Construction costs are estimated to be $11.0 million. A construction loan is available at 5.25% annual interest, with 1.25 points in origination fees charged. The total interest paid on the loan over the construction period will be $315,000. A permanent loan at 4.5% annual interest paid monthly over 30 years is used to pay off the construction loan. Fees to acquire the permanent loan are 2.5 points. The estimated NOIs from operations are listed below. Complete shaded cells in the table below to determine the offer price for land acquisition. Assume you require a 12% return on the project.

	Year 0	Year 1	Year 2	Year 3
EXPECTED CASH FLOW DURING CONSTRUCTION
Construction costs		-11,000,000
Construction loan fees	-137,500
Construction loan interest		-315,000
Permanent loan
Permanent loan fees
Permanent loan
Land acquisition
EXPECTED CASH FLOW FROM OPERATIONS
Net operating income			900,000	1,000,000
Less: annual debt service
Before-tax cash flows
EXPECTED CASH FLOW FROM SALE
Sale price at 6.5% cap rate
Less: Selling expenses @ 4.0%
Net sale price
Outstanding loan balance
Before-tax equity reversion
EXPECTED CASH FLOWS TO EQUITY
Expected cash flows to equity
Required IRR on equity = 12%			12.0%