You have the opportunity to purchase an office property in the Chicago suburbs and need to estimate NOI. The property has a total of 60,000 square feet, subdivided into 10 individual tenant spaces. Your research indicates the average annual market rent is $35 per square foot.

Based on your review of other similar properties, you can assume 4% of PGI for vacancy/credit loss. Operating expenses will include property taxes, insurance, water, and the management fee. You estimate property taxes will be $5.15 per square foot and insurance will be $2 per square foot. This will cover fire and other hazards, liability, loss of rents in the event of a disaster, etc.

The tenants pay their own electric and gas bills, and you as owner will pay the water bill, which can be estimated at $100 per month per tenant space. Since there is no common area, all of the janitorial expense will also be the tenant's responsibility. The city provides trash pickup for residential tenants but these are all retail or restaurant tenants and they will have to arrange for a dumpster at their own cost.

As owner, you will need to hire a management company and it will charge 2% of PGI for management of the premises.

QUESTION: Based on these assumptions, how much NOI will this property generate?

Please show how you calculated each of the following: PGI, Vacancy, EGI, and Operating Expenses. Also, arrange them into a simple income statement like this:

PGI -vacancy ------------ EGI -Op Ex ------------ NOI