You are the owner of a 65,000 square foot office building. You purchased the building five years ago for $11,500,000.

During that entire time the building was triple net leased to a tenant who was also responsible for all maintenance and capital upkeep.

The net rent the tenant paid was flat at $12.50 per square foot per year.

You have just negotiated a lease extension which will raise the rent to $14.00 per square foot for the next 10 years.

You believe that you can sell the building now for the same cap rate as when you purchased it.

Now the new investor is considering a loan proposal for an interest only loan at 4.25% annual rate and no fees.

The lender's constraints are a maximum LTV of 60% and a minimum DSCR of 1.5.

The new investor believes the current tenant will again renew for 10 years and believes net rents will then be $17.00 per square foot.

However, as the building will then be more than 25 years old, the investor anticipates the cap rate will then be 10%.

Q

1) How much equity will the investor have to raise to invest in this deal?

2) What is the anticipated leveraged IRR for the equity investment?

3) What is the anticipated leveraged equity investment multiple?