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You are analyzing a 1 1 , 0 0 0 square foot office property for potential acquisition. The property is currently being used as a
You are analyzing a square foot office property for potential acquisition. The property is currently being used as a small animal veterinary clinic. The three veterinary doctors who run the clinic have just renewed the lease for ten years at $ psfyr gross rent. The lease calls for a rent increase of $ psf per year for the term of the lease.
Although the property is fully occupied by a single tenant, your lender and your investors will demand that you impute a vacancy rate.
Purchase price: $
Acquisition costs: $
Year one operating expenses: $ psfyr
Operating expenses annual growth rate: percent
Projected end of year five sale price: Capitalize year six NOI at percent
End of year five cost of sale: percent of sale price
Anticipated holding period: Five years
Assessed land value: $
Assessed improvement value: $
Ordinary income tax rate: percent
Capital gains tax rate: percent
Costrecovery recapture tax rate: percent
Following are the loan terms from Wells Fargo Bank:
Maximum loantovalue LTV ratio: percent
Minimum debtservice coverage ratio DSCR:
Interest rate: percent
Amortization period: years
Loan term: years
Payments per year:
Loan costs: percent of loan amount
Answer
the following:
What is the IRR Before Tax on Equity for a year hold? points What is the IRR After Tax on Equity for a year hold? points Assuming the $ in acquisition costs remain constant, how much can you pay for this property purchase price to get a After Tax IRR. points
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