Real Estate Question?

[Claire]

Quantitative Analysis

1. Develop a five year proforma statement for a 40,000 sq.ft. office building based on the following information

a.92 percent of the building is lease able.
b.Management fees are 6 percent of Effective Gross Income
c.Utilities are $1.50 per square foot and growing at 3.5 percent per year.
d.Maintenance expenses are 14 percent of Total Income
e.Property taxes are 10 percent of Total Income
f.Insurance expenses are $5,000 per year
g.Reserve requirements are $6,500 per year
h.Assume a 5 percent vacancy rate
i.Tenant information

ABC Consultants 6,800 sq.ft. $13.20/sq.ft. 2.5% per year
Credit Inc. 12.000 sq.ft. $12.30/sq.ft. None
Camby Insurance 9,000 sq.ft. $12.70/sq.ft 3% per year
EK Imports 9,000 sq.ft. $12.70/sq.ft. 2% per year
Bench marks:
Capitalization rate of 9.8 percent
Interest rate 7.25 percent
LTV 70 percent
Term 25 years
Compute:
Monthly payment
Mortgage balance at time of sale
Net Present Value based on discount rate of 11 percent
Leveraged IRR
Unleveraged IRR
Debt Coverage ratio
Breakeven point
Sale price based on going-out cap rate of 10.5 percent and 3 percent selling expenses
Sensitivity analysis: Separate runs for each and explanation
1.EK Imports leaves in the third year and space is not rented
2.Capitalization rate is change to 11.2 percent