Use the information provided below to estimate the market value of the office building that has been described.

Type of Property	Office Building
Leasable Space	100,000 square feet
Average Rent	$20.00 per square foot per year
Expected Rent Growth	4.50% per year
Vacancy and Collection Losses	15.00% of potential gross income
Other Income	$1.50 per square foot per year
Expected Growth in Other Income	3.00% per year
Operating Expenses	27.50% of effective gross income
Capital Expenditures	2.50% of effective gross income
Going-In Cap Rate	5.50%
Going-Out Cap Rate	6.25%
Selling Expenses	4.00% of future selling price
Discount Rate	6.75%

A) What is the market value of this property according to the direct capitalization approach?

1. Estimate the NOI for year 1.
2. Use the appropriate cap rate.

B) What is the market value of this property according to the discounted cash flow approach? Assume that you are going to sell the property at the end of the 5^th year of ownership.

1. Estimate the NOI for the holding period (each year individually).
2. Estimate the terminal value.
3. Use the appropriate discount rate to arrive at the NPV.