You are considering a purchase of a multi-tenant, downtown office building, of which you would hold as a 5-year investment. The Seller is asking $3,500,000 for the building. Your analysis would assume a 5-year holding period and based on your return requirements and the associated risk of downtown office space, you require a 10% rate of return (you will use discounting cash flow method). The building offers a total rentable area of 20,000 square feet, and 100 garage- parking spaces. You are provided the following information on the property from the current owner. The owner has annual contracts from tenants on the building for 18,000 square feet of the total space at $15.00 psf, gross. Additionally, 90 parking spaces are leased by annual contract for $80.00 per month, per space. You expect this same office vacancy to occur into perpetuity, and expect parking vacancy to equally correlate with the office vacancy. Your market rental study of the downtown office market indicates that these current terms of the subject property are accurately representative of the market. 2. Your market study and knowledge of the downtown office market indicates the following annual expenses as appropriate for the subject property: a. Management Fees b. Annual Real Estate Taxes: c. Hazard Insurance: d. Maintenance/Repairs: e. Supplies f. Capital Replacement Allowance: 8,000 g. Administrative Costs: h. Operating Costs of the Garage: $6,500 5% of EGI $9,000 $3,000 $11,000 $4,000 $4,500 Your market study and knowledge further indicates the following trended increases in incomes and expenses, which can safely be assumed in analysis forecasts: a. Office rents b. Parking rents: c. Real Estate Taxes: d. Other Operating Expenses: 3% per annum 3% per annum 3% per annum 2% per annum In an effort to benefit from positive financial leverage, you are able to secure financing with the following terms: Loan Amount: Interest Rate Terms: $2,000,000 ($1,500,000 equity investment/ dewnpayment) 9.0%, fixed fully-amortizing 25 Year, fully-amortizing