You have been assigned to value a local office building. This building contains 15,000 SF of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You have been assigned to value a local office building. This building contains 15,000 SF of rentable area. Based on the information below, determine what this building could sell for if the investor has a 5-year hold period. We will assume your hold period begins on January 1, 2022 and will run through December 31, 2026. Once you have found the building's NOI for each of the 5 years, you will need to use the NOI of year 6 to calculate the Discounted Cash Flow. A cap rate of 8.4% has been historical in this market and is what the investors would like you to use. Estimate the Net Operating Income of the following building based on the following information: (Be sure to include PGI of each property, as well as the EGI and NOI for the entire property) The building is currently at a 100% occupancy level with the following information on the lease: Suite 100: 4.400 SF space, $25/SF with 3% increases each year. No additional reimbursements. Suites 200: 3.300SF, $22.50/SF fixed and responsible for Percentage Rent. They will pay 12% for any sales they have over $1,500,000 each year. Assume their sales for the first year are $2,000,000 and increase by 15% each subsequent year. Responsible for reimbursing their net share of Utilities. Suite 300: 4,000 SF, Year 1 begins @ $17/SF and will increase based on the CPI-U for Year 2. Please use this information on the CPI-U to find the average change in 2021 to apply as the increase for 2022 and assume a 2% year over year increase for the remaining hold period. Reimbursements of their net share of utilities, taxes, insurance, maintenance, and garbage (to find not share, determine the percent of the building this tenant occupies and multiple the expense by that amount Consumer Price Index Historical Tables for U.S. City Average CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U) (not seasonally adjusted) Percent change from 12 months ago 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.6 2.9 1.6 1.6 -0.1 1.4 2.5 2.1 1.6 2.5 1.4 2.1 2.9 2.0 1.1 0.0 1.0 27 2.2 1.5 2.3 1.7 2.7 2.7 1.5 1.5 -0.1 0.9 2.4 2.4 1.9 1.5 2.6 3.2 2.3 1.1 2.0 -0.2 1.1 2.5 2.0 0.3 4.2 3.6 97 1.7 13 1.4 2.1 0.0 90 1.0 1.9 2.8 1.8 0.1 5.0 1.7 1.8 21 0.1 1.0 1.6 2.9 1.6 0.6 5.4 3.6 1.4 2.0 2.0 0.2 0.8 1.7 2.9 1.8 1.0 5.4 3.8 1.7 1.5 1.7 0.2 1.1 1.9 2.7 1.7 1.3 5.3 232382238 3.9 2.0 1.2 1.7 0.0 1.5 1.7 14 5.2 3.5 SEEEEEEEEEE 2.2 1.0 1.7 0.2 1.6 2.0 2.5 1.8 1.2 5.0 3.4 331332333 1.8 0.5 1.7 2.2 2.2 1.2 4.8 3.0 1.7 1.5 0.8 0.7 2.1 1.9 2.3 1.4 4.6 Suite 400: 3,300 SF; Tenant pays monthly rent of $4,000/month with subsequent annual increases of 3.25% per year for the entire lease period. This is a NNN lease so be sure to include the reimbursements for those expenses based on their net share. Additional Information (based on historical data): Assume a vacancy rate/collection loss of 7% for the entire building Miscellaneous Income: Vending machines in the building generate $200/month with estimated 2% increases each year. Expenses (apply an estimated 2% increase on all Operating Expenses) Utilities- $4/SF/year Garbage collection-$150/month Real estate Taxes- $65,000/year Insurance-$18,000/year Maintenance- $3/SF/year Management-5% of EGI (Non-recoverable expense) New Roof expenditure- $65,000 in year 3 Parking Lot re-pavement-$30,000 in year I Be sure to account for any reimbursements made by the tenants. Suite 100 2021 2022 2023 2024 2025 2026 Total PGI: Suite 200 Total Sales Natural Breakeven Sales over Breakeven Additional % Rent Paid 2021 2022 2023 2024 2025 2026 Total Suite 300 Change in CPI-U 2021 2022 2023 2024 2025 2026 Total PGI: Suite 400 2021 2022 2023 2024 2025 2026 Total PGI: PGI Suite 100 Suite 200 Suite 300 Suite 400 Total PGI Vacancy/Collection Loss Miscellaneous Income EGI A Operating Expenses Fixed Variable Total Operating Expenses Capital Expenditures Total Capital Expenditures ΝΟΙ Direct Capitalization Value B 2021 C 2022 E 2023 GO H 2024 2025 2026 M You have been assigned to value a local office building. This building contains 15,000 SF of rentable area. Based on the information below, determine what this building could sell for if the investor has a 5-year hold period. We will assume your hold period