Office Tower Acquisition Model

Real estate technical case study example for an office tower acquisition deal

Assumptions

Development Program

  • 310,000 rsf
  • Purchase price: $183/sf

Tenant and Lease

  • Tenant 1: 50% occupancy
  • Tenant 1 lease terms: $32/rsf full-service rental rate for 10 years
  • Rent bumps: 3% every 2 years
  • Full-service rental rate: $35/rsf
  • Lease duration: 5 years
  • TIs: $18/rsf
  • LCs: 8%
  • Future tenant 1: 8 months after purchase
  • Future tenant 2: 15 months after purchase

Operating Costs and Expenses

  • Operating Expenses: $17/psf
  • Parking ratio: 3 stalls per 1,000 sf
  • Parking rate: $110/month per stall
  • Initial capex: $300,000
  • Deferred capex: $55,000/year for 3 years

Debt Assumptions

  • Interest rate: 4%/year
  • Origination fee: 1%
  • Exit fee: 1%
  • Loan amortization: 25 years
  • Loan term: 5 years

Financial Performance Metrics

  • Cap rate: 9%
  • Hold period: 5 years

Model