28.7 Acre site (net area i.e. excluding wetlands) Zoning Retail shopping center

Question

28.7   Acre site (net area i.e. excluding wetlands)

Zoning Retail shopping center use

5              Spaces per 1,000 SF (Assume 800 SF/Space in parking pavement, including access areas)

40%        lot coverage permitted including both parking pavement and building

Part 1 – Physical (10 points)

How big of a building can be built on the site (round to the nearest 1,000 square feet)?

What is the most we can pay for the land to make a deal work?

Assume

$100.00 per SF building total development costs (including parking but excluding land)

$12.00 per SF building in projected Net Operating Income (NOI)

10.50% target return on costs (capitalization rate)

QUESTION 3

Using the total development cost including land from Question 2a, what is annual debt service?

Assume

80%        Loan-to-cost ratio

9.50%    mortgage constant

QUESTION 4

Assuming $12 per square foot in NNN rent and the debt service you calculated in Part 2b, what is breakeven occupancy?

Assume

$4.00     Real estate taxes per SF

$5.50    Other operating costs per SF

$9.50 Total reimbursable Operating Expenses

Explanation / Answer

Question-1

Size of the site = 28.7 Acres = 28.7 * 48560 SF = 1250172

40% lot coverage permitted including both parking pavement and building, which implies that Building can be constructed in 40% of 1250172 SF = .4 * 1250172 = 500068.8 SF.

Hence Building can be constructed on 500068.8 SF or 11.480 Acres.

Question-2

Total Development Cost, Td = $100.00 per SF * 500068.8 SF = $50006880

Net Operational Cost , N = $12 per SF * 500068.8 SF = $6000825.6

10.5% target return, R = N/.105 = 6000825.6/.105 = $57150720

Total Cost that we pay = Td + N + R = 1.131584 * 108 (Approx.)

Question-3

Total Development Cost, Td = $100.00 per SF * 500068.8 SF = $50006880

80% Loan, L = .8 * 50006880 = $40005504

Annual Debt Service, D = 9.5% of L = .095 * 40005504 = $3800523

Question-4

$4.00 Real estate taxes per SF, RS = 4 * 500068.8 = $2000275

$5.50 Other operating costs per SF, OO = 5.5 * 500068.8 = $2750378

$9.50 Total reimbursable Operating Expenses, Reim = $9.5 = 0 (Approx.)

Cost, C = RS + OO + Reim = $4750653

D = $3800523

Total Cost = C + D = $4750653 + $3800523 = $8551176

BE Occupancy = 8551176 / 12 = 712598

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