09-20-2023 SA#4 Location Risk Analysis Yale SOM 895

Yale School of Management International Real Estate, Mgmt 895 Please post to Canvas before Noon on Septemberr 27, 2023 to receive credit Skill Assessment #4 Location and Market Timing Risk Analysis Munich and Athens Shopping Centers (PEP Perlacher Einkauff-Paradies and The Mall Athens) Below are the cash flows for two shopping centers: one is located in Munich and the other in Athens. Both centers are considered to be dominant in their respective markets Assume that you are able to purchase a 100% interest in either center at returns set by your company Investment Committee. Questions: 1. Calculate the Reversionary Value (Assumed Sale Price) at the specified rate for each asset at the end of Year 5, based on Year 6 NOI; 2. Using the @NPV function, calculate the purchase price for each asset at the rates specified based on a 5-year hold; 3. What is the first-year return (OAR) for each asset? 4. What is the value per square meter for each asset? 5. Which asset would you acquire for the five-year investment period and why? 6. What further information would be most important for you to have to complete your analysis? Investment Committee Rates Munich Athens Spread (BP) Discount Rate 4.50% 8.00% 350 Exit Cap Rate (Reversionary OAR) 4.00% 6.00% 200 GLA (Gross Leaseable Area) in Sq. Meters 50,000 58,500 10 Yr-Sovereign Debt Rate as of 09/18/2023 (and 22,/21,/20, /19, /18, /17, /16) 2.7% (1.8%, 0.32%, 0.54%, 0.57%, 0.45%, 0.33%,0.15%) 4.1% (4.3%, 0.75%,1.01%, 1.6%, 4.04%,5.37%,7.61%) Currency Euros Note: All amounts shown are in Euros Munich Center Pro Forma (Euro 000) Period: 0 1 2 3 4 5 NOI (Net Operating Income) 20,000 € 21,400 € 22,042 € 24,246 € 23,761 € Cash Flow Before Debt and Taxes: 18,600 € 20,972 € 21,601 € 22,307 € 23,286 € Purchase Price and Cash Flows/Reversion: 18,600 € 20,972 € 21,601 € 22,307 € FX Adjustment: None Value Per Square Meter (000): 0 € OAR Year 1 (%): Athens Center Pro Forma (Euro 000) Period: 0 1 2 3 4 5 NOI (Net Operating Income) 11,000 € 11,770 € 12,123 € 13,335 € 13,069 € Cash Flow Before Debt and Taxes: 10,230 € 11,535 € 11,881 € 12,269 € 12,807 € Purchase Price and Cash Flows/Reversion: 10,230 € 11,535 € 11,881 € 12,269 € FX Adjustment: None Value Per Square Meter (000): 0 € OAR Year 1 (%):