Consider the following loan information. . Total acquisition price: $3,000,000. Property consists of twelve office suites,...
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Consider the following loan information. . Total acquisition price: $3,000,000. Property consists of twelve office suites, five on the first floor and seven on the second. Contract rents: three suites at $2,400 per month, two at $3,000 per month, and seven at $1,330 per month. Annual market rent increases: 3% per year. W . .. . Vacancy and collection losses: 5% per year. .. Operating expenses: 35% of effective gross income each year. . Capital expenditures: 6% of effective gross income each year. . . W Expected holding period: 5 years. W Expected selling price in year 5: Year 6 NOI capitalized at 5%. Selling expenses in year 5: 3% of the sale price. First mortgage loan: 75% LTV. . . M Annual mortgage interest rate: 4.5%. Loan term and amortization period: 25 years (monthly payments). Total upfront financing costs: 2% of loan amount. Required return: 9% 1. Create a oneyear operating pro forma and calculate investment criteria (cap rate, equity dividend rate, net income multiplier, effective gross income multiplier, debt coverage ratio, debt yield ratio, and loanto value ratio). 2. Create a fiveyear operating pro forma up to BTCF and BTER. 3. Calculate the NPV and IRR of the project based on the 5year levered cash flows. 4. (Sensitivity Test) Calculate the project NPV of levered cash flows based on the following required return assumptions: 10%, 12%, 14%, 16%, 18%, and 20%. 5. (Extra Credit 5pts) Calculate the project NPV of levered cash flows when LTV is 90% (instead of 75%). How does it change the NPV and IRR? Consider the following loan information. . Total acquisition price: $3,000,000. Property consists of twelve office suites, five on the first floor and seven on the second. Contract rents: three suites at $2,400 per month, two at $3,000 per month, and seven at $1,330 per month. Annual market rent increases: 3% per year. W . .. . Vacancy and collection losses: 5% per year. .. Operating expenses: 35% of effective gross income each year. . Capital expenditures: 6% of effective gross income each year. . . W Expected holding period: 5 years. W Expected selling price in year 5: Year 6 NOI capitalized at 5%. Selling expenses in year 5: 3% of the sale price. First mortgage loan: 75% LTV. . . M Annual mortgage interest rate: 4.5%. Loan term and amortization period: 25 years (monthly payments). Total upfront financing costs: 2% of loan amount. Required return: 9% 1. Create a oneyear operating pro forma and calculate investment criteria (cap rate, equity dividend rate, net income multiplier, effective gross income multiplier, debt coverage ratio, debt yield ratio, and loanto value ratio). 2. Create a fiveyear operating pro forma up to BTCF and BTER. 3. Calculate the NPV and IRR of the project based on the 5year levered cash flows. 4. (Sensitivity Test) Calculate the project NPV of levered cash flows based on the following required return assumptions: 10%, 12%, 14%, 16%, 18%, and 20%. 5. (Extra Credit 5pts) Calculate the project NPV of levered cash flows when LTV is 90% (instead of 75%). How does it change the NPV and IRR?
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Related Book For
Real Estate Finance and Investments
ISBN: 9780073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
Posted Date:
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