Rent Calculation
If the total cost to construct a building is $15,000,000, and there are 70,000 Rentable SF. I would like to make a 10% annual return. What is the formula I should use?
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$15,000,000 * 10% / 70,000 SF = $21.43 / SF NNN.
I mean, c'mon. This isn't even a real estate question. This is like 9th grade algebra.
If you want to add a vacancy factor: (Total Development Cost * % Return) / (1-GV %) / SF
Not sure if trolling.....
CAPM formula would be best.
I think CAPM is much too simplified for these purposes.
The OP's profile says: Real Estate - Commercial - 1st Year Associate
I work in development - hands on project management, my role has very little to do with modeling on a day to day basis, but thanks for being an A$$hole!
also, your actual return depends on how much debt you use, rent growth, exit cap rate, etc. But seriously, i'm not even sure where to start with this, it was a weird question.
Thanks I appreciate your input.
I have my answer - which I have to admit was much easier than I originally suspected, just needed to be thought through.
That is correct, I have not came across an absolute NNN lease. The point I was trying to make is that in the real world, when someone says NNN, people automatically assume you are referring to the tenant being responsible for 100% of all operating expenses. It would be uncommon to think that NNN means absolute NNN.
And my exception was a single tenant building. As an FYI, my experience excludes industrial, which is where I would assume this is more common.
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