Question

In: Accounting

2. An office building has the following investment characteristics:             Year 1 NOI                   

2. 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


Related Solutions

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
An apartment building has the following investment characteristics: Year 1 NOI $2,500,000 Year 2 NOI $2,600,000...
An apartment building has the following investment characteristics: Year 1 NOI $2,500,000 Year 2 NOI $2,600,000 Year 3 NOI $2,704,000 Year 4 NOI $2,812,000 You plan to purchase the asset at a 5% initial cap rate and to sell it 3 years later, also at a 5% cap rate. You plan to use a loan at 60% LTV to purchase the asset. The loan will be interest-only (no amortization) at a 4% annual interest rate. Answer the following: What is...
An apartment building has the following investment characteristics:             Year 1 NOI                 $2,500,000
An apartment building has the following investment characteristics:             Year 1 NOI                 $2,500,000             Year 2 NOI                 $2,600,000             Year 3 NOI                 $2,704,000             Year 4 NOI                 $2,812,000 You plan to purchase the asset at a 5% initial cap rate and to sell it 3 years later, also at a 5% cap rate. You plan to use a loan at 60% LTV to purchase the asset. The loan will be interest only (no amortization) at a 4% annual interest rate....
You are seeking financing for a $500,000 investment in an apartment building. The NOI in the...
You are seeking financing for a $500,000 investment in an apartment building. The NOI in the first year is projected to be $35,000. The bank is willing to underwrite a fully-amortizing, 30 year fixed rate mortgage with constant monthly payments at an interest rate of 6%, compounded monthly. Please note the following ratio: Debt Coverage Ratio= Net Operating Income/ Annual Debt Service Compute the Debt Coverage Ratio if the bank underwrites a mortgage at a Loan-to-Value Ratio of 75%.
You have an opportunity to buy an office building for $125,000 that produces an annual NOI...
You have an opportunity to buy an office building for $125,000 that produces an annual NOI of $10,000. You can obtain an 80% loan from a bank with a 7% interest rate and amortized for 30 years. Your required investor cash on cash return is 12%. You will have to put 20% of the purchase down. What is the value of the office building? A. $140,999 B. $118,242 C. $113,895 D. $125,000
A company has two investment possibilities, with the following cash inflows: Investment Year 1 Year 2...
A company has two investment possibilities, with the following cash inflows: Investment Year 1 Year 2 Year 3 A $1,600 1,800 2,000 B $1,200 1,200 1,200 If the firm can earn 7 percent in other investments, what is the present value of investments A and B? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar. PV(Investment A): $ PV(Investment B): $ If each investment costs $4,000, is the present value of each...
A property has first year NOI of $1.5 million. NOI grows at 7% during the next...
A property has first year NOI of $1.5 million. NOI grows at 7% during the next two years. In year four, NOI goes drops 50% due to a lost tenant. You are very lucky and replace the tenant. Year five NOI is 4X year four. (continues below…) What is year 5 NOI? continue…You have a $10 million mortgage on this property, at 5% interest, amortization of twenty years. There are two partners who have invested $3 million total in the...
Conference Services Inc. has leased a large office building for $4 million per year. The building...
Conference Services Inc. has leased a large office building for $4 million per year. The building is larger than the company needs: two of the building's eight stories are almost empty. A manager wants to expand one of her projects, but this will require using one of the empty floors. In calculating the net present vlaue of the proposed expansion, upper management allocates one-eighth of $4 million of building rental costs (i.e., $.5 million) to the project expansion, reasoning that...
A real estate investment has the following expected cash flows: Year 0 Year 1 Year 2...
A real estate investment has the following expected cash flows: Year 0 Year 1 Year 2 Year 3 Year 4 Cashflow 10,000 25,000 50,000 35,000 The discount rate is 9%. What is the investment’s value 4 years from now? Select one: a. $ 132,152 b. $103,700 c. $ 113,345 d. $120,000 e. $130,757
A building owner is evaluating the following alternatives for leasing space in an office building for...
A building owner is evaluating the following alternatives for leasing space in an office building for the next five years: Net lease with steps. Rent will be $15 per square foot the first year and will increase by $1.50 per square foot each year until the end of the lease. All operating expenses will be paid by the tenant. Net lease with CPI adjustments. The rent will be $16 per square foot the first year. After the first year, the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT