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FOUR PART QUESTION RETAIL REIT wants to buy CORE SHOPPING CENTER from its current...

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Finance

FOUR PART QUESTION

RETAIL REIT wants to buy CORE SHOPPING CENTER from its current owner and uses the cash flow projections to value the property. RETAIL REIT will pay $30,500,000 for the center and expects to sell it at the end of Year 10 for $36,000,000 with a 2% cost of sale. NOI growth is expected to be just over 2.0% (annualized) through the 10 years.

  1. What is the expected IRR for RETAIL REIT?
    1. 6.77%
    2. 7.72%
    3. 8.14%
    4. 8.75%

  1. If NOI growth is 1.9% through the analysis period, the impact to RETAIL REITs IRR will be?
    1. Accretive
    2. Dilutive
    3. No Impact

  1. If capitalization rates compress and RETAIL REIT sells the property for $37,000,000, the impact to RETAIL REITs IRR will be?
    1. Accretive
    2. Dilutive
    3. No impact

  1. If the Tenant Improvement expense in Year 2 is $120,000, the impact to RETAIL REITs IRR will be?
    1. Accretive
    2. Dilutive
    3. No Impact

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