Company X is evaluating the following land acquisition with a view to develop, lease$-$up$,$ and operate the resulting building. You have been asked to underwrite the opportunity, as well as prepare a brief write$-$up for Management summarizing the opportunity and your recommendation. Management would like to see returns on a $1-$year. $5-$year, and $10-$year hold scenario following construction completion. Where appropriate, please make your own defensible assumptions. You may also wish to include other costs that are not listed below that you feel are appropriate. Build a detailed financial model that includes calculating NOI for each year, revenue projections and a debt schedule for a $1$ year, $5$ year, and $10$ year scenarios with the information provided below.

Timeline:

$24$ Months to rezone

$24$ months to construct $6$ months pre$-$leasing $($prior to occupancy$)$

Additional $6$ months to stabilization $(97\%)$

Massing:

Land area: $0\mathrm{.}92$ Acres

Maximum FSI: $4\mathrm{.}50$x

Commercial GCA: $11,400$

Commercial Efficiency: $95\%$

Typical residential efficiency: $78\%$

Average Residential Unit Size: $836$ft$2$

Residential Parking Ratio: $0\mathrm{.}85$x$/$unit

Commercial Parking Ratio: $1\mathrm{.}00$x$/1,000$ft$2$ Commercial CGA

Residential Storage Lockers: $75$

Revenue:

Residential Rental Revenue per SF: Value engineer to reach minimum $15\%$ IRR on $1-$year hold and $5\mathrm{.}00\%$ Development yield upon stabilization

Parking Revenue: $$200/$stall$/$month

Storage Locker: $$75/$locker$/$month

Commercial Revenue: $$35$ PSF $($NNN$)$

Costs:

Land: $

$14,000,000$ Purchase Price

$4\mathrm{.}00\%$ Land Transfer Tax

$3\mathrm{.}00\%$ Acquisition Fee

Construction:

$$325/$ft$2$ Residential GCA

$$250/$ft$2$ Commercial GCA

$$55,000/$Parking Stall

Construction Manager: $3\mathrm{.}00\%$

City & Municipal Fees

Residential Development Charges: $$34,000/$Residential Unit

Commercial Development Charges: $$52/$ft$2$ Commercial GCA

Municipal Planning Application Fees: $$2,500,000$

Municipal Building Permit Fee: $$2\mathrm{.}00/$ft$2$ GCA

Cash$-$in$-$lieu of Parkland Dedication: $10\%$ land value

Miscellaneous Municipal Fees: $$720,000$

Professional Fees

$$9\mathrm{.}00/$ft$2$ GCA

Additional Costs:

Offsetting$/$Carrying NOI: $$250,000/$year prior to construction

Development Management: $3\mathrm{.}00\%$ of total budget

Marketing: $$1,000/$residential unit

Commercial Lease$-$up commissions: $$5\mathrm{.}00/$ft$2$ Commercial GCA

Residential Lease$-$up Commissions: $$1,000/$residential unit

Financing Costs

VTB:

$70\%$ LTV

$6\mathrm{.}00\%$ per annum $($Interest Only$)$

Construction Loan: Size: Max $95\%$ LTC subject to Min $1\mathrm{.}10$x DSCR

Construction Interest: Prime $0\mathrm{.}35\%$

$2\mathrm{.}50\%$ Placement Fee $($one$-$time$)$

Note: the construction loan will flip into an amortizing loan at construction completion

Amortizing Loan:

Interest Rate: $4\mathrm{.}00\%$ Amortization Period: $50$ Years

Operating Expenses:

$$6,750/$Residential Unit

Property Management: $4\mathrm{.}00\%+$ HST on total residential revenue

Disposition:

Cap Rate: $4\mathrm{.}25\%$ and $6\mathrm{.}00\%$ on Residential and Commercial forward $12-$month NOI, respectively Broker Fee: $1\mathrm{.}00\%$ on gross sales proceeds