A property owner has provided you with the following information. Assume the owner has no other...

A property owner has provided you with the following information. Assume the owner has no other assets or liabilities. The annual gross revenue is $3,275,000. The debt service payment on the loan is $147,000 per month. The capitalization rate is 8%. Assets: Cash $ 1,000,000 Land 1,500,000 Building 29,500,000 Total Assets $ 32,000,000 Liabilities & Equity: Nonrecourse Liabilities $ 25,000,000 Partner’s Capital 7,000,000 Total Liabilities & Capital $ 32,000,000

14. What is the property’s NOI?

Calculate the Debt Service Coverage Ratio?

What is the Debt to Asset Ratio?

Last year’s Debt Ratio for the property was 74%. The industry average Debt to Asset ratio is 82%. Based on the available information would you consider this to be a low, normal or high risk investment and why?

What is the Effective Gross Income Multiplier?

Expert Solution

Debt Service Payment per Month	$ 1,47,000.00
Yearly Payment	$ 17,64,000.00
Gross Revenue (EBITDA)	$ 32,75,000.00
Debt Service Coverage Ratio	=EBITDA/Debt Service Payment
Debt Service Coverage Ratio	1.857

Let take Capitalization Rate as Loan Interest
Liabilities	$ 25,00,000.00
Yearly Debt Service Payment	$ 17,64,000.00
Total (Including Interest)	$ 42,64,000.00
Principle	$ 39,48,148.15	+4264000/1.08
Interest	$ 3,15,851.85

Gross Revenue (EBITDA)	$ 32,75,000.00
Less: Interest	$ 3,15,851.85
Net Operating Income	$ 29,59,148.15

Debt to Asset Ratio
Debt	2500000
Total Assets	3200000
Debt to Total Assets	78.13%

Last Year	74%
Industry Average Debt Asset Ratio	84%
Company Debt to Asset Ratio is less than Industry Average so it is Low risky

Effective Gross Income Multiplier	Total Assets/Gross Income
	0.977099

ekkarill92 answered 1 year ago

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