Conduct analysis for a large pension fund that is

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Reference no: EM13346670

Conduct analysis for a large pension fund that is evaluating whether or not to purchase the Standard Life Centre located at 121 King St W.

Financial Analysis

Step 1 - Prepare an estimate of property value using the information and assumptions given in Tables 1, 2 and 3 below.  You may need to make other assumptions to complete your valuation.

Step 2 - Conduct research to construct a more accurate set of assumptions for the items listed in Table 3. Explain and justify your assumptions. 

Step 3 - Re-compute the estimate of property value using the values in your new Table 3 and those in the existing Tables 1 and 2. 

The financial analysis section should be approximately 5 pages long, consisting mainly of text about your assumptions, plus your new table 3 and your computations of property value.

Table 1 - Rent roll

Tenant

Size in square feet (sf)

Rate per sf per year

Lease expiry date

Office1

208,000

24

2016

Office2

104,000

27

2020

Office3

158,000

30

2024

Vacant Office

12,000

 

 

Retail1

10,000

40

2015

Retail2

10,000

60

2020

Table 2 - Projected expenses for the year 2013

Category of expense

Amount

Taxes

$4,500,000

Operating costs and insurance

$4,500,000

Cleaning

$980,000

Utilities

$2,560,000

All leases are triple net.  (Note/hint:  this is extremely important in your model.)

 Table 3 - Assumptions

Growth in rental rates

2%

Rate of vacancy and collection loss

1%

Growth in expenses

2%

Length of holding period

10 years

Terminal cap rate at disposition

7%

Selling costs as % of price

2%

Discount rate

5.5%

Rental rate on renewal

Same as existing rate.

Reference no: EM13346670

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