Because of existing leases, a property is projected to have NOI of $ per year for each of the next years. All of the leases will have expired at the end of the years. If the property were not encumbered by existing leases, the appraiser estimates that the NOI would be $ for the first year and increase by percent each year over a projected holding period of years

a Estimate the value of the fee simple estate by discounting the cash flows at a percent discount rate. Assume that the resale price at the end of the fifth year can be estimated by applying a percent terminal capitalization rate to the sixth year NOI

b Estimate the value of the leased fee estate by discounting the appropriate cash flows at an percent discount rate.

c What does the difference in the answers for part A and B represent?

Answer rating: 100% (QA)

a Estimating fee simple value Year NOI if not leased Growth Rate ... View the full answer