Robust Properties is planning to go public by creating a REIT that will offer 1 million shares of stock. It is currently trying to develop a pro forma set of financial statements. Robust is faced with a number of questions about its handling of some accounting and financial disclosure issues. Robust Properties I. Major Financial Information: a. Assetsproperties (actual cost) $ 100,000,000 b. Depreciable basisbuildings only $ 80,000,000 c. Useful life 40 years years d. Operating expenses 38 % of rents % of rents e. Management expensesthird parties 5 % or fents % of rents f. General and administrative expenses 3 % of rent s of rents g. Mortgage @ 8% interest only, 10 years $ 30,000,000 h. Financing fees $ 900,000 II. Lease Information: a. Average lease term 5 years years b. Leasable space 1,000,000 square feet square feet c. Base rents (year 1) $ 15 per square foot per square feet d. Escalation factorrents per year 5 % % e. Lease commissions 4 % of year 1 rent % of year 1 rent f. Tenant improvements $ 10 per square foot per square feet The management of Robust Properties has asked you to prepare preliminary pro forma financials for the next three years. Specifically, you should have (1) a beginning balance sheet, (2) operating statements for each of the next three years, and (3) all relevant financial ratios for year 1 results only. Robust will pay all financing fees, tenant improvements, and lease commissions upon commencing operations. It would like to pay a minimum dividend of $4.00 per share. In preparing your pro forma operating statements, Robust wants you to consider the effects of reporting in the following two ways:

Required: a. What would EPS, FFO, and ROC, for both Approaches

Approach 1 Approach 2 Lease commissions Amortize, 5 years Expense in year 1 Finance fees Amortize, 10 years Expense in year 1 Tenant improvements Depreciate, 40 years Depreciate over 5-year lease term Buildings Depreciate, 40 years Depreciate, 40 years

USE EXCEL