Models Used:

Perpetuity (P): Can be used for initial and terminal values.

Gordon Growth (GG): Can be used for initial and terminal values.

Multiple Approach (M) (Use GPRI): Calculate the Multiple using a 12% expected return.

Discounted Cash Flow (DCF)

• Calculate the Terminal Value (TV)

Assumptions: Alexandria BioPharma/Tech Medical Office Development Mission Bay San Francisco

Also, show the calculations for valuations utilizing the above methods:

Net Operating Income (NOI): NOI (t=0) = $125 million

NOI Growth Rate: g going in = 2% g terminal = 1%

Gross Potential Rental Income (GPRI): GPRI (t+1) = $150 million

Expected Return (Discount Rate): E(r) going-in = 12% E(r) terminal = 14%

Proforma Cash Flow Growth Rates:

g (t+1) = 10%, g (t+2) = 8%, g (t+3) = 5%, g (t+4) = 2%, g (t+5) = 2%, g (t+6) = 1%

Cost of Development/Construction Cost = $1.25 billion

Five Year Holding Period

Using P/GG/M: What is the intrinsic value of the project?

Using DCF: What is PV, NPV, IRR?

Would you Accept or Reject the Project?

If the NPV was negative what iterations would you go through? If you still could not get the project NPV positive, what would be your last scenario be? And what would NNPV need to be?