Financial feasibility

Topics: Real estate, Net income, Generally Accepted Accounting Principles Pages: 4 (522 words) Published: November 4, 2013
Financial Feasibility
Monthly Income Statement
FactorsCalculationsResults
Potential Gross Income$2.30/sq ft * 201,707 sq ft$463,930.00 Leasable space 201,707 sq ft
Parking400 * $145$58,000.00
Vacancy allowance: 15%15%* ($463,930+$58,000) $ 78,290.00 EGI: $463,930-$69,590$443,640.00
Operating expenses: 32% of EGI$257,094*.32$141,965.00
Net operating income:$257,094 - 82,270 $301,675.00

Assumptions
Changes in Rent
“Commercial real estate investors and occupiers turned more cautious in response to political, fiscal and economic uncertainty. Despite this, office rents and values have held their ground as both the leasing and value indices remain above year ago levels. We see this as a pause in the market, not a fundamental change in underlying market dynamics,” Dr. Raymond Torto, CBRE Global Chief Economist. There was little change in Global Office Real Estate Rents at the end of the 2012 3rd quarter. Rental rates and the growth in rents are highly correlated with occupancy rates. CBRE anticipates that office-using employment will recover to its pre-recession peak by the end of 2013. As a result, CBRE projects that average rents will increase by 3.5% in 2013, and to 4.4% in 2014.

The property’s current average rent is $2.30 per square foot. We will use a 3% rent growth rate. Changes in Property Value
Changes in Vacancy Allowance
The vacancy rate declined to its lowest level since 2009. Despite the slow economic recovery and growth rate, the United States commercial real estate market showed improvement across all property sectors in the 2012 2nd quarter.

Corporate Commercial Real Estate Group, (CBRE) predicts that the office market vacancy rate will continue to decline moderately. By the end of the third quarter, the national office vacancy rate declined by 20 basis points to reach 15.5%. “The vacancy rate has declined by 70 bps on a year-to-year basis, indicating that the office recovery is continuing despite...
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