Cash Flow ( commercial real estate ), assignment help
Consider the following information for XYZ Commercial Office building:
Please show all work, and provide any assumptions. Using Excel for the Cash flow
Square footage: 150,500 square feet
Tenancy:
A Tenant- 62,000 sf paying $24.00psf; remaining lease term 2 years
B Tenant- 54,000 sf paying $26.50psf; remaining lease term 5 years
C Tenant- 34,500 sf paying $25.75psf; remaining lease term 3 years
Market rents: The market rents are currently $32.25 psf. The market rents are expected to increase 2.75% in year one and 3% thereafter and all tenants will renew their leases at the prevailing market rates. Lease terms (new or renewal) will be 5 years with two 5 year options.
A 5% credit loss should be taken on income.
EXPENSES:
Operating expenses are $2.40 psf and will escalate at 3% annually.
Management fees are 4.75% of Effective Gross Income
Real Estate Taxes are currently $4 psf and are expected to decrease 15% in year one due to an expected refund on appeal, however will escalate 3% annually thereafter.
CAP EX:
Roof repair of $50,000 in year one.
Lobby renovation of $125,000 in year three.
1. Prepare a cash flow statement (Excel) for FOUR years for the property.
2. Assuming a discount rate of 9%, what is the present value of the cash flows?
3. Assuming you sold the building based on year 4’s NOI and a terminal cap rate of 10%, what price did you sell ?