Construction Loan You hired an investment firm and a developer to build an office building on a 4-acre plot of land. Construction will begin at the end of 2022 (December 31, 2022). Use the follow deal structure to set up a development pro forma: Land Size: 4 acres Land Price: $160 square foot Floor Area Ratio: 10 (this means you can construct 10 floors) Leasable to Gross Area Ratio: 90% Hard costs per gross square foot $175 Soft costs per gross square foot $90 Completing time is 2 years Debt financed based on a LTC (loan-to-cost) = 70% (This is the same idea as LTV) Remainder of funds come from investors (equity) Annual interest rate is 5% and interest is capitalized Draw on equity first and use until exhausted, then draw on debt Assume that 50% of land cost is paid in the first month and 50% in the last month Hard and Soft Costs are distributed evenly over the 2 year period. (This is not the case in real life but it's an assumption to make your model easier). . Instructions Make a development pro forma for the construction phase of the deal. Begin with determining the uses of funds by calculating the funds needed for the development (land acquisition, hard and soft costs). Then determine the source of funds. Show the 2 years construction period monthly. When you are done, show the amount of the construction loan that needs to be refinanced.

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