An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in...

 

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An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the property's taxable income? What is the effective yield to the lender through the date of prepayment on a $540,000 fixed rate mortgage loan fully amortizing over 30 years but paid off after 10 years if the stated annual interest rate is 6.50%, the lender charges 2.0% as an origination fee, $720 for an appraisal and $36 for a credit report and there is no prepayment penalty? An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the property's taxable income? What is the effective yield to the lender through the date of prepayment on a $540,000 fixed rate mortgage loan fully amortizing over 30 years but paid off after 10 years if the stated annual interest rate is 6.50%, the lender charges 2.0% as an origination fee, $720 for an appraisal and $36 for a credit report and there is no prepayment penalty?

Answer rating: 100% (QA)

To calculate the propertys taxable income we need to determine the propertys gross rental income operating expenses and depreciation expense Gross Ren... View the full answer