You own a 50-unit residential 3-bed apartment complex in Kampar, Malaysia with total area of 50,000 square feet. Average occupancy rate is 90% and the average monthly rent is RM 8,000 expected to grow by 7% each year for foreseeable future. You estimate that 6% of the revenue is never collected. Monthly operating costs are 20% of the revenue in first year and are expected to grow in line with the consumer price index (CPI), 3% per annum. Insurance costs are 3% of the capacity. Other revenue per year amounts to RM 500,000 which are expected to stay constant for next 5 years. Property taxes are 5% and income tax is 20%.

During last year, three apartment buildings were sold within one square kilometre area: Building A had a total covered area of 25,000 square feet building, had 30 units and was sold for RM 40 million; Building B had area of 70,000 square feet, 60 units and was valued at RM 70 million and Building C had area of 60,000 square feet, 42 apartments and was sold at RM 55 million.

The market value of the land is RM 30 million, and it took RM 20 million to construct the building 10 years ago. Assuming inflation over the last 10 years to be 2.5% on average.

During the last 3 years, comparable properties were valued based on a 10% capitalization rate, assume in a net average growth rate in net operating income (NOI) is 5% for the purpose of direct capitalization method forever.

Compute your properties value using direct capitalization approach.