you will need you to create a spreadsheet /proforma of the cash flows from a property. There is no magic. All you have to do is layout the cash flows on a monthly basis. Then you need to (on a second tab) aggregate the cash flows by year. When you have the second tab showing annual cash flows for the 5 years of holding period plus the reversion, you can calculate value, mortgage and all the other metrics. I am not looking for elegant coding. I am just looking for an understanding of how the cash flows work and how to calculate the various metrics.

This assignment is to create an analysis for purchasing a property, projecting rents, expense pass throughs, expenses, capital over a five-year holding period and the sale. Below is all the information that you need to do the calculations and determine the metrics behind the investment.

Market rent $50/sf for gross leases with a new base year based on expenses at time of new lease

$30/sf for net leases.

Growth rate 2.5% annually for everything

Rent Roll

Tenant SF Rent/yr /sf Stop Lease Start Mo. Term Steps

Tenant A 30,000 $49.00 BY $20.00/sf 1/1/2021 10 yrs 3%/year

Tenant B 20,000 $45.00 percentage rent 1/1/2021 8 y see belowrs

Tenant C 15,000 $30.00 Net 1/1/2021 3 yrs N/A

Tenant D 35,000 $50.00 BY $21.50/sf 6/1/2021 10 yrs $36/sf in month 57

Total

Base year (BY) The tenant will pay for expenses that have risen to a level above their expense stop. Net leases have a stop of zero, so they pay all reimbursable expense. (Expense stop) x sf

Tenant B Percentage rent the tenants will pay 10% on sales per year exceeding $9,800,000. The sales are Yr1 450/sf, yr2=550/sf, yr3=510/sf, yr4=465/sf and yr5=600/sf.

Tenants A and D are modified gross with expenses passed through over a base year while tenant C is Net.

Vacancy/Credit Loss 10% of PGI

Expenses

Expense Category Expense per foot

Taxes $10.00/sf

R&M $ 3.00/sf

Insurance $ 0.50/sf

Utilities $ 4.00/sf

Payroll $ 1.75/sf

Security $ 1.00/sf

G&A $ 0.80/sf

Total Reimbursable $21.05/sf

Non Reimbursable

Management 3% of EGI

Assume zero rollover possibility. Downtime (vacancy at end of lease) 6 months

Capital Expenditures

Total Capital at rollover 25/sf growing at inflation

Structurural reserve = $0.15 per square foot each year .

From the above information, you should be able to create a proforma. Use following parameters.

Reversion 7.0%

Discount Rate 10.0%

Term 5 years

Loan Info

Amortization 30 years

Term 5 years

Rate 4% rate

LTV 70%

Create a proforma for a five-year hold aggregating the cash flows from each lease.

Calculate

• Value
• Loan
• IRR
• Cash flow after debt Service
• Cash on Cash Return
• Debt service coverage Ratio
• Leveraged IRR
• Debt Yield
• Break-even ratio

Extra Credit worth 10%

The developer will invest 20% of the equity and the money partner will invest 80%. The investment partner has been promised an 8% preferred return. They will split cash flows after the preferred return 50/50. Please calculated each investors IRR and Equity Multiple.

How to begin

Start by creating a column for each month of the hold period and additional 12 months for the reversion year. In these columns enter in the first line 1 increasing each month by 1.

The next line put in the dates. Starting with 1/1/21.

Then for each lease put in the monthly rent that is due for each month.

Add a line for the sum.

Then put in the pass through that is due in each month for each tenant.

Add a line for the sum of the pass throughs.

Sum of pass throughs and rent equals PGI

Apply the vacancy for the property

Calculate EGI.

Enter in each column the appropriate expense for each line for each column.

Sum the expenses

Subtract the expenses from the EGI

Dont forget that rent and expenses are shown as $/sf/year so when creating the cash flows on a monthly basis you have to adjust accordingly..