Word Problem #1 (3 points each)
You Dave the opporunty to buy a single tenant, retal/buldingein West Campus. The all in purchase price
423* 00 000 You have be aDve 20 001 al a tire ye Fetal buitins:/0).21t, 593 Axed interest rate, with a 25,
expectantation schadule you pay tris roan on & ayear,lite and or th year. The NNN rent in Year 1 Is
expertesito be 532, 000 and shouid grow 31/ 393 de Jext,* Vat' Expect Pre vacancy to be 6%, The operating
ins contes, n Year lare expected to be 5A5, 000 and Wit tr War )c year. sume that you aro going to sell
this building at the end o the third year (on the Pd. A NoW a 2 SoS exIt CaD With 2% associated sales costs,
Assume there are no tax implications.
27. What is the Gross Potential Income in year 37_
28. What is the dollar amount for vacancy in year 2?
29. What is the NOI in year 1?
30. How much is the yearly payment for the loan?
31. What is the project's NPV assuming a 12% discount rate?
32. Based on a three-year hold, what is the project IRR?
33. Based on a three-year hold, what is the Equity Multiple?
You have the opportunity to buy a single tenant, retail building in West Campus. The all in purchase price is 1,000,000. You have been able to source a five-year loan, with a 70% LTV, 5% fixed interest rate, with a 25-year amortization schedule. You pay this loan once a year at the end of the year. The NNN rent in year 1 is expected to be $82,000, and should grow at 3% a year. You expect the vacancy to be 6%. The operating expenses in year 1 are expected to $45,000 and will grow at 3% a year. Assume that you are going to sell this building at the end of the third year (on the Yr. 4 NOI) at a 7.5% exit cap with 2% associated sales costs. Assume there are no tax implications.
1. What is the Gross Potential Income in year 3?
2. What is the dollar amount for vacancy in year 2?
3. What is the NOI in year 1?
4. How much is the yearly payment for the loan?
5. What is the project's NPV assuming a 12% discount rate?
6. Based on a three-year hold, what is the project IRR?
7. Based on a three-year hold, what is the Equity Multiple?
