Reference no: EM131324887
Please show all work and submit an excel file.
Type of Property: Office Building
Leasable Space: 60,000 square feet
Average Rent: $43.55 per square foot per year
Expected Rent Growth: 4.76% per year
Vacancy and Collection Losses: 8.6% of potential gross income
Other Income: $3.15 per square foot per year
Expected Growth in Other Income: 3.5% per year
Operating Expenses: 40% of effective gross income
Capital Expenditures: 5% of effective gross income
Going-In Cap Rate: 5.82%
Going-Out Cap Rate: 6.19%
Selling Expenses: 5% of future selling price
Discount Rate: 7.65%
a. What is the market value of this property according to the direct capitalization approach?
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 5th year of ownership.
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