What is the maximum amount you would pay for the site

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Reference no: EM132845588

Question - You are considering the following development opportunity of a Suburban Office building with 250,000 buildable SF:

Load Factor is 1.1 times or 110%

Market rental rates for your completion in two years is anticipated at $20/rentable SF/annum.

Market vacancy is 10%

Estimated operating costs on rentable sf (to landlord) = $6/rentable SF/annum

The debt markets are offering the following terms for a permanent mortgage on such property: Interest rate 6%, 30-year amortization, DCR 1.2, LTV 75%, and Debt Yield of 8%.

Construction cost $140/ buildable SF

Required -

a. If the site is listed at $5M, is the project feasible?

b. What is the maximum amount you would pay for the site?

c. What is the quick estimate of return on the project if you pay the listed price?

Reference no: EM132845588

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