A C G M N 0 9 10 You are a Real Estate developer building a small office tower in Montreal. The construction will take one year and the units have all been pre-leased. 11 The stabilized NOI at opening will be $750,000 and comparable cap rates are 6%. 12 The construction lender is willing to finance the project based on the terms and conditions shown below. 13 a) Based on the budget, calculate the oustanding construction loan at the end of the year. 14 b) How much equity will you be able to withdraw at the end of the construction period if you take-out a mortgage with the terms and conditions shown below? 15 16 Please make your calculations to the right of the data on this worksheet. 17 18 19 113,000 20 21 22 Development Budget: 23 24 Land 2,000,000 25 Site preparation 250,000 26 Hard costs 7,000,000 27 Professional fees 300,000 28 Permits 125,000 29 Project management 150,000 30 Leasing commissions 16,000 31 Other soft costs 195,000 32 10,036,000 33 Interest 34 TOTAL 10,149,000 35 36 37 Cash flow: 38 39 The land is purchased and site preparation occur in the first 40 month. The soft cost (excluding interest) are evenly 41 distributed over the 12 month period. The hard costs are 42 evenly distibuted over month 3 to month 12. All cash 43 flows occur at the end of the month. 44 45 46 47 48 49 Construction loan: 50 51 LTC 65.0% 52 Interest rate 5.5% 53 54 55 Stabilized NOI at opening 700,000 56 Comparable cap rates 5.0% 57 58 59 Mortgage loan: 60 61 Term (years) 5 62 Amortization period (years) 25 63 Mortgage rate 64 Maximum LTV 75.0% 65 Minimum DSCR 1.25 66 4.0%