Reference no: EM132235378

Assignment

Question 1: Value the property using the Cost Approach. You will do this by computing each entry in the following construction budget's line items and summing them:

Item	National $Amount	Local $Amount
Site (Land) Acquisition Cost
Landscaping Costs
Cost of Parking Space Const.
Total Hard Costs
Total Soft Costs
Total Construction Costs

Question 2: What is the total value of land as a percent of the total project's value (i.e. total cost of construction)?

Question 3: Our guests from MAI said that land is typically 20-30% of value in a balanced market. Is the % allocation of value to land under the cost approach significantly different from this? If so, what does this tell you?

Question 4: Value the property using the Comps Approach You will do this by taking a weighted average of the value of the four comparables, where the weights reflect how similar (i.e. "comparable") they are to the subject property. For value, you can use their sale price or sale price/sqft. You are also free to only use subset of the four comparables if you believe that one or two of them are not good ones.

Present and show your work. Be aware that the comps approach is more art than science: there is no one "correct" answer. Rather, you will be graded on this component by how well you show your work and how well you argue your reasoning for the final number you arrive at.

Question 5: Which particular comp did you think was the most comparable and why?

Question 6: Which particular comp did you think was the least comparable and why?

Question 5: Value the property using the Cap Rate version of the Income Approach. You will do this by computing each entry in the following table and the using those numbers to compute the Estimated Price. (Note: you may wish to set up a more detailed version of the table, where each tenant's rent and each individual operating expense is broken out separately.)

Item	Year 1
Total Annual Rent
-Total Operating Expenses
=Net Operating Income
Cap Rate
Estimated Price (=NOI/Cap Rate)

Question 6: What percent of total annual rental income is operating expenses? Does this percent seem reasonable to you? (Hint: google around to find what percent of gross income that operating expenses should be.)

Question 7: Value the property using the DCF version of the Income Approach. You will do this by computing each entry in the following table and the using those numbers to compute the Estimated Price.

Note that this is conceptually the same as the Cap Rate Approach, but with two key differences:

1) The cash flows are spread out over 10 years.

2) In the final year that you are holding the building, you will apply the appropriate cap rate to that year's NOI to obtain a predicted sales price. You will then add this sales price to your year 10 NOI before computing the NPV of all your cash flows.

Question 8: Value the property using the DCF version of the Income Approach, but for the pessimistic scenario.
 
Question 9: Value the property using the DCF version of the Income Approach, but for the optimistic scenario.

Question 10:Summarize your valuation results by completing the following table:

Approach	Estimated $Value	Estimated $Value/SqFt
Cost Approach
Comps Approach
Cap Rate Approach
DCF-Baseline
DCF-Pessimistic
DCF-Optimistic
Asking Price

Question 11:Which approach do you think is the most appropriate one for this case study, and why? Which approach do you think is the leastappropriate one for this case study, and why?

Question 12: What is your final, best estimate of the property's current market value? (It is fine to blend the values from different approaches). Describe your reasoning why you think this is the most accurate value. Compare your value to the property's current list price and discuss why you think there may be any significant difference.

Attachment:- Valuation Case Study.docx