Abacus Property Group is a diversified property group specialising in investing in core
plus property opportunities in Australia. Abacus was established in 1996 and it was listed on
the ASX in 2002 and are included in the S&P/ASX 200 index. In January 2022, Abacus
Property Group bought an office property at 710 Collins Street, Docklands for $76,500,000.
We find the information about this transaction and the estimated information about this
property and Abacus Property Group below:

Purchase price $ 76,500,000
Total cost of acquisition 1% of acquisition price
Loan to value ratio 60%
Annual interest rate on loan 5%
Loan payment method Interest only

Market rent $ 550 per m2 per annum
Market rent increase 5% per annum
Net Lettable Area (NLA) 9,500 m2
Miscellaneous income $ 14,000 per annum (fixed)
Vacancy and collection allowance 4% of potential gross income
Operating expenses $100 per m2 per annum of NLA
Operating expenses increases by 3%
Capital expenditure in year three $ 1,000,000

Holding period of this office property 6years
Growth rate of NOI after year 6 3.2%
Reselling expenses 1% of reselling price

Corporate tax rate 30%
Capital gain tax rate 30%

Expected rate of return 9%

Analyze the feasibility of this investment project based on the calculation of NPV, IRR, and
Value/Investment Ratio.

Answer rating: 100% (QA)

To analyse the feasibility of this investment project we need to calculate the net present value NPV internal rate of return IRR and valueinvestment r... View the full answer