You have been asked to advise on the following investment opportunity. An office building is currently available on the market for $85m. It is a 20 year old property and has been recently leased for ten years. The current Net Operating Income (NOI) is $4.5m. Based on the following assumptions conduct an appraisal of the property.

• Discount Rate = 6.50%
• The assumed rental growth = 2%.
• Exit Yield = 7.25%

Based on the figure you obtain what would you advise the client? Do you feel that this is a good opportunity or not. If not, what assumptions would have to change to make this an attractive investment opportunity for the client?