CRE: a stabilized acquisition and a terminal cap rate

A stabilized commercial property bought on a going-in cap rate, held ten years with fully reimbursed expenses, and sold by capping the final year's net operating income.

Every number below is checked against an independent reference implementation on every commit — period by period, and on each metric, inside a declared tolerance. See benchmark methodology.

The case

A stabilized 10,000 square foot commercial building, bought for $1,417,958 — year-one net operating income capped at 6.0% — held for ten years and sold by capping the tenth year's net operating income at 6.5%, net of 2% selling costs.

The building is fully leased for the whole hold with no rollover and no lease-up, so its income is a single stabilized stream rather than a rent roll: potential gross income of $100,000, full reimbursement of the three recoverable expenses, and a 10% vacancy and credit deduction taken against the two together. The leases reimburse 100% of real estate taxes, insurance and common area maintenance; management is 3% of effective gross revenue; a capital reserve runs at $0.20 per square foot. Every line escalates at 3% a year.

The interest of it is the shape at the two ends. The purchase settles at the open of the first year and earns no discount; the sale settles at the close of the tenth, alongside that year's operating cash, and is struck on the net operating income of the year that has just finished rather than a forward year.

The reference

A published teaching model for a basic real estate acquisition, distributed as a spreadsheet. It states every driver — year-one income, each expense, the management fee, the reserve, the escalator, both cap rates, the selling cost — and publishes the resulting cash flow line by line together with its own internal rate of return, equity multiple and net present value.

Not redistributable. No terms are stated by the publisher, so the figures are asserted against and the workbook is not vendored. NOTES.md records what it is and where it came from.

What it exercises

The acquisition price, the capital reserve and the selling costs are declared as streams; everything else is a pack contract.

The vacancy deduction is taken on potential gross income plus reimbursements, so its base is stated as an expression that escalates with the two lines it sits on rather than as a fixed figure.

The result

model.npv at 7% = 90,853.72729 against the published 90,853.72728969366, model.irr = 0.078484 against the published 0.07848381094537493, and the equity multiple 1.851981 against the published 1.8519810968410686. All three exact.

Every line reproduces per period: potential gross income, reimbursements, the vacancy deduction, all four operating expenses, the capital reserve, the purchase, the sale at 1,707,797.546881 and its selling costs.

The delta

None. Every asserted figure is the source's own and reproduces exactly.

The equity multiple is measured on the capital invested — the acquisition — with the ten years of operations counted as what the investment returned.

Run configuration

{
  "deterministic": {
    "annual_discount_rate": 0.07
  }
}

Verified results

Checked period by period: 11 series across 10 periods — 110 values in all, each within ±0.001 of the reference.

• cre.acquisition.purchase
• cre.revenue.line.potential_gross
• cre.revenue.line.reimbursements
• cre.vacancy.loss
• cre.opex.line.real_estate_taxes
• cre.opex.line.insurance
• cre.opex.line.cam
• cre.opex.line.management_fee
• cre.capital.reserve
• cre.exit.sale
• cre.exit.selling_costs

Summary metrics for the base run: