1) What is the estimated purchase price of the subject property?
2) What is the estimated sale price at the end of the 5-year holding period?
3) What is my effective Tax Rate?

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Your client is purchasing, a 50, 000 square foot retail strip center in Orange, CT. There is a 30,000 square foot grocery anchor and eight 2,500 square foot retail stores. Two units are vacant. The grocery anchor pays $10.00 per square foot net rent and has 9 years remaining on their lease. The 6 occupied retail tenants pay $12.00 per square foot net and remaining lease terms range from 6 to 9 years. Market rent for comparable retail space is $15.00 net + CAM. All leases for the subject property are net plus CAM (Common Area Maintenance) charges. Operating Expenses are: RE Taxes $4.00 per square foot per annum. Property insurance is $0.75 per square foot per annum. Property Management is 5.0% of Gross operating income. Repairs and Maintenance is $$0.50 per square foot per annum. Common Utilities run about $0.85 per square foot per annum. Legal fees and accounting run about $2,000 per year Advertising runs about $3,000 per year. Snow removal averages about $12,000 per year, Ground care runs about $11,000 per year. HVAC Contract is $1,500 per quarter. Year Financing: Financing is available for $4,604,025 at 5.25% for a 20-year amortization with monthly payments and a 5- year term. The lender is charging 1 point. Develop a 5 Year Cashflow After Tax Analysis, Vacancy rate for years 1 is at 10.0% and declines the second year forward to 6.0% Rental income will increase in year two 2.5% thereafter. Other income will increase 3.0% each year. Expense escalation will be 2.0% year 2 and 3.0% thereafter. Holding period 5 Years-Year of acquisition Buy in January - Year of disposition Sell in December-Cost at acquisition is $15,000 and Sale cost 5.5% of sale price. Taxes: Assessor's records indicate 20% allocation to land and 80% to improvements. Marginal tax rate is Federal 28%-State 5% - Federal Capital Gain Tax=20% State = 6% Federal recapture tax is 25% - You Buy the property in January and sell it in December in sale year. Cap Rates: Going in cap rate of 6.5% and going out cap rate 6.0% Year acquired Full years held (2-27.5) Year of sa 1 2 7 3.485 3.182 2.879 2.576 2.273 1970 1.667 3.636 Year of sale (40) 0.152 9 10 11 12 1.061 0.758 0.458 0.152 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 1 2 Year acquired 2.461 2.247 (1) IRS Cost-Recovery Percentages for Residential Property Month Full years 2.564 2564 hold (2-39) 0.458 0.758 1061 1.364 1.667 1970 2273 2576 2.879 3.182 3.495 0.107 0.321 IRS Cost-Recovery Percentages for Non-Residential Real Property Month 3 2.033 2.564 0.535 4 8 1.364 1819 5 7 1.606 1391 1177 6 8 9 10 0.963 0.749 0.535 0.321 0.107 2.564 2.564 2.564 2564 2.564 0,749 0.963 1.177 1.301 1.605 11 12 2.564 2.564 2.564 2.564 1819 2.033 2247 2.461 Your client is purchasing, a 50, 000 square foot retail strip center in Orange, CT. There is a 30,000 square foot grocery anchor and eight 2,500 square foot retail stores. Two units are vacant. The grocery anchor pays $10.00 per square foot net rent and has 9 years remaining on their lease. The 6 occupied retail tenants pay $12.00 per square foot net and remaining lease terms range from 6 to 9 years. Market rent for comparable retail space is $15.00 net + CAM. All leases for the subject property are net plus CAM (Common Area Maintenance) charges. Operating Expenses are: RE Taxes $4.00 per square foot per annum. Property insurance is $0.75 per square foot per annum. Property Management is 5.0% of Gross operating income. Repairs and Maintenance is $$0.50 per square foot per annum. Common Utilities run about $0.85 per square foot per annum. Legal fees and accounting run about $2,000 per year Advertising runs about $3,000 per year. Snow removal averages about $12,000 per year, Ground care runs about $11,000 per year. HVAC Contract is $1,500 per quarter. Year Financing: Financing is available for $4,604,025 at 5.25% for a 20-year amortization with monthly payments and a 5- year term. The lender is charging 1 point. Develop a 5 Year Cashflow After Tax Analysis, Vacancy rate for years 1 is at 10.0% and declines the second year forward to 6.0% Rental income will increase in year two 2.5% thereafter. Other income will increase 3.0% each year. Expense escalation will be 2.0% year 2 and 3.0% thereafter. Holding period 5 Years-Year of acquisition Buy in January - Year of disposition Sell in December-Cost at acquisition is $15,000 and Sale cost 5.5% of sale price. Taxes: Assessor's records indicate 20% allocation to land and 80% to improvements. Marginal tax rate is Federal 28%-State 5% - Federal Capital Gain Tax=20% State = 6% Federal recapture tax is 25% - You Buy the property in January and sell it in December in sale year. Cap Rates: Going in cap rate of 6.5% and going out cap rate 6.0% Year acquired Full years held (2-27.5) Year of sa 1 2 7 3.485 3.182 2.879 2.576 2.273 1970 1.667 3.636 Year of sale (40) 0.152 9 10 11 12 1.061 0.758 0.458 0.152 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 1 2 Year acquired 2.461 2.247 (1) IRS Cost-Recovery Percentages for Residential Property Month Full years 2.564 2564 hold (2-39) 0.458 0.758 1061 1.364 1.667 1970 2273 2576 2.879 3.182 3.495 0.107 0.321 IRS Cost-Recovery Percentages for Non-Residential Real Property Month 3 2.033 2.564 0.535 4 8 1.364 1819 5 7 1.606 1391 1177 6 8 9 10 0.963 0.749 0.535 0.321 0.107 2.564 2.564 2.564 2564 2.564 0,749 0.963 1.177 1.301 1.605 11 12 2.564 2.564 2.564 2.564 1819 2.033 2247 2.461

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1To estimate the purchase price of the subject property we need to calculate the ... View the full answer