Multimodal Hub 1 is an industrial property in Pennsylvania with an in place 20 year-lease to a low credit company. The area is becoming a major warehouse hub. The tenant has 10 years left on the lease...

Multimodal Hub 1 is an industrial property in Pennsylvania with an in place 20 year-lease to a low credit company. The area is becoming a major warehouse hub. The tenant has 10 years left on the lease term.

The property has 50,000 square feet and pays $1,000,000 of rent per year. The landlord pays expenses which start at $400,000 per year. Expenses and rent both grow at 4%. A management fee is due equal to 5% of rent.

You are offered a 7-year loan at 4.5%, 25-year amortization. The maximum loan amount will be determined by the lesser of 55% LTV or 1.4x DSC. You intend to sell at the end of year 7. You expect you can buy the property at a 6% cap rate and sell it at a 5% cap rate.
Since it is an industrial property land accounts for 35% of the purchase price. Depreciation is over 40 years. Your capital gains taxes are 20%, recapture is 25% and income taxes are 35%. You need to make 15% on your equity after taxes.

Question: What is the NOI at year 5?