PROPPRAC 706 Valuation – Graded progress check 3
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PROPPRAC 706 Valuation - Graded progress check 3
Step 1: Download the Excel-based multi-tenants valuation worksheet provided in section 3.6 and use it to complete the following task.
Step 2: Use your solutions to answer the questions in the Canvas quiz Graded progress check 3.
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Task: |
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You have been asked to value a two level commercial office property, as at today, by way of the Discounted Cash Flow (DCF) and Direct Capitalisation Approaches. Two commercial tenants occupy the property. You have been provided with the following assumptions/ determinants: Tenant A: Deed of Lease: Six years commencing a year ago Rental reviews: Rent reviews are annual CPI+1% increases, and to market on renewal Ratchet clause: Soft Rent provisions: Paid yearly in advance Gross contract rental: $90,000 per annum plus GST Assessed net market rental: $80,000 per annum plus GST and OPEX Commencing OPEX: $8,000 per annum plus GST. Tenant B: Deed of Lease: Four years commencing today Rental reviews: Rent reviews are annual 3% increases and to market on renewal. Ratchet clause: Soft Rent provisions: Paid yearly in advance Net contract rental: $80,000 per annum plus GST and OPEX Assessed net market rental: $90,000 per annum plus GST and OPEX. General: DCF Period: Five years Discount rate: 7.50% Terminal yield: 8.00% Market yield: 7.00% Market rental increase: 4.0% p.a. compounding OPEX increase: 2.0% p.a. Annual CPI 2.0% Purchase price: $2,540,000 plus GST Capital expenditure: $20,000 plus GST payments at end of year 1 and end of year 3. . |
Step 3: Upload your Excel spreadsheet to the final question in the quiz. This must be fully functional (i.e. it must connect all cells in the analysis to the valuation assumptions and utilise Excel functions to undertake the analysis where possible; there should be no manual calculations in your DCA and DCF valuations).
2023-08-03