Please Solve using Excel

Office building acquisition analysis:

You have been presented with an office building for sale for $115 psf. The building is 240,000 sf. There is one tenant in place who leases 50% of the building at a full service rental rate of $25.00 psf for the next 10 years. Operating expenses for the building are $13.00 psf.

Your research has proven that market lease terms for this building are $27.00 psf full service for a 5

year lease. Tenant Improvements and leasing commissions on new deals are $15.00 and 6% respectively. Buildings of this quality should trade on a 10% cap rate based on the forward twelve months NOI.

Assume that you will lease the balance of the space to two equal sized tenants at market rates. The first new lease will occur 8 months after you purchase the building, and the second new lease will happen 15 months after purchase. If you sell the building at the end of year 3 what is your unleveraged IRR? Please use the XIRR formula to calculate =xirr(value A:value B, date A:date B)

Now assume that you closed with a loan of 65% of your purchase price. Here are the terms of the loan, it is a 5 yr loan with a 7% interest rate that is interest only and has a one-point origination fee. What is your leveraged IRR? Please use the XIRR formula to calculate.

Based on your analysis and your general knowledge of real estate, what are other issues to consider when evaluating whether or not you should buy this building?