A class B-/C office building located in a Class A location in mid-town Phoenix constructed in 1960, is 40 % vacant. Market vacancy is 12% for Class A buildings and 20% for class B. The prospective new Buyer in under contract to buy this property for $27 million. The gross area of the property is 150,000SF distributed on ten (10) floors. The developer wants to reposition the property into a Class A-/B+ office building and sell it once stabilized within 5 years.

Purchase Price $180/SF X 150,000SF $27,000,000

Building CapEx $ 80/SF X 150,000SF $12,000,000

TI -New Leases $ 60/SF X 60,000SF $ 3,600,000

TI- Renewals $ 20/SF X 90,000SF $1,800,000

Commissions $ 10/SF X 60,000SF $ 600,000

Soft Costs $ 100/SF X 150,000SF $ 15,000,000

Total Project Cost $400/SF $ 60,000,000

QUESTION 1 ( 10Points )

What kind of loan for this property in Phoenix would you select, a CMBS conduit loan or one from a Portfolio Lender?

Discuss in detail the pros and cons of each kind of loan. (Use a grid format with bullet points).

QUESTION 2 ( 15 points )

What tools and methods would you use to lease the vacant space in the Phoenix building example in the above question? How would you structure your Leasing Campaign?

Deal with each of the following in detail. (Use a grid format with bullet points).

1. lease structures
2. brokerage community interaction
3. capital expenditure items
4. marketing efforts
5. TI costs and concepts
6. technology