Use the information provided below to estimate the market value of the office building that has been described.
Type of Property: Office Building
Leasable Space: 100,000 square feet
Average Rent: $20.00 per square foot per year
Expected Rent Growth: 4.50% per year
Vacancy and Collection Losses: 15.00% of potential gross income
Other Income: $1.50 per square foot per year
Expected Growth in Other Income: 3.00% per year
Operating Expenses: 27.50% of effective gross income
Capital Expenditures: 2.50% of effective gross income
Going-In Cap Rate: 5.50%
Going-Out Cap Rate: 6.25%
Selling Expenses: 4.00% of future selling price
Discount Rate: 6.75%
Please show all computations:
A. What is the market value of this property according to the discounted cash flow approach? Assume that you are going to sell the property at the end of the 5th year of ownership.
i. Estimate the NOI for the holding period (each year individually).
ii. Estimate the terminal value. iii. Use the appropriate discount rate to arrive at the NPV.
1.First let us calculate the NOI for the 5 years.
2. Then let us calculate the Terminal value of property using the formula: Last year NOI / Going out cap rate
3. Then let us discount all NOI (deducting selling exp from last year NOI) & Terminal value using disc. rate of 6.75%
So market value = 24,340,331.5 dollars
4. Now let us calc. NPV
Use the information provided below to estimate the market value of the office building that has...
Use the information provided below to estimate the market value of the office building that has been described. Type of Property: Office Building Leasable Space: 100,000 square feet Average Rent: $20.00 per square foot per year Expected Rent Growth: 4.50% per year Vacancy and Collection Losses: 15.00% of potential gross income Other Income: $1.50 per square foot per year Expected Growth in Other Income: 3.00% per year Operating Expenses: 27.50% of effective gross income Capital Expenditures: 2.50% of effective gross...
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