Property Information:

Property Name: SoCal Complex

Property Type: Office & Retail property

Analysis Start Date: January, 2022

Analysis Period: Five years

Rentable Sq Ft: 11,828

Inflation: The general inflation rate is 3% per year.

Miscellaneous Revenue:

Overtime AC: $2,000 per month for overtime air conditioning, which is 100% fixed.

Parking: 24 parking spaces are available for $50/month. An occupancy rate of 115% is expected.

Reimbursable Expenses:

Insurance: The cost of property insurance will be $0.35/SF/Yr and is 100% fixed. This expense will inflate by 2%.

Real estate Tax: $22,000 in property taxes is paid each year, which will not be inflated for year 2, but inflated after that by the general inflation rate of 3%.

Utilities: Utilities will cost $0.80/SF/Yr. This expense will inflate at the general inflation rate.

CAM: A common area maintenance fee of $0.75/SF/YR is charged. This expense will inflate by the general inflation rate.

Non-Reimbursable Expense:

Management Fee: 3% of EGI.

Capital Expenditures:

Roof replacement: A one-time roof replacement of $100,000 begins on the analysis date.

Reserve: AC system is $3000 per year and the carpet is $0.2/SF/Yr.

Rent Roll Information:

Name of Tenant: SoCal Real Estate

Lease Type: Office

Lease Status: Contract

Square Footage: 5,828

Start of Lease: Jan 2022

Term of Lease: 7 years

Base Rent: $20/SF/YR

Rent Change: Beginning from the 3rd year, the rent will inflate by 4% annually for the remainder of the lease

Reimbursement: Base stop of $4/SF/Yr

Rent Abatements: 1 month free for the first month, and half a month free for the 13th month

Tenant Improve: $15 per square foot

Leasing Commission: 5% of total lease value over the lease term

Name of Tenant: Home & Land Mortgage

Lease Type: Office

Lease Status: Contract

Square Footage: 4000 SF

Start of Lease: January, 2022

Term of Lease: 5 years Rent: $82,000 /YR for the first year, and after that, increase by $1000 per year.

Reimbursement: Tenant pays pro rata (share based on the tenants share of the property) share of utilities and CAM expenses 3

Name of Tenant: New York Pizza

Lease Type: Retail

Lease Status: Contract

Square Footage: 2000 SF

Start of Lease: January, 2022

Term of Lease: 6 years

Rent: $23/SF /YR for the first year, and after that, increase to 24/SF/YR on 1/1/2018.

Reimbursement: Net reimbursement (pay the prorate share of reimbursable expenses based on the tenants share of the property)

Property Purchase and Resale: Purchase

Price: $2,150,000

Resale Calculation: Capitalize the n+1s NOI

Capitalization Rate: 8.50%

Resale Commissions: 3%

Resale Cap Rate Matrix:

Low Cap Rate: 7.5%

High Cap Rate: 8.5%

Increment: 50 Basis Points

Present Value Determination:

Discount Rate: 10%, with 5 additional rates in 50 basis point increments.

Debt Financial information:

Start Date: January, 2022

Amortize Start: January, 2022

Term Length: 25 years

LTV Ratio: 75%

Interest Rate: 6%

Points/Fees: 1 point

Depreciation and Tax:

80% of the property is eligible for depreciation, and it is on a straight-line basis.

Useful life of 39 yrs.

Ordinary income tax rate is 35%, depreciation capture rate is 25% and capital gain tax rate is 15%.

Questions

1. Conduct an IRR (Equity IRR, ATIRR and project IRR) analysis

2. Sensitivity analysis impact on IRRs using the resale cap rate matrix information given

3. Use and state any other pertinent assumptions if necessary