Overview of Real Estate Development Assignment 4

You are considering buying an out-of-date office building and plan a renovation and conversion to condominiums. You know the following:

35,294 gross square feet 15% allowance for common areas 1,200 average square foot unit size $900 average sale price per square foot 7% cost of sale

(a.) How many units can you expect to get out of the conversion and how much will you net from the sale of the condos?

(b.) How much can you offer to pay for the office building given the following development assumptions?

5% closing and due diligence costs for the building 450 per square foot hard costs 12% of hard costs for Design, Permitting, Marketing and Other Soft Costs $655,000 legal costs

$1,000,000 finance costs 5% Development fee (of total development cost)

(c.) How much can you offer to pay for the office building if you think hard costs are going to be $50 per square foot higher?

(d.) How much can you offer to pay for the office building if you think the condos might sell for only $800 per square foot?