begins on January 1, 2022 and will run through December 31, 2026. Once you have found the building's NOI for each of the 5 years, you will need to use the NOI of year 6 to calculate the Discounted Cash Flow. A cap rate of 8.4% has been historical in this market and is what the investors would like you to use. Estimate the Net Operating Income of the following building based on the following information: (Be sure to include PGI of each property, as well as the EGI and NOI for the entire property) The building is currently at a 100% occupancy level with the following information on the lease: Suite 100: 4.400 SF space, $25/SF with 3% increases each year. No additional reimbursements. Suites 200: 3.300SF, $22.50/SF fixed and responsible for Percentage Rent. They will pay 12% for any sales they have over $1,500,000 each year. Assume their sales for the first year are $2,000,000 and increase by 15% each subsequent year. Responsible for reimbursing their net share of Utilities. Suite 300: 4,000 SF, Year 1 begins @ $17/SF and will increase based on the CPI-U for Year 2. Please use this information on the CPI-U to find the average change in 2021 to apply as the increase for 2022 and assume a 2% year over year increase for the remaining hold period. Reimbursements of their net share of utilities, taxes, insurance, maintenance, and garbage (to find not share, determine the percent of the building this tenant occupies and multiple the expense by that amount Consumer Price Index Historical Tables for U.S. City Average CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U) (not seasonally adjusted) Percent change from 12 months ago 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.6 2.9 1.6 1.6 -0.1 1.4 2.5 2.1 1.6 2.5 1.4 2.1 2.9 2.0 1.1 0.0 1.0 27 2.2 1.5 2.3 1.7 2.7 2.7 1.5 1.5 -0.1 0.9 2.4 2.4 1.9 1.5 2.6 3.2 2.3 1.1 2.0 -0.2 1.1 2.5 2.0 0.3 4.2 3.6 97 1.7 13 1.4 2.1 0.0 90 1.0 1.9 2.8 1.8 0.1 5.0 1.7 1.8 21 0.1 1.0 1.6 2.9 1.6 0.6 5.4 3.6 1.4 2.0 2.0 0.2 0.8 1.7 2.9 1.8 1.0 5.4 3.8 1.7 1.5 1.7 0.2 1.1 1.9 2.7 1.7 1.3 5.3 232382238 3.9 2.0 1.2 1.7 0.0 1.5 1.7 14 5.2 3.5 SEEEEEEEEEE 2.2 1.0 1.7 0.2 1.6 2.0 2.5 1.8 1.2 5.0 3.4 331332333 1.8 0.5 1.7 2.2 2.2 1.2 4.8 3.0 1.7 1.5 0.8 0.7 2.1 1.9 2.3 1.4 4.6 Suite 400: 3,300 SF; Tenant pays monthly rent of $4,000/month with subsequent annual increases of 3.25% per year for the entire lease period. This is a NNN lease so be sure to include the reimbursements for those expenses based on their net share. Additional Information (based on historical data): Assume a vacancy rate/collection loss of 7% for the entire building Miscellaneous Income: Vending machines in the building generate $200/month with estimated 2% increases each year. Expenses (apply an estimated 2% increase on all Operating Expenses) Utilities- $4/SF/year Garbage collection-$150/month Real estate Taxes- $65,000/year Insurance-$18,000/year Maintenance- $3/SF/year Management-5% of EGI (Non-recoverable expense) New Roof expenditure- $65,000 in year 3 Parking Lot re-pavement-$30,000 in year I Be sure to account for any reimbursements made by the tenants. Suite 100 2021 2022 2023 2024 2025 2026 Total PGI: Suite 200 Total Sales Natural Breakeven Sales over Breakeven Additional % Rent Paid 2021 2022 2023 2024 2025 2026 Total Suite 300 Change in CPI-U 2021 2022 2023 2024 2025 2026 Total PGI: Suite 400 2021 2022 2023 2024 2025 2026 Total PGI: PGI Suite 100 Suite 200 Suite 300 Suite 400 Total PGI Vacancy/Collection Loss Miscellaneous Income EGI A Operating Expenses Fixed Variable Total Operating Expenses Capital Expenditures Total Capital Expenditures ΝΟΙ Direct Capitalization Value B 2021 C 2022 E 2023 GO H 2024 2025 2026 M
Expert Answer:
Answer rating: 100% (QA)
Here are the stepbystep workings to value the office building based on the given information Suite 100 2022 4400 SF x 24SF 105600 2023 4400 SF x 2475SF 3 increase 108800 2024 4400 SF x 2550SF 3 increa... View the full answer
Related Book For
Auditing An International Approach
ISBN: 978-0071051415
6th edition
Authors: Wally J. Smieliauskas, Kathryn Bewley
Posted Date:
Students also viewed these accounting questions
-
You have been assigned to a strategic leadership committee that has been charged by the CEO with developing and implementing a comprehensive management accounting and control system. At the first...
