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Analysis of the subject property market condition, asking Price, ability to with stand cash flow shocks, etc

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Analysis of the subject property market condition, asking Price, ability to with stand cash flow shocks, etc. Both Alcorn and Embarcadero Partnership would like to know the condition of the apartment market based on the information given above including price-to-rent ratios, asking price, per square foot, asking rent, overtime provided above. In particular, the client would like to know whether there is opportunity for growth in this market. Both Alcorn Partners (buyer) and the Embarcadero Partnership (seller) would also like know how the asking price of $13.5 M compares with prices for similar properties in the market area. Hence, one immediate issue that you need to address in this part of the case is whether the asking price is a fair offer, i.e., is the property overpriced or underpriced at $13,500,000? There are several performance and valuation metrics you can use to address the issue such as cap rate, net income multiplier or net income multiples, price per square foot, etc. Of course, you are not limited to these metrics. Indeed, in addition to other valuation methods you are also gplicitly required to use Front Door and Back Door models using relevant data given in the case and other data you can objectively justify using. Alcom would want you to include the Front Door and Back Door Capital Budging Model discussed in class, as one key asset pricing model in addition to others. The capital structure of this investment is of course determined by the outstanding loan amount to be assumed and the implied equity amount. In preparation for this