Below are is all the information that you need to do the calculations and determine the metrics behind the investment.
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Market rent $30/sf for gross leases
$22/sf for net leases
Growth rate 3% annually for everything
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Tenant SF Rent/yr /sf Stop Lease Start Mo. Term Steps
Tenant A 25,000 $33.00 BY $9.40/sf 1 10 yrs 3%/year
Tenant B 30,000 $27.00 BY $8.50/sf 1 8 yrs $32/sf in yr 5
Tenant C 35,000 $20.00 Net 1 3 yrs N/A
Tenant 10,000 $30.00 BY $10.00/sf 13 10 yrs 36 in month 67
Base year (BY) The tenant will pay for expenses that have risen to a level above their expense stop. Net leases have a stop of zero, so they pay all reimbursable expense.
Tenants A, B and D are modified gross with expenses passed through over a base year while tenant C is Net.
Vacancy/Credit Loss 5% of PGI
Expense Category Expense per foot
Taxes $ 5.00/sf
R&M $ 1.00/sf
Insurance $ 0.25/sf
Utilities $ 2.00/sf
Payroll $ 0.85/sf
Security $ 0.50/sf
G&A $ 0.40/sf
Total Reimbursable $10.00/sf
Management 3% of EGI
Assume zero rollover possibility. Downtime (vacancy at end of lease) 6 months
Total Capital at rollover 25/sf growing at inflation
From the above information, you should be able to do proforma.
Discount Rate 10.0%
Term 5 years
Amortization 30 years
Rate 4% rate
a proforma for a five-year hold aggregating the cash flows from each lease.
- Cash flow after debt Service
- Cash on Cash Return
- Debt service coverage Ratio
- Leveraged IRR
- Debt Yield
- Break-even ratio