Ww 4 JW Sy Aes Case Study Manual — ARGUS Valuation - DCF Mayfield Plaza General Description Mayfield Plaza at 1204 Sunnyside Circle, is a welliocated 76,328 square foot office building that is located in the central business district of Baytown, Georgia. Mayfield Plaza has a reputation for offering its tenants numerous up-scale amenities, while maintaining low operating costs. However, there is some concern that tenant tum-over is neat. Using the given data and assumptions, create a Discounted Cash Flow model to analyze 8 years of information beginning January 1, 2008. Inflation Inflation will be calculated on a calendar year basis. Expect a General Inflation rate of 3.6% every year. However, there are two overrides to the General Inflation rate. Reimbursable Expenses will inflate at 3% for all analysis years and Market Rents will inflate at 6% for all years. Miscellaneous Revenues ‘There are three revenues that are not tied to the tenants: parking, vending and event income. Parking and vending are both variable, whereas, event income will be entered as a fixed revenue. All Miscellaneous Revenues should inflate at General Infiation. ‘At otal occupancy, assume that Parking Income will generate $542 per month, Event Income will create $1,290 per year in revenue and $12,000 per year should derive from Vending Revenue. Reimbursable Expenses ‘These six expenses should be reimbursed by the tenants and any future tenant that leases space on this property. All expenses are fixed except for Janitorial. 75% of the janitorial expense is. variable. The annual totals and timing of the expenses are as follows Real Estate Taxes: $270,000 paid in July of every year Insurance: $51,760 Janitorial $0.22/SqFt Ext Landscaping: $12,502 Security: 30:47/SqFt Repairs & Maintenance: 30.89/SqFt Non-Reimbursable Expenses ‘The property is responsible for a Management Fee that is 4% of the Effective Gross Revenue. In other words, this expense will not be recovered by the tenants. Capital Expenses Replacement Reserves: $0.10 per square foot per year, 3.5% inflation. Structural Repairs: ‘$52,600 paid in March 2011 (no inflation). General Vacancy Loss For conservative purposes, assume a Vacancy Loss equivalent to 4% Potential Gross Revenue. This General Vacancy will be reduced by the property's actual vacancy. Updated 27972008 ©2007, ARGUS Valuation - DOF Software, inc. 3Case Study Manual - ARGUS Valuation - DCF Rent Roll ; org Abdus ee SC per Rent Data Baskin Venture Capita! | 26,075 | 8105-7108 | s10.S0'SaFUYr S4.50/SqFt Expense Stop | Vacate Suite 101 Office ‘Shiblee Mortgage 22,104 | 975-8109 | sto.sossaruve S4.58/S9Ft Expense Stop | Market Suite 201 — Office Newton's RealEstate | 8.216 | vo7-1211_ | st3/saFuve $5.00/SqFt Expense Stop | Vacate Group increasing $0.50'SqF Suite 202 ~ Office every year Powers Media asia | eor-an7 | swsqeivr ‘4.0SqFt Expense Stop | Renew Connection increasing 5% per Sute 203 ~ Office year Hit & Ng.Law Firm 4209 | eo7-sn3_ | stasqruvr S4.72ISqFt Expense Stop | Market Suite 102 Office increasing 5% per year Pollock Medical Source | 5,210 | eins 12/17 | sts/saFuvr Base Stop ‘3 Months of Suite 103 — Office increasing 2% par Free Rent year ‘Tistaisqrt Lc! 696 Renew * Show Absorption and Turnover Vacancy for any lease that starts afer the analysis start date Market Data Tenants > 20,000 SqFt Renewal Probability: 70% Market Rent: $13.50/SqFVYear for new tenants and renewing tenants Months Vacant 5 months downtime Tenant Improvements: $20.00/SqFt allowance for new tenants $6,00/SqFt allowance for renewing tenants Leasing Commissions: 5% broker fees for new tenants 3% broker fees for renewal tenants Reimbursements: Base Year Stop Tem Lengths: 8 Years Tenants < 20,000 SqFt Renewal Probability 50% Market Rent: '$15.00/SqFt/Year for new tenants and renewing tenants Months Vacant 3 months downtime ‘Tenant Improvements: '$15,00/SgFt for new tenants $4,00/SqFt allowance for renewing tenants Leasing Commissions: 5% broker fees for new tenants 3% broker fees for renewal tenants Reimbursements: Base Year Stop Term Lengths: 5 Years Updated 2/19/2008 © 2007, ARGUS Valuation - DOF Software, Ine 43 ts SS Case Study Manual - ARGUS Valuation - DCF Purchase Price and Resale ‘Assume a purchase price of $4,750,000 for the project. Mayfield Plaza will be sold after an 8-year holding period. To determine the resale value, capitalize the 9” year's NOI at a 7.5% terminal cap assuming that the NOI is stabilized at a 10% Vacancy Rate. Broker's commissions are expected to be equivalent to 3% of the Gross Resale proceeds and $15,000 should also be deducted for Environmental Fees. Project Financing ‘An amount of $3,200,000 will be borrowed to cover necessary costs. The mortgage will begin in January 2008, amortize for 30 years at an 8% interest rate, and the remaining balance will be paid in full at the end of the analysis. Present Value Discounting ‘The unleveraged present value of the building will be determined by discounting the cash flows from operations at a discount rate of 11.25%, Without the bank funding, how much cash is required day one of the analysis to achieve 11.25% IRR (unleveraged and leveraged)? Compare the following reports: + Schedule of Cash Flow from Operations + Prospective Resale and IRR Summary * Prospective Present Value Summary + Supporting Schedules Updated 2/1972008 © 2007, ARGUS Valuation - DCF Software, inc. 5