Welcome to this video. In this video, I will cover the disposition section in the ARGUS Excel Model. This section consists of two variables – the exit cap rate and the transaction cost.
Exit Cap Rate
I will input 8.5% as the exit cap rate. I can see the cap rate is sensitivity tested from seven and a half to nine and a half percent (7.5% to 9.5%) in this table. This gives me a better idea of what the net sale proceeds would be using different cap rates.
I will input 1.25% for the transaction cost. This means 1.25% of the gross value is used to pay for legal fees, broker commissions, and other relevant costs. After paying off the debt and transaction costs, I arrive at the net proceeds. The exit timing is consistent with the holding period – 60 months.
At last, the numbers in the middle row go into the calculation while the other numbers do not. Let’s go to the Annual Cash Flow Summary tab. I can see the sale is about 21 million dollars. The cost of sale is about 260,000 dollars. Debt repayment is about 10 million dollars. The net proceeds are about 10 million dollars as well. Everything looks good.
I have completed the disposition section in the ARGUS Excel Model. Thanks for watching this video. I will see you in the next one.