-
You have been assigned to select an MUS sample from Whitney Company's detailed inventory records as of September 30. Whitney's controller gave you a list of the 23 different inventory items and their...
-
As an internal auditor, you have been assigned to evaluate the controls and operation of acomputer payroll system. To test the computer systems and programs, you submit independentlycreated test...
-
You have $300,000 saved for retirement. Your account earns 6% interest. How much will you be able to pull out each month, if you want to be able to take withdrawals for 20 years? $ Get help: Video
-
Solve the quadrature problem in the previous exercise using your local (C or POSIX) threads library. You will have to read online documentation for the thread package on your host OS, where you will...
-
Comparative income statement data for Manitou Ltd. and Muskoka Ltd., two competitors, are shown below for the year ended June 30, 2014. Instructions (a) Using vertical analysis, calculate the...
-
IAS 1 Presentation of Financial Statements requires the publication of a statement of recognised income and expense or a statement of changes in equity. Explain the need for the publishing of these...
-
The founder of Frenza asks us to assist her in accounting and analysis of the corporations bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications...
-
A slide 4.1 meters long makes an angle of 35 with the ground. To the nearest tenth of a meter, how far above the ground is the top of the slide? X 4.1 m 7.1 m 2.4 m 3.4 m 5.0 m 35
-
Using the Public MACRO BITCOIN scorecard spreadsheet (linked in its associated masterclass lesson - Long Term 32), create a COPY of it and perform a complete analysis for the date 22/2/2022....
-
Estimate quantity of Steel Reinforced rebar of given plan below for the reinforced concrete beams as presented in given crose section below Notes: - Standard hook for main rebar = (12db) without bend...
-
In one type of expense reimbursement scheme, employees overstate the cost of actual business expenses. What are common ways in which such an overstatement can be achieved? Over state another...
-
Ayayal Limited uses a perpetual inventory system. The inventory records show the following data for its first month of operations: Date Explanation Units Unit Cost Total Cost Balance in Units Aug. 2...
-
A 10.33 cm focal length converging lens is 40.6 cm to the left of a 15.31 cm focal length converging lens. A 5.3 cm tall object is placed 12.34 cm to the left of the converging lens with a 10.33 cm...
-
Assume that using the undeclared message2 variable throws an exception. What does the code segment output? function findError() { try { } let message1 = "No errors here"; message2;...
-
On a frictionless horizontal surface, block A of mass m = 1.5 kg moving with speed vA = 3.5 m/s suddenly collides with and sticks to another block B of mass M = 3.0 kg that is initially at rest. This...
-
Discuss the Following in a Single Initial Reply: 1) This may seem like an obvious one, but it is important to understand the differences in financial management. Who can describe the difference bet...
-
(a) What is the focal length of a magnifying glass that gives an angular magnification of 8.0 when the image is at infinity? (b) How far must the object be from the lens?
-
Describe the procedures and documentation of a controlled count of clients investment securities.
-
Define the term contingency fee, explaining how such fees apply to PAs. Do you feel a change is necessary to rules for contingency fees in Canada?
-
Describe the four main types of modified opinions and the reasons each would be used in an audit report.
-
The following extract is from Conceptual Framework for Financial Accounting and Reporting: Elements of Financial Statements and Their Measurement, FASB 3, December 1976. The benefits of achieving...
-
The following extract is from Comments of Leonard Spacek, in R.T. Sprouse and M. Moonitz, A Tentative Set of Broad Accounting Principles for Business Enterprises, Accounting Research Study No. 3,...
-
What factors should be considered in selecting an allocation base?
Study smarter with the SolutionInn App