Evaluate the investment potential of an office building based on the information provided below, Current operating expenses
Question:
Evaluate the investment potential of an office building based on the information provided below, Current operating expenses and real estate taxes are $2,826,400 and the management fee of 4% is included in this number.
Square Feet Rent/SF Expense Stop
Tenant 1 45,000 $29.50 $13.00
Tenant 2 26,000 $32.10 $14.00
Tenant 3 52,000 $32.00 $12.25
Tenant 4 37,000 $30.25 $16.00
Assume our class standard vacancy rate(5%) and replacement reserves(250) unless otherwise noted.
Vacancy rate: 5%
Replacement reserves: 0.20
NOI: 2,455,663
Based on your proforma, please answer the following questions :
1. If the prevailing cap rate was 5.85%, what would you pay for the property?
2. You believe you can get a loan at all all-in interest rate of 240 BPs (2.4%) over the US Treasury (2.6%). What is the Loan Amount if the lender is offering a 70% Loan-to-Value and 30-year amortization.
3.What is the Annual Debt Service using the loan amount determined above.
4.What is the Debt Service Coverage Ratio on this loan?
5.What is the stabilized Cash Flow?
6.What is the Cash on Cash Return (ROE)?