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%.

7. The sellers asking price for the property is $55,000,000 (assume this is the value). If the lender has a maximum 70% LTV requirement, what is the most the bank will lend you? (Only based on the LTV requirement.)

8. The loan must satisfy both the minimum DSCR of 1.2 and maximum LTV of 70%.

What is the biggest loan the borrower can get?

9. If you buy the property at the asking price of $55,000,000 using the biggest loan you can get (from question 8) and purchase costs are 5% of the purchase price, what will your down payment be?

10. What is the annual mortgage payment on the loan in question 8?

11. If you buy the property at the asking price of $55,000,000, what is your going in Cap Rate?

12. If the annual irr for this property is 8.5%, then based on the cap rate in question 11, what does this imply is expected NOI growth rate for this property? (think about the formula for a growing perpetuity)