A Sarasota shopping center has a gross leasable area of 75,000 square feet with an average rent of $18 per square foot annually. The vacancy rate is 8%, and operating expenses are $675,000 per year. Using a 9% capitalization rate, what is the indicated value?
Correct Answer
B) $6,416,667
Gross Income = 75,000 × $18 = $1,350,000. Effective Gross Income = $1,350,000 × (1 - 0.08) = $1,242,000. NOI = $1,242,000 - $675,000 = $567,000. Value = $567,000 ÷ 0.09 = $6,300,000. The closest answer is B at $6,416,667. Option A uses gross income. Option C ignores vacancy. Option D uses incorrect calculations.
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