You are the Chief Financial Officer of Rock Creek Industrial Properties, LLC. Rock Creek owns and operates warehouse properties in the Washington, DC area. Rock Creek's $500,000 deposit has just gone "at risk" on the acquisition of a 100,000 square foot warehouse in Newington, Virginia, a market which has a 90% occupancy rate. You are developing the pro forma that will be utilized for analyzing the acquisition when The President of Rock Creek walks into your office:

"I'm having a tough time getting the numbers to work" you tell her,

"What rate of increase have you utilized for rents and expenses?" she asks as she grabs the pro forma from your hands and reminds you that Real estate taxes never go up very quickly; its politically unpopular.

"Since The Property is 97.5% leased, I'm increasing rents at 5% a year and expenses at 3% a year. I'm utilizing 2.5% of gross rents as the vacancy and collection loss" you explain.

"So what's the problem?" she asks,

"Two big tenants moved in last year and The Seller gave them six months of free rent and $10 psf of buildout so last year's Net Cash Flow was zero" you explain,

"We, our partners, and our lenders wont own the Property last year. We don't care about last year's Net Cash Flow. Start your cash flow projections on the day we acquire the Property and show the rents going forward. By the way, what are all of these costs that reduce our projected sale proceeds in the tenth year?"

"I just included a 1.0% brokerage commission and half of the Title and Recordation costs" you sheepishly explain,

"Forget that stuff nobody ever notices it anyway. You need to back into a cap rate for the sale that generates enough proceeds that we can show our equity partners the 20 IRR that we need to raise the money" she orders as she walks out of your office."

Identify as many Pro Forma abuses as you can in this conversation.