Assume you are an investment manager and you have a retail and logistics client with a requirement for a building with 114,000 SF located in the Lehigh Valley of PA. When you prepared your pro forma and first qouted a rent to your client, you estimated that total hard and soft costs would be $60/SF. But inflation has driven up construction costs so you now expect hard and soft costs to be $66/SF. Assume a building to land coverage ratio of 50%. At the start of the process, you had optioned the land at $7.00/SF of Land Area and held off on closing until the end of the option term. You had quoted a rent $5.27/SF/Yr. Your pension fund investors are demanding a min. return of 5.6% on costs. The permitting process has taken longer than expected and now the option period that you had on the land has expired. Now you have to go back and renegotiate the land price with the land owner. At what $/SF of Land Area do you need to achieve your target unleveraged 5.6% yield on cost?

		5.5
		7.5
		6.4
		8.0

please provide explanation