Ridge Business Center Ridge Business Center is a warehouse/office property in Charlotte. The property includes a well-maintained building totaling 50,000 sq ft in leasable area. The property has been offered for sale by the current owner at an asking pric (2024)

Ridge Business CenterRidge Business Center is a warehouse/office property in Charlotte. The property includes a well-maintained building totaling 50,000 sq ft in leasable area.The property has been offered for sale by the current owner at an asking price of $5 Million. As a Financial Analyst of XYZ Investors, you are expected to identify if the property will be a good acquisition for the company. An investment must generate a minimum of 15% IRR for XYZ Investors.Please build a financial model using the assumptions below to provide an answer to the Management. Required sheets have been provided.Investment AssumptionsAcquisition Date 01-Jan-21Holding Period 5 years * time for which the property is ownedSale Date last day of 60th monthTerminal Cap Rate 7.5% * This rate is used to determine Sale Price by the following formula: Sale Price= 5th Year NOI/Terminal Cap RateCost of Sale 2% * 2% of Sale Earnings go to broker/lawyerLoan AssumptionsLoan Start Date 01-Jan-21Term of Loan 5 yearsLTV 75% * of PriceInterest Rate 4.0%Loan Fees 1%Amortization Period 25 years * Calculate monthly loan payments, you will need an amortization scheduleRent Assumptions1) Assume rents increase every year on the first day of the calendar year2) Rents shown are Annual rents on a per square feet basis. Convert them to monthly rents and actual $ as and when required.3) NNN leases are triple net leases, the tenant has to pay their proportionate share of CAM, taxes, and insurance over and above the rent4) Consider Suite 1006 as vacant for the entire duration of 5 yearsRent Roll (As of 31 July, 2020)Suite Leased Area Status Lease Start Date Lease End Date Annual Rent PSF Rent Increase Date Rent Increase Lease Type(sq. ft) (mm/dd/yy) (mm/dd/yy) (as of 31 July, 20) (mm/dd/yy) Annual (%)1001 10,000 Occupied 03-01-18 03-31-28 $12.15 01-01-21 3% NNN1002 10,000 Occupied 06-01-19 06-30-29 $11.50 01-01-21 3% NNN1003 15,000 Occupied 01-01-20 01-31-30 $10.75 01-01-21 3% NNN1004 5,000 Occupied 03-01-18 03-31-28 $12 01-01-21 5% NNN1005 10,000 Occupied 06-01-19 06-30-29 $12 01-01-21 5% NNN1006 6,000 VacantTotal 56,000 $10.32Expense Assumptions1) All expenses are paid by the landlord2) All expenses grow 2% annuallyExpense AssumptionsExpense Type Annual Expense ($)CAM $25,000Taxes $75,000Insurance $25,000Utilities $20,000Repairs $45,000Total $190,000Capital ExpenditureYear Annual Amount($ psf)2021 $2.002022 $1.252023 $1.002024 $1.002025 $1.00Prepare monthly cash flows and amortization schedulePlease refer to the excel sheet for the case study – Ridge Business Center. Use functions of Excel wherever necessary, no macros should be used for the case study. Calculate Levered IRR on the investment using the data provided.Investor A & B both invested $100,000 in a private investment and were promised 10% IRR.- A received $15,000 in Year 1 and $5,000 in Year 2- B received $10,000 in Year 1 and $10,000 in Year 2Both of them exited the investment at the end of the 2nd year. Even though both got 10% IRR on their investments, what could be the possible reason for B’s unhappiness?Our client is a real estate private equity company that focuses on multifamily acquisitions. A property we are looking at has a net operating income (NOI) of $567,678. The asking price is $10,650,567.

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