Reference no: EM133555181

Question: An investor has hired you to help value and analyze an industrial (distribution warehouse) property she is interested in purchasing. The property in question has 495,000 square feet of rentable space. The property is leased to a single tenant paying a contract rent of $15 per square foot annually. The tenant signed a 10-year, fixed (constant) rent lease contract two years ago. The lease is "triple net" meaning that building operating expenses are passed through to and paid directly by the tenant. The investor/owner is responsible for capital costs associated structural components of the property. Reserves for future capital needs are estimated at $2 per square foot per year. The annual overall vacancy rate in all properties in the market area of the subject property is running at about 6%.