question archive Real Estate Finance: You are the owner of a 85,000 square foot office building
Real Estate Finance: You are the owner of a 85,000 square foot office building
Subject:FinancePrice: Bought3
Real Estate Finance: You are the owner of a 85,000 square foot office building. You purchased the building five years ago for $14,750,000.
During that entire time the building was triple net leased to a tenant who was also responsible for all maintenance and capital upkeep. (triple net lease: Tenant pays all the expenses of the property including real estate taxes, building insurance, and maintenance.)
The net rent the tenant paid was flat at $19.00 per square foot per year. You have just negotiated a lease extension which will raise the rent to $22.00 per square foot for the next 5 years.
You believe that the building will then sell for $18,000,000.
If the sale is successful, what is your leveraged investment multiple assuming you obtain an interest only loan for 75% of value at the time of your purchase at an interest rate of 5%?
A. 2.32
B. 1.22
C. 1.77
D. 3.32
