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Start Excel. Download and open the
file named Excel_Project.
In
the NOI sheet, calculate the Total Rentable
Square Feet (RSF) by Unit Type in range F3:F7 by multiplying the number of
units for each type by the square footage of each unit type. Then calculate
the Total rentable square footage of the building in cell F8.
In
cell I4, enter a formula that calculates the annual insurance expense for
Year 1. As the building owner, you obtain insurance at a rate of $400 per
residential unit. Commercial units pay their own insurance. So you only pay
insurance on the residential units.
In
cell I5, enter a formula to calculate the Repairs & Maintenance expense
estimate for Year 1. You assume that each month,
there will be a repair expense of $120 for half of the residential units.
Commercial units pay for their own repairs and maintenance.
In
cell I6, enter a formula to calculate the annual Utilities expense estimate
for Year 1. All tenants will pay their own utilities. But you, the owner,
will pay $0.40 per square foot per month for the 1200 square feet of common
area space (E13) of the building (lobby, hallways, elevator, gym, etc.).
In
cell I9, enter a formula to calculate the annual Janitorial Cleaning expense
estimate for Year 1. A cleaning company can clean the 1200 SF common area
twice per week at a rate of $150 per day. Enter the annual cleaning expense,
assuming 52 weeks in a year.
In
cell I10, enter a formula to calculate the annual property Management fee.
Management companies charge 5
% of rental income. (Use monthly rent estimates
in range C3:C7 and the number of units per type in range D3:D7 to determine
annual rental income.)
In
cell I12, enter a formula to calculate the annual doorman security expense
estimate for Year 1. You will employ 2
doormen. Each one spends an 8 hour shift each day, 6 days per week. Assume 52
weeks per year and $12/hour wage for each doorman.
In cell I13, enter a formula to
calculate the Brokerage Fee to find tenants for all of the residential units.
Realtors charge the equivalent of one month of rent for each unit leased.
In cell I14, enter a formula to
calculate the Brokerage Fee to find tenants for all of the commercial units. Each
commercial lease is negotiated for a 5-year term of fixed rent. So the
brokerage fee for each unit is an upfront charge of 5
% of the total rent for
the entire 5-year lease period.

In
cell I15, enter a formula to calculate the Capital Reserves estimate for Year
1. Capital Reserves are savings put aside in case there is a large unforeseen
repair or expense incurred. You estimate a capital reserve of $0.50 cents per
RSF of the building.
In
cell E19, enter a VLookup function to calculate the annual base rent for the first unit based on Unit Type. Use the Year
1 Rental Assumptions table in your formula and make sure to calculate annual rent. Copy your formula down
the column to cell E42.
You
assume that Residential Rent will increase by 2
% each year (see cell E11).
For each residential unit, calculate annual rent estimates for Years 2 to 10
by applying the Residential Rent Increase to the previous year’s rent.
Base
rents for the commercial unit leases are fixed for 5 years. And you assume a
Year 6 rent increase (see cell E12) that will be fixed for Years 6 through 10
as well. For each commercial unit, enter the annual rent for Years 2 to 10, taking
into account that in the 6th Year, there will be a new increased
rent that is fixed for the remaining 5 years.
Calculate
Total Base Rent for each year in row 43. Apply Bold font to this row and
format the values as Currency format with no decimals.
You negotiate a percentage rent
component of the lease with the Large
Commercial tenant in Unit G1. The Percentage Rent clause says that the
tenant will pay you 2
% of their gross sales, not to exceed $12,000
in percentage rent. The Large Commercial tenant has given you their sales
projections for the next 10 years (row 79). Enter an IF function in cells E45:N45
that calculates the percentage rent based on the tenant’s
sales projection for that Year.
Calculate
Potential Gross Rent for each year in row 46 by adding Percentage Rent to
Total Base Rent. Apply Bold font to this row and format the values as
Currency format with no decimals.
You
can expect a certain amount of vacancy and uncollected rent each year, which
is accounted for in the Vacancy and Collection Loss estimate (cell E14). Calculate
Vacancy and Collection Loss estimate by multiplying the loss factor to the Potential
Gross Rent for each year in row 48.
