Sammie's Club wants to buy a 320,000-square-feet distribution facility on the northern edge of a large midwestern city. The subject facility is currently renting for $5.9 per square foot. Based on recent market activity, two properties have sold within a two-mile distance from the subject facility and are very comparable in size, design, and age. One facility is 350,000 square feet and is presently being leased for $5.80 per square foot annually. The second facility contains 300,000 square feet and is being leased for $6.00 per square foot. Market data indicates that current vacancies and operating expenses should run approximately 50 percent of gross income for these facilities. The first facility sold for $13.8 million, and the second sold for $12.3 million. Required: a. Using a going-in or direct capitalization rate approach to value, how would you estimate value for the subject distribution facility? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Comparable 1 Comparable 2 b. What additional information would be desirable before the final direct rate (R) is selected? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) The trend in NOI Property values Financing % % Risk
Sammie's Club wants to buy a 320,000-square-feet distribution facility on the northern edge of a large midwestern city. The subject facility is currently renting for $5.9 per square foot. Based on recent market activity, two properties have sold within a two-mile distance from the subject facility and are very comparable in size, design, and age. One facility is 350,000 square feet and is presently being leased for $5.80 per square foot annually. The second facility contains 300,000 square feet and is being leased for $6.00 per square foot. Market data indicates that current vacancies and operating expenses should run approximately 50 percent of gross income for these facilities. The first facility sold for $13.8 million, and the second sold for $12.3 million. Required: a. Using a going-in or direct capitalization rate approach to value, how would you estimate value for the subject distribution facility? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Comparable 1 Comparable 2 b. What additional information would be desirable before the final direct rate (R) is selected? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) The trend in NOI Property values Financing % % Risk
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:Sammie's Club wants to buy a 320,000-square-feet distribution facility on the northern edge of a large midwestern city. The subject
facility is currently renting for $5.9 per square foot. Based on recent market activity, two properties have sold within a two-mile
distance from the subject facility and are very comparable in size, design, and age. One facility is 350,000 square feet and is presently
being leased for $5.80 per square foot annually. The second facility contains 300,000 square feet and is being leased for $6.00 per
square foot. Market data indicates that current vacancies and operating expenses should run approximately 50 percent of gross
income for these facilities. The first facility sold for $13.8 million, and the second sold for $12.3 million.
Required:
a. Using a going-in or direct capitalization rate approach to value, how would you estimate value for the subject distribution facility?
(Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Comparable 1
Comparable 2
b. What additional information would be desirable before the final direct rate (R) is selected? (You may select more than one answer.
Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the
question mark to empty the box for a wrong answer.)
The trend In NOI
Property values
Financing
%
%
Risk
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