Question

Industrial Building (125,000 SF)

Rent is $ 7.25 PSF NNN (Tenant pays NNN CAM, RE TAXES and INSURANCE)

Expense Data

Vacancy Rate and Credit Loss run approximately 8% per Annum

Management Fees are 5% of GOI

Utilities are paid by Tenant and are separately metered

Real Estate Taxes are $ 125,000 per year

Common Area Maintenance is $ .75 PSF Per Annum

Accounting and Legal are $ 3500 per annum.

Insurance is $ .35 PSF Per Annum

Capita Reserves are $ .15 PSF per Year

1. What is the NOI based upon the following data provided?  Calculate the purchase price based on 8% Cap Rate.

NOI _______________________________

SALES PRICE ____________________

Answer 1

	Workings	Amount
Rental Income	125000 SF *7.25 psf	906250
Vacancy & Credit Loss	8% * 906250	-72500
Gross Operating Income		833750
Management Fees	5% * 833750	-41687.5
Accounting and Legal Fees		-3500
Net Operating Income		788562.5
Cap rate =8%
Purchase/Sale Price = NOI / Cap rate = 788563/8% = $9,857,038
Answer
Net Operating Income	$788,563
Sales Price	$9,857,038
Note 1 : Capital reserve is not considered while calculating NOI
Note 2 : Common Area Maintenance, RE taxes and Insurance are not considered while calculating NOI since tenant is paying these expenses