Suppose you are a real estate developer building a small office tower. The construction will take one year and the units have all been pre leased.The stabilized NOI at opening will be 720000 and comparable cap rates are 6%

The construction lender is willing to finance the project based on the terms and conditions shown below

Development budget: Land:2,000,000

Site preparetion:250,000

Hard cost: 8,000,000

Professional fee: 300,000

Permit:75,000

Project management: 150,000

Cashflow: The land is purchaed and site preparation occur in the first month. The soft cost distributed over the 12 month period. The hard cost distributed over month 3 to month 12 . All cashflow occur at the end of the month

Construction Loan

LTC:65%

Interest rate:5%

Mortgagae loan

Term: 5 years- Amortization period:25- Mortgage rate:4%

LTV:75%

Min DSCR: 1.25

Question: a)Calculate the outstanding construction loan at the end of the year

B)How much equity you will be able to withdraw at the end of the construction period if you take out a mortgage with the term and condition above