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An office building has the following investment characteristics: Year 1 NOI $2,100,000 Year 2 NOI $2,200,000...

An office building has the following investment characteristics: Year 1 NOI $2,100,000 Year 2 NOI $2,200,000 Year 3 NOI $2,300,000 Year 4 NOI $2,400,000 Initial (going in) cap rate 7% Loan Principal $18,000,000 Interest rate 5% Amortization 30 years Exit cap rate 8% Holding period 3 years Solve for each of the following:

Purchase price

Loan to value ratio

Annual debt service

Debt service coverage ratio for year 1

Loan balance at the end of year 3

Equity (Levered) IRR

Solutions

Expert Solution

Purchase price of the property is $30,000,000

Loan to Value Ratio is 60%

Annual Debt Service is $1,170,925.83

Debt Service Coverage Ratio for Year 1 is 1.79

Loan Balance at the end of Year 3 is $17,145,906.32

Levered IRR Calculation

The Levered IRR is 7.52%

Workings

jeff jeffy answered 2 years ago
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