Exhibit 8-4

Centre Point Office Building: Reconstructed Operating Statement

Power User Tips

Potential Gross Income (PGI) $180,000
Less: Vacancy and Collection Losses (VC) 10.0% $18,000 Show percentage; expenses negative?
Effective Gross Income (EGI) $162,000
Less: Operating Expenses (OE)
Fixed Expenses
Real Estate Taxes $15,900
Insurance $9,200 $25,100 Watch the start/end of SUM functions!
Variable Expenses
Utilities $12,800
Garbage Collection $1,000
Supplies $3,000
Repairs $5,200
Maintenance $10,500
Management $7,200 $39,700 Watch the start/end of SUM functions!
Total Operating Expenses (OE) $64,800
Less: Reserve for Capital Expenditures
Roof and Other Exterior Expenditures $4,900
Tenant Improvements to be Paid by Owner $3,200
Total Reserves for Capital Expenditures $8,100

Net Operating Income (NOI) $89,100

Power User Tip: Use column widths for indenting.

 Exhibit 8-5
Direct Market Extraction of the Overall Cap Rate, R0

First-Year Sale R0
Comparable NOI Price (Going In Cap Rate)

A $80,000 ÷ $919,540 = 0.087

B $114,000 ÷ $1,390,244 = 0.082
C $100,000 ÷ $1,250,000 = 0.080
D $72,000 ÷ $808,989 = 0.089
E $90,000 ÷ $1,097,561 = 0.082
Average 0.084

Power User Tip: Use "Insert Symbols" for those special characters.
 Exhibit 8-6
EGIM Analysis for Centre Point Office Building

Comparable
A B C

Recent Sale Price $1,044,120 $1,151,720 $904,050

Effective Gross Income (EGI) $158,200 $175,300 $143,500
EGIM (Sale Price / EGI) 6.60 6.57 6.30
Average 6.49

Power User Tip: You can center titles across a range of columns.
 Exhibit 8-7
Centre Point Office Building: Five Year Pro Forma NOI
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Potential Gross Income (PGI) $180,000 $185,400 $190,962 $196,691 $202,592 $208,669
Less: Vacancy and Collection Losses (VC) $18,000 $18,540 $19,096 $19,669 $20,259 $20,867
Effective Gross Income (EGI) $162,000 $166,860 $171,866 $177,022 $182,333 $187,802
Less: Operating Expenses (OpEx) $64,800 $66,744 $68,746 $70,809 $72,933 $75,121
Less: Reserve for Capital Expenditures (CapEx) $8,100 $8,343 $8,593 $8,851 $9,117 $9,390
Net Operating Income (NOI) $89,100 $91,773 $94,526 $97,362 $100,283 $103,291

Power User Tip: Rounding can sometimes seem to make columns not quite add up.

Power User Tip: Do a "sanity check" from time to time. For example, check the rate of growth of the various components of the incomes
statement, as below. Is there really any information in the extra years?

Year-To-Year Change
Potential Gross Income (PGI) 3.0% 3.0% 3.0% 3.0% 3.0%
Less: Vacancy and Collection Losses (VC) 3.0% 3.0% 3.0% 3.0% 3.0%
Effective Gross Income (EGI) 3.0% 3.0% 3.0% 3.0% 3.0%
Less: Operating Expenses (OpEx) 3.0% 3.0% 3.0% 3.0% 3.0%
Less: Reserve for Capital Expenditures (CapEx) 3.0% 3.0% 3.0% 3.0% 3.0%
Net Operating Income (NOI) 3.0% 3.0% 3.0% 3.0% 3.0%

Power User Tip: Remember that the last year is typically only used to estimate the sale price, which is included in the proceeds of the year of the
sale.
 Exhibit 8-9
Centre Point Office Building: Reconciliation of Value Indicators

Approach Indicated V0 Weight (%) Weighted V0

Indicated values from income approach

DCF analysis (NOIs) $1,061,000 60% $636,600
Direct capitalization $1,060,000 30% $318,000
EGIM analysis $1,051,000 5% $52,550
Indicated value from cost approach $1,075,000 5% $53,750
Indicated value from sales comparison approach Not applied 0% $0
Weighted V0 added to yield final estimate of value: $1,060,900
Rounded to: $1,061,000

Power User Tip: Text and formulas do not mix well. Be careful when constructing the
formula.

Power User Tip: Excel can round numbers for you. If you want to round to 1000's then
divide by 1000, round and multiply result by 1000.
 Exhibit 8-10
Capitalization Rates, Income, and Value Components

Overall Cap Rate (R0) = NOI1 ÷ Current Property Value (V0)

Terminal Cap Rate (Rt) = NOIn+1 ÷ Terminal Property Value (Vn)
Building Cap Rate (Rb) = Building Income ÷ Value of the building (Vb)
Land Cap Rate (RL) = Land Income ÷ Value of the land (VL)

Power User Tip: Building and Land Cap Rates are most useful if there is a substantially different use the is
permitted on the land, or if the separate land rent is paid.