Question

Park Place Complex, located in Pleasantville, Jupiter is a 21-floor modern building complex consisting of commercial offices and retail establishments. Key building details are presented below.

• Site area – 20 acres with space for 2,500 parking spots

• Basement – 2 levels.

Houses building security operations and mail receipt/sorting facilities.

• Atrium – floors 1 and 2.

These two floors can be used by everyone including visitors. In addition to housing elevator banks and escalators, the atrium houses several fancy coffee shops and high end eat-in places like a health food café and ice cream yogurt shop.

• Retail Stores – floors 3 thru 7.

The retail space is occupied by two Anchor Tenants and 18 In-Line tenants.

Each retail floor has 38,000 sq. ft. (28,000 rented area + 10,000 common area).

• Office Space in 12 floors – floors 8 thru 19.

The floors are occupied by all office tenants.

Each office floor has 35,000 sq. ft. of rentable area, of which 5,000 sq. ft is common area.

• Restaurant - 20^th floor.

The restaurant utilizes 35,000 sq. ft. of rentable area. The restaurant is operated by a third-party providing food at subsidized prices for employees in the building, who are allowed to use the restaurant with valid ID. The restaurant pays no rental charges since the food is offered at subsidized prices. The restaurant is supervised by a 12-memb board consisting of the building management and executives from few large tenants.

• HVAC equipment – floor 21.

• Details about the leases are provided below.

• Present Occupancy – 100%.

However, management uses following occupancy rates for planning and financial reporting purposes: 98% for Atrium Retail, 95% for Retail in floors 3 thru 7, and 97% for offices in floors 8 thru 19. Restaurant on the 20^th floor will always be part of the building.

• First year budgeted expenses.

Operating expenses for inside of the building $5.5 million

Operating expenses for outside parking space and landscaping $0.9 million

Operating expenses to cover repairs and other items to maintain building quality $1.6 million

Real Estate Taxes $5.2 million

Property Insurance $0.9 million

Allocation for Capital Expenditures $4.3 million

• Lease Details

     

Atrium (Floor 1, 2)	Atrium Common Area = 50,000
2 Floors Total Area = 70,000	Arium Rented Area = 20,000
	Atrium retail establishments $30/rsf plus 8% of sales
	Sales of all Atrium retail establishments = $2.5 mil/year
	COM pass thru for all space in the atrium = $2/rsf escalating at CPI
Retail Space (Floors 3 - 7)	Retail Floors Common Area (RCA) = 50,000
5 Floors Total Area = 190,000	Retail Floors Rental Area (RRA) = 140,000
	Floors 3: RSF = 28,000, Rate = $40 flat for 5 years
	Floors 4+5: RSF = 56,000, Rate = $35 growing at $2/year
	Floors 6+7: RSF = 56,000, Rate = $34 flat + 6% of sales
	COM Pass Thru = $8/rsf for common area of floors 3-7
	$2/rsf for atrium common area
	COM expenses are escalating at CPI
Office Space (Floors 8 - 19)	Office Floors Common Area = 60,000
12 Office Floors Total Area = 420,000	Office Floors Rental Area = 360,000
	Lease Type: Gross Lease at 43/rsf, escalates at $3/year.
	Base Year CAM of $10/rsf is included in gross lease
	Beginning year 2, escalations at cpi will be passed thru.
Restaurant (floor 20)	Rentable area = 35,000
One floor, Total Area = 35,000	Base Rent = 0
	Maintenance Pass Thru = $10/rsf, escalating at cpi

1. Develop a present a summary report (like the one discussed in the class for Baldwin Mall).

Make sure it is clean and neat.

2. Develop a pro forma statement for the first year of operations, like the one discussed in the class.

Answer 1

The answer is as following :