You want to purchase an office building in Brooklyn. The property contains 112,000 square feet of rentable space and is currently occupied by multiple tenants each with differing maturities on their respective leases. No lease is currently shorter than 1 year.

The annual rent in the 1^st year of ownership is $55.50/sq ft.

The vacancy rate is 3.5%. You expect to incur collection losses (from tenant default) of 1.5%.

4.You decide you want to take out a loan to finance the purchase of this property. It will be a 10 yr balloon at an interest rate of 4.25% amortizing over a 30 year period with monthly payments and monthly compounding. The lender will provide financing up to a minimum Debt Service Coverage Ratio (DSCR) of 1.2 based off the 1^st year NOI.

What is the largest annual loan payment the lender will allow you to make based on the DSCR?

6. What is the largest loan a lender is willing to provide you with based on question 4? (Use the terms and loan payment from question 4.)

The answer to 4 is 2952600. Just answer 6 unless you see that my answer to 4 is wrong as well