Suppose it costs $17,500 per year in real estate taxes for a 5,500 SF leaseable area at
Question:
Suppose it costs $17,500 per year in real estate taxes for a 5,500 SF leaseable area at the start of the lease. Expense inflation grows at 3% per year. The landlord uses an EXPENSE STOP. - What reimbursement does the landlord receive in year 3?
2. Suppose transactions are occurring at 5.45% cap rates. The 10-year treasury is transacting at a 4.25% yield.
- What is the risk premium paid to investors?
- How do the four influencers of cap rates affect the investors demanded return?
- If a transaction occurred at a 4.25%, the same as the treasury yield, why would an investor still want to invest the real estate opportunity? (HINT: Think of the Cash Flow).
3. Building is stabilized at $4.7M and the purchase price is $77.8M.
- What is the cap rate?
- What is the risk premium when the 10-year treasury is at 4.3%?
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim