You would like to buy an industrial property in Pointe-Claire that has two tenants occupying all of the leasable area. The current owner provides you with the following information.

• One tenant has six years remaining on his lease. It is a triple-net lease with a base rent of $50,000 per year for 5,000 square feet. The tenant has always paid his rent on time.

• The second tenant has 4 years remaining on his lease. It is a double-net lease with a base rent of $30,000 per year for 4,000 square feet. The tenant has always paid his rent on time

• There is a small common area of 1,000 square feet.

• The owner provides you with an income statement showing the following expenses for last year. Maintenance expenses are expected to increase by $2,000 starting this coming year. All other expenses are not expected to change.

Property taxes	$8,000
Income taxes	$7,000
Property insurance	$5,000
Snow removal	$1,000
Maintenance	$5,000
Management and Other	$3,000
Depreciation	$6,000

• The property has no expected vacancy or credit losses.

• The owner has allowed a local company to put up a sign on the side of the building for $1,000 per year.

• The capitalization rate for comparable properties is 10%.

Calculate the value of the property using the Income Capitalization Approach.

Answer: