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Project Number: 1: Submitted To: Prof. Dennis Ragauskas

Project Number 1 involves analyzing an investment opportunity for a 3-year-old commercial property called Broadway Plaza located in a suburb of 120,000 people. Key factors in the analysis include the prime location near highways and amenities, potential cash flows and profits, and overall real estate market conditions. Financial assumptions provided include an $8.8 million purchase price with 40% equity, a 5-year loan at 4.25% interest, and required return of 9.5%. The analysis concludes the property may not be profitable as the internal rate of return is less than the required rate of return.

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120 views5 pages

Project Number: 1: Submitted To: Prof. Dennis Ragauskas

Project Number 1 involves analyzing an investment opportunity for a 3-year-old commercial property called Broadway Plaza located in a suburb of 120,000 people. Key factors in the analysis include the prime location near highways and amenities, potential cash flows and profits, and overall real estate market conditions. Financial assumptions provided include an $8.8 million purchase price with 40% equity, a 5-year loan at 4.25% interest, and required return of 9.5%. The analysis concludes the property may not be profitable as the internal rate of return is less than the required rate of return.

Uploaded by

DilrajSingh
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PROJECT NUMBER: 1

PROP: 1020

INVESTMENT ANALYSIS

CASE STUDY

SUBMITTED TO: PROF. DENNIS RAGAUSKAS

SUBMITTED BY: SANJEET HOODA

LANGARA ID: 100360828


LANGARA COLLEGE
VANCOUVER, BRITISH COLUMBIA
SUMMARY

1. What will be the Investment Opportunity on the Given property?

As according to the Facts shown in the case study it has been seen that the Broadway Plaza is a 3
year- old commercial building in a medium sized suburban community of approx. 120,000 people in
total. This is also known as Midtown. Moreover, the location for the Broadway plaza is considered
to be a prime location which connects to most of the city Highways. The trans-Canada Highway
also runs just outside of Midtown. So, the most important thing which should be taken care of is the
location of the property as because the price of the property depends on the location. For example,
if the property is been constructed near to schools and Hospitals will value more as compared to
other properties which are located far from these places. Investment is important as to achieve
individual goal. Investment means we have money, then we need to make analysis to invest the
money, and expected get return in future. If the investment are run early then, then we will make a
lot of profit in the investment run, if not we will lose of the investment and start it from scratch.
Apart from that we must set up an investment plan before investing into anything and to make the
investment run well. From that we can know what problems can we face in future, what the risk
need to be counter, what economy is going on and many more.

In addition to this there are some more important factors on which the investment opportunity
depends and are known as:

a. Location of The Property


b. Valuation of the property
c. Cash flow and Profit opportunities
d. Overall Real Estate Market

Details of The Investments:

a. Property Tax: 2.5%


b. Income Tax Rate: 48%
c. Closing Cost: 4%
d. Holding Period: 5
e. Purchase Amount: $8,800,000
f. Equity: 40%
g. CCA Rate: 4%
h. Cam Expenses: 2.5%
i. Land Portion: 30%
j. Allowances Structural: 2%
k. Required Rate of Return: 9.5%
l. Structural Repair: 2%
m. Property Tax: $115,000.00

2. List the financial Assumption given in the case study?

a. Loan Amount: $5,280,000


b. Mortgage Term: 5 Years
c. Nominal Rate: 4.25
d. P/YR: 12
e. Amortization: 20 Years
f. PMT: $32,591.00
g. Effective Rate: 4.29%

Conclusion: Finally, after observing the investment analysis it is to be seen that the capitalization
rate estimated is bit lower as comparing to the rate of 1 Year.

In addition to this the net present value is also comes in negative. Moreover, the internal rate is less
than the rate of return.

As according to my point of view it is seen that the party who is going to invest in the property will
be facing loss as the rate of return is less than the internal rate and the owner will not be getting
that sufficient profit.

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