Reference no: EM132283728
Assignment -
You are required to prepare a Discounted Cash Flow analysis over a 10 year period using an Excel spreadsheet to determine the value of a modern multi tenanted industrial warehouse complex.
The valuation date is 1 June 2019.
Lease Details
Unit 1: 4,300m2 in a new lease from 1 June 2019 for 12 years at a rental of $180 per square metre ($/m2). Rent reviews are on the basis of 3% per year for the first 6 years and then a review to market at the commencement of year 7.Rent reviews for the balance of the term are 3% pa. This unit is in very good condition and in March 2019 the owner spent approx. $25 per square metre capital works for the purposes of the new tenant.
Unit 2: 3,850m2 in a new lease from 1 June 2019 for 11 years at a rental of $185/m2. Rental is reviewed every 3 years to market. This unit is also in very good condition and the owner also spent approx. $25/m2 in March 2019 to bring it to this condition.
Unit 3: 4,180m2 in area leased from 1 June 2010 for 10 years at a current rental of $155/m2.There is no option to renew on lease expiry. Rent reviews are every 3 years to market. This unit is in inferior condition to Units 1 & 2.
Unit 4: 4,050m2 in area leased from 1 June 2011 for 10 years with no option to renew on lease expiry. Current rental is $165/m2. Rent reviews are every 2 years to market with the rental not to exceed 2.5% for each year. This unit is in a similar condition to Unit 3.
All leases are on a net basis i.e. each of the tenants pay their share of outgoings in addition to the base rentals shown above. Outgoings are calculated on a basis proportionate to the area each tenant occupies. Outgoings paid by the owner and reimbursed by the tenants equate to $30/m2 and in addition the owner is responsible for outgoings that cannot be claimed from the tenants of $3.50/m2.
Leasing costs charged by agents are generally 4% of the gross income.
Acquisition costs comprise Stamp Duty of 5.25% plus legal costs of 0.30%. Disposal costs including agent's fees and legal are 2.5%.
A respected economic forecast firm has predicted inflation over the next 10 years to be:
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
3.1% 3.6% 2.2% 2.6% 3.4% 3.8% 4.1% 3.7% 3.1% 2.7%
The consensus among 3 property research firms is that for industrial property of this type, rental growth over the next 5 years should be:
Yr 1 Yr 2 Yr3 Yr4 Yr5
4.0% 4.25% 3.5% 3.0% 3.0%
Sales of similar industrial complexes in the area are currently showing capitalisation rates of between 8.25% and 8.75%.
Analysed sales of comparable investment properties currently show discount rates of between 9.50% and 10.75%.
Attachment:- Assignment Files.rar