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ATTACHMENT <br />Vacancv and Collection Loss <br />Small office buildings are most frequently purchased for owner -occupancy and are <br />analyzed using the sales comparison approach, with values calculated assuming no <br />vacancy or collection loss. However, from the perspective of an investor, a stabilized <br />vacancy and collection loss within the historical range is usually applied, assuming a five - <br />to 10 -year holding period. An estimated stabilized vacancy and collection loss of 3% is <br />considered appropriate for the direct capitalization analysis. <br />Expense Analysis <br />The subject property is an owner -user office building. Typically, leases for similar <br />buildings in this market are written on a triple -net lease basis, where the tenant is <br />responsible for operating expenses for the property including: taxes, insurance, utilities, <br />common area maintenance, building repairs and maintenance. The owner is responsible <br />for management, miscellaneous expenses, and administrative costs. The capital value <br />analysis has been analyzed on a typical triple -net basis. <br />Overall Capitalization Rate <br />A review of sales and listings of office properties found that reported OARs reflect <br />rates from 4.00% to 5.00%. These sales are considered the best evidence of an <br />appropriate capitalization rate for the subject property. <br />75E-15 <br />