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    Office Building Case Study - Part One (MS Word)

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    minani marc
    The document provides information about investing in an office building, including: 1) The owner is asking $3.5 million and leases 18,000 sq ft for $20/sq ft and 90 parking spaces for $120/month each. 2) Annual operating expenses include management fees, taxes, insurance, and maintenance. 3) A $1.5 million mortgage is available at 6% for 25 years with $115,974 annual payments and no prepayment penalty. 4) Expected annual increases are 3% for office and parking rents and 2-3% for other expenses.

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    Office Building Case Study - Part One (MS Word)

    Uploaded by

    minani marc
    29 views1 page
    The document provides information about investing in an office building, including: 1) The owner is asking $3.5 million and leases 18,000 sq ft for $20/sq ft and 90 parking spaces for $120/month each. 2) Annual operating expenses include management fees, taxes, insurance, and maintenance. 3) A $1.5 million mortgage is available at 6% for 25 years with $115,974 annual payments and no prepayment penalty. 4) Expected annual increases are 3% for office and parking rents and 2-3% for other expenses.

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    Office building case study

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    The document provides information about investing in an office building, including: 1) The owner is asking $3.5 million and leases 18,000 sq ft for $20/sq ft and 90 parking spaces for $120/month each. 2) Annual operating expenses include management fees, taxes, insurance, and maintenance. 3) A $1.5 million mortgage is available at 6% for 25 years with $115,974 annual payments and no prepayment penalty. 4) Expected annual increases are 3% for office and parking rents and 2-3% for other expenses.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    29 views1 page

    Office Building Case Study - Part One (MS Word)

    Uploaded by

    minani marc
    The document provides information about investing in an office building, including: 1) The owner is asking $3.5 million and leases 18,000 sq ft for $20/sq ft and 90 parking spaces for $120/month each. 2) Annual operating expenses include management fees, taxes, insurance, and maintenance. 3) A $1.5 million mortgage is available at 6% for 25 years with $115,974 annual payments and no prepayment penalty. 4) Expected annual increases are 3% for office and parking rents and 2-3% for other expenses.

    Copyright:

    © All Rights Reserved
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    of 1

    CASE STUDY: PART ONE

    BEFORE TAX CASH FLOWS

    You have the opportunity to invest in an office building in downtown Jacksonville, in which you
    would purchase as a 5-year holding investment with a 10% required rate of return (discount
    rate). The building offers a total rentable area of 20,000 square feet, and 100 garage-parking
    spaces. You are provided the following information on the property from the current owner:

    1. The owner is asking $3,500,000 for the building.

    2. The owner has annual contracts from tenants on the building for 18,000 square feet
    of the total space at $20.00 psf, gross. Additionally, 90 parking spaces are leased
    by annual contract for $120.00 per month, per space. You expect this same office
    vacancy to occur into perpetuity, and expect parking vacancy to equally correlate
    with the office vacancy. These lease terms are found to be in line with the downtown
    office market.

    3. Current annual operating expenses for the building follow:


    a. Management Fees: 5% of EGI
    b. Annual Real Estate Taxes: $9,000
    c. Hazard Insurance: $3,000
    d. Maintenance/Repairs: $11,000
    e. Supplies $4,000
    f. Capital Replacement Allowance: $8,000
    g. Administrative Costs: $4,500
    h. Operating Costs of the Garage: $6,500

    Your mortgage lender has committed to you a loan to purchase the office building (should you
    decide to partake in the investment), which would offer the following terms:

    Loan-to-Value: $1,500,000 Mtg; $2,000,000 hard equity


    Interest Rate: 6% FRM
    Loan Duration: 25 years, fully amortizing
    Payment: $115,974 per annum
    Prepayment Penalty: None

    A study of the office building market in downtown Jacksonville indicates the following trended
    increases in incomes and expenses, which can safely be assumed in analysis forecasts:

    a. Office rents: 3% per annum


    b. Parking rents: 3% per annum
    c. Real Estate Taxes: 3% per annum
    d. Other Operating Expenses: 2% per annum

    Assignment: Based on the above information, prepare a reconstructed year-one income and
    expense statement, and a reconstructed income and expense statement forecasting returns for
    the 5-year holding period (six years analysis required). For both statements, calculate through
    Before Tax Cash Flows.

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