Robust Properties is planning to go public by creating a REIT that will offer 1 million shares of stock. It is currently trying to develop a pro forma set of financial statements. Robust is faced with a number of questions about its handling of some accounting and financial disclosure issues. Robust Properties I. Major Financial Information: a. Assets-properties (actual cost) b. Depreciable basis-buildings only c. Useful life d. Operating expenses e. Management expenses-third parties f. General and administrative expenses g. Mortgage @ 8% interest only, 10 years h. Financing fees II. Lease Information: a. Average lease term b. Leasable space c. Base rents (year 1) d. Escalation factor-rents per year e. Lease commissions f. Tenant improvements $ 100,000,000 $ 80,000,000 40 years 38% of rents 5% of rents 3% of rents $ 30,00,000 ,000,0 $ 900,000 5 years 1,000,000 square feet $ 15 pounds per square feet 5% 4% of year 1 rent $ 10 pounds per square feet The management of Robust Properties has asked you to prepare preliminary pro forma financials for the next three years. Specifically, you should have (1) a beginning balance sheet, (2) operating statements for each of the next three years, and (3) all relevant financial ratios for year 1 results only. Robust will pay all financing fees, tenant improvements, and lease commissions upon commencing operations. It would like to pay a minimum dividend of $4.00 per share. In preparing your pro forma operating statements, Robust wants you to consider the effects of reporting in the following two ways: Required: a. What would EPS, FFO, and ROC be under both approaches? (Round your intermediate calculations and final answers to 2 decimal places.)
Robust Properties is planning to go public by creating a REIT that will offer 1 million shares of stock. It is currently trying to develop a pro forma set of financial statements. Robust is faced with a number of questions about its handling of some accounting and financial disclosure issues. Robust Properties I. Major Financial Information: a. Assets-properties (actual cost) b. Depreciable basis-buildings only c. Useful life d. Operating expenses e. Management expenses-third parties f. General and administrative expenses g. Mortgage @ 8% interest only, 10 years h. Financing fees II. Lease Information: a. Average lease term b. Leasable space c. Base rents (year 1) d. Escalation factor-rents per year e. Lease commissions f. Tenant improvements $ 100,000,000 $ 80,000,000 40 years 38% of rents 5% of rents 3% of rents $ 30,00,000 ,000,0 $ 900,000 5 years 1,000,000 square feet $ 15 pounds per square feet 5% 4% of year 1 rent $ 10 pounds per square feet The management of Robust Properties has asked you to prepare preliminary pro forma financials for the next three years. Specifically, you should have (1) a beginning balance sheet, (2) operating statements for each of the next three years, and (3) all relevant financial ratios for year 1 results only. Robust will pay all financing fees, tenant improvements, and lease commissions upon commencing operations. It would like to pay a minimum dividend of $4.00 per share. In preparing your pro forma operating statements, Robust wants you to consider the effects of reporting in the following two ways: Required: a. What would EPS, FFO, and ROC be under both approaches? (Round your intermediate calculations and final answers to 2 decimal places.)
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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Transcribed Image Text:Robust Properties is planning to go public by creating a REIT that will offer 1 million shares of stock. It is currently trying to develop a
pro forma set of financial statements. Robust is faced with a number of questions about its handling of some accounting and financial
disclosure issues.
Robust Properties
I. Major Financial Information:
a. Assets-properties (actual cost)
b. Depreciable basis-buildings only
c. Useful life
d. Operating expenses
e. Management expenses-third parties
f. General and administrative expenses
g. Mortgage @ 8% interest only, 10 years
h. Financing fees
II. Lease Information:
a. Average lease term
b. Leasable space
c. Base rents (year 1)
d. Escalation factor-rents per year
e. Lease commissions
f. Tenant improvements
$ 100,000,000
$ 80,000,000
40 years
38% of rents
5% of rents
3% of rents
$ 30,00,000
,000,0
$ 900,000
5 years
1,000,000 square feet
$ 15 pounds per square feet
5%
4% of year 1 rent
$ 10 pounds per square feet
The management of Robust Properties has asked you to prepare preliminary pro forma financials for the next three years. Specifically,
you should have (1) a beginning balance sheet, (2) operating statements for each of the next three years, and (3) all relevant financial
ratios for year 1 results only. Robust will pay all financing fees, tenant improvements, and lease commissions upon commencing
operations. It would like to pay a minimum dividend of $4.00 per share.
In preparing your pro forma operating statements, Robust wants you to consider the effects of reporting in the following two ways:
Required:
a. What would EPS, FFO, and ROC be under both approaches? (Round your intermediate calculations and final answers to 2 decimal
places.)
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