NVI Technical College Information

I NCOME C APITALIZATION A PPROACH 64

P RO F ORMA O PERATIONS Following is a summary of the income and expense projections for the subject which is a summation of the preceding analysis. The subject property is currently operating at stabilized occupancy.

DIRECT CAPITALIZATION

FY 2024

$

Per SF

Income

Gross Potential Rent Expense Recoveries

$2,257,000 $814,451 $3,071,451 ($307,145) ($30,715) $252,831 $56,425 $423,188 $82,008 $70,531 $884,983 $1,848,609

$8.00 $2.89

Total Potential Gross Income

$10.89 -$1.09 -$0.11

Less Vacancy Loss Less Collection Loss

10.00%

1.00%

Effective Gross Income (EGI)

$2,733,592

$9.69

Expenses Real Estate Taxes

$0.90 $0.20 $1.50 $0.29 $0.25 $3.14 $6.55

Insurance

CAM

Management

3.00%

Replacement Reserves

Total Expenses

32%

NET OPERATING INCOME (NOI)

D IRECT C APITALIZATION Direct capitalization is a method used to convert a projected single year’s income expectancy into an indication of value. Dividing a property’s net operating income by an appropriate market-derived capitalization rate provides a value indication. This capitalization rate is known as the overall rate. There are several methods that can be used in deriving an overall rate that can be used to capitalize the net operating income that was projected in the previous Pro Forma Operating Statement. M ARKET D ERIVATION When adequate data is available, the overall rate is best derived from the comparable sales employed in the Sales Comparison Approach. However, as the comparable sales were fee simple owner-occupied transactions, data from secondary comparables was utilized. The following table summarizes capitalization rates extracted from these comparable sales transactions.

F OUR B UILDING I NDUSTRIAL C OMPLEX A PPRAISAL

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