptions are available to aid your analysis:

Vacancy and Collection Loss (% of PGI) 7%

Year 1 Operating Expense Ratio (% of EGI)39%

Annual Inflation of Rents 3%

Annual Inflation of Expenses 4%

Commercial Depreciation Period39 years

Your Income Tax Rate35%

Your Capital Gains Tax Rate28%

Terminal Cap Rate (Applied to 5th year's NOI at sale)11%

Selling Expenses as a percent of Gross Sales Price 5%

Your After Tax Required Rate of Return12%

Planned Holding Period 4 years

1) Pro Forma Cash Flow Statement based on the information given.

Should you invest in this property under the terms and assumptions outlined?

Why or why not?