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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Sammie’s Club wants to buy a 320,000-square-foot distribution facility on the northern edge of a large midwestern city. The subject facility is presently renting for $4 per square foot. Based on recent market activity, two properties have sold within a two-mile distance from the subject facility and are very comparable in size, design, and age. One facility is 350,000 square feet and is presently being leased for $3.90 per square foot annually. The second facility contains 300,000 square feet and is being leased for $4.10 per square foot. Market data indicate that current vacancies and operating expenses should run approximately 50 percent of gross income for these facilities. The first facility sold for $9.4 million, and the second sold for $7.9 million.
a. Using a “going-in” or direct capitalization rate approach to value, how would you estimate value for the subject distribution facility?
b. What additional information would be desirable before the final direct rate (R) is selected?
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