We can employ a number of options for calculating the resale value.

Appreciate Initial Purchase Price

This method will increase the initial purchase price by a growth rate every year of the analysis.  The initial purchase price, growth rate, and year of resale determine the value of the property.

Capitalize Net Operating Income

This method will determine the resale value by dividing the net operating income (NOI) by the cap rate.  Net operating income includes all revenue and reimbursable and non reimbursable operating expenses. It does not include a deduction for debt service, capital expenditures, or tenant improvements, leasing commission, or development costs.

Capitalize Cash Flow After TI's and LC's

This method will determine the resale value by dividing the cash flow before debt by the cap rate.  The cash flow before debt is the net operating income less tenant improvements, leasing commissions, capital expenditures, and development costs.  This method includes all revenue and reimbursable operating expenses. It also subtracts the calculation year's tenant improvements, leasing commissions, and capital expenditures and reserves before calculating the resale value.  This method does not include a deduction for debt service.

Capitalize Cash Flow Adjusted for Average TI's and LC's

This method will determine the resale value by dividing the net operating income (NOI) by the cap rate.  Net operating income includes all revenue and reimbursable and non reimbursable operating expenses. It does not include a deduction for debt service, capital expenditures, or tenant improvements, leasing commission, or development costs.

Capitalize NOI Using Rate Adjusted for Age

This method will modify the cap rate to reflect the condition of the building upon resale.