An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the acquisition cap rate? a.7.00% b.6.00% c.8.00% d.10.00%
An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the acquisition cap rate? a.7.00% b.6.00% c.8.00% d.10.00%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the acquisition cap rate?
a.7.00%
b.6.00%
c.8.00%
d.10.00%
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