/What is the market value of this property according to the direct capitalization approach?

Learning Goal: I’m working on a business and need to help me learn.

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 attach a table to this page clearly showing all your computations similar to the power point slides on Canvas(Handwritten or an MS excel spreadsheet are acceptable).

1/What is the market value of this property according to the direct capitalization approach?

a.Estimate the NOI for year 1.

b.Use the appropriate cap rate.

2/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.

Estimate the NOI for the holding period (each year individually).
Estimate the terminal value.
Use the appropriate discount rate to arrive at the NPV.

 

 

Reference no: EM132069492

WhatsApp
Hello! Need help with your assignments? We are here

GRAB 25% OFF YOUR ORDERS TODAY

X