Subtract
Vacancy & Collection Loss from Potential Gross Rent to determine
Effective Gross Rent for each year in row 49. Apply Bold font to this row and
format the values as Currency format with no decimals.
In cell E54, enter an HLookup formula
based on the Year to determine the real estate tax rate using the table in
the Taxcast sheet. (Do not enter the hardcoded tax rate.)
You multiply the real estate tax rate
per square foot (found by the HLookup) to the residential square footage. The
commercial units will pay their own share of taxes. Copy your formula to
Years 2 to 10.
Hint: See Tax Expense formula in cells
I3 and J3.
Set cell E55 equal to the Year
Insurance expense in the Operating Expense Assumptions table at the top of
the sheet. Copy the formula down to cell E60. For each of the expenses in
rows 55 to 60, calculate Year 2 to Year 10 expenses using their respective
annual percentage increases displayed in column B.
Management Fees are calculated as a
percentage of Total Base Rent. In row 61, enter a formula to calculate the
Management Fee for each year using the annual percentage fee displayed in
column B.
You negotiate a maintenance contract
with the elevator manufacturer for a fixed cost of $900 per year for 10
years. Set cell E62 equal to the appropriate cell in the Operating Expense
Assumptions table. Enter a formula in cells F62:N62 to display the annual
Elevator Maintenance cost for each year.
Set cell E63 equal to the appropriate
cell in the 2020 Operating Expense Assumptions table. Enter a formula in
cells F63:N63 to display the annual Security expense using the annual
percentage increase displayed in column B.
Set cell E64 equal to the appropriate
cell in the Operating Expense Assumptions table.
Assume you’ll
pay a brokerage fee to either rent out or renew all of the residential units every
2 years. The brokerage fee for each unit will be 1-month of that year’s
rental rate.
Enter a formula every two years
starting in Year 3 to calculate the Brokerage Fee for Residential units.
Set cell E65 equal to the appropriate
cell in the Operating Expense Assumptions table.
Assume you’ll
pay a brokerage fee to re-rent or renew each commercial unit every 5 years.
The brokerage fee for each unit will be a percentage of the total rent over
the entire 5 year lease period.
Enter a formula to calculate the
Brokerage Fee for Commercial units. Hint: Commercial unit brokerage fees will
only be paid out in Year 1 and Year 6.
Set cell E66 equal to the appropriate
cell in the Operating Expense Assumptions table. Enter a formula in cells
F66:N66 to display the annual Capital Reserves using the annual percentage
increase displayed in column B.
Calculate Total Expenses for each
year in row 67. Then calculate Net Operating Income for each year in row 69.
Net Operating Income is calculated as Effective Gross Rent less Total
Expenses. Apply Bold font and format the values as Currency format with no
decimals for both rows.
Select the 2020 Expense Assumptions
in array H3:I15 and make a pie chart. Move it to its own sheet named Expense Chart.
Apply Chart Style 7 to the pie chart. Change the Chart Title to Expense Comparison. Position the
Legend on the righthand side.
Using the Data Labels task pane,
remove the Values and display the Percentages and Categories. Close the task
pane. Position the data labels as Data Callout.
Change the Legend Font to Times New
Roman size 8. Change the Data Labels to Times New Roman size 6.
Place the Expense Chart sheet between the NOI sheet and the Taxcast
sheet.
For Extra Credit, calculate the Cash
Flow After Debt Service. Assume you can purchase this building for $6.1
million. Calculate the Down Payment, Loan Amount, Monthly Debt Payment and
Annual Debt Payment based on the information given in the Mortgage Finance
table in the NOI sheet.
In row 72, enter the total annual
debt service for each year. In row 73, calculate the Cash Flow After Debt
Service for each year. Apply Bold font and format the values as Currency
format with no decimals for both rows.
Save the workbook under FirstNameLastName_ExcelProject.
Close the workbook and then exit Excel. Submit the workbook as directed.