Can you answer the second part, please? First part answer is $137.5m.

Assume a building generates revenues of $7.7M/Yr and expenses of $2.5M/Yr. A third party believes he can improve operations so that revenues increase to $8M though expenses remain the same. Assuming a 4% cap rate, what price should the third part be willing to pay to acquire the property? (ANS: 137.5M)

Staying with Question 9, assume that the buyer would like to install a new facade at a cost of $2M? The facade work is being done by the buyer for strategic reasons. What would be the effective acquisition cap rate post completion of the facade work?

1. 4.0%

2. 3.94%

3. 3.78%

4. 3.5%