Assume you have been engaged by a real estate developer to analyze a proposed real estate investment. The property is expected to be finance with loan-to-value ratio of 80%, 8% mortgage interest rate, amortized for 30 years. The owner is prepared invest 20% equity. You have been given the following additional information on the proposed project. a. Total project cost or total capital budget = $10,000,000 b. Loan to value ratio 80% b Equity Dividend Rate (EDR) or Return on Equity (ROE) 10% d. Expense ratio = 20% e. Real estate tax ratio = 18% f. Vacancy ratio = 2% g. Replacement reserve ratio = 5% h. Equity dividend rate or return on equity = 15% i. Gross leasable area (GLA) = 160,000 sq. ft. j. Building Efficiency ratio = 95%

(22a). Using the front door/back door model and the relevant information given above calculate the required total potential gross income (PGI) and the rent per square foot to justify the $10,000,000 investment, using the Front Door/Back Door model (7 points)

(22b). Assume the NOI from the project is $1,700,000 and the lender requires a debt coverage ratio of 2.5 calculate the maximum loan amount (4 points)