1. What is real estate development?
2. What is the role of the real estate developer in the developmentprocess?
3. Describe the main types of real estatedevelopers.
4. What are the stages of real estatedevelopment?
5. What is the feasibility analysis? What are the main components of feasibilityanalysis?
6. Describe the seven components of a real estate market study.
7. You are considering developing a new apartment building with 300 units of 1,000 rentable square feet each. The expected rent is $2.00 per rented sf. per month with vacancy of 5%and 0.5% bad debt allowance. (Hint: Build a spreadsheet to answer thesequestions.
   1. What is the expected potential gross income (or gross potentialrevenue)?
   2. What is the expected effective grossincome?
   3. Theoperatingexpensesareprojectedtobe30%oftheeffectivegrossincome.Inapartment buildings,thelandlordsareresponsibleforoperatingexpenses.WhatistheexpectedNOI?
   4. The going-out cap rate is 4%. For how much you expected to sell thisbuilding?
   5. Thedesignofyourapartmentbuilding impliesanefficiencyof80%.Whatistheestimated gross square footage (gsf) of yourbuilding?
   6. The construction hard cost is $175/gsf (including a garage). What is the estimated hard constructioncost?
   7. You estimate that soft cost is 10% of hard construction cost and that development contingency is 3% of hard construction cost. What are the estimated soft cost and developmentcontingency?
   8. Assumethatthelandcost$10,000,000.Whatisthetotalproject cost(land+hardcost+soft cost + developmentcontingency)?
   9. You obtain a construction loan. You borrow 60% of the total project cost at 6% annual interest rate. Assume that your construction loan will have a two-year term and average draw during these two years equal to 65%. What is the estimated construction loan interest?
   10. Usingyourpreviousanswers,whatistheoverallcaprate(oryieldoncost)ofyourproject?
   11. Assuming that your feasibility criteria is that the spread between the yield on cost and the going-out cap rate is greater than 150 basis points. Is this project economicallyfeasible?
   12. What is the cost of land that makes the yield on cost equal to5.5%?
   13. Assuming that you pay 10,000,000 for the land, what is the rent per square foot permonth that makes the yield on cost equal to5.5%?
8. The equity cash flows of a development project are supposed to be divided between two partners in a JV agreement. The investor in this agreement puts 100% of the necessary cash for the project while the developer puts 0%. The agreement stipulates that the investor will get 8% cumulative preferred return. After the preferred return is paid, the investor will receive back her equity balance. After the equity balance is paid, any remaining cash flows will be divided between the developer and the investor according to the following waterfallstructure.

Investor IRR above 8% and below15%
Percentage of cash flow to developer	30%
Percentage of cash flow to investor	70%
Investor IRR above 15% and below25%
Percentage of cash flow to developer	40%
Percentage of cash flow to investor	60%
Investor IRR above25%
Percentage of cash flow to developer	50%
Percentage of cash flow to investor	50%

Assuming that the equity entity cash flows in a development project are below. What are the investor's and the developer's cash flows and their respective IRRs?

Equity Entity Cash Flows
Year
0	1	2	3
$ (2,000,000)	$ -	$ 400,000	$ 2,500,000

9. A developer expects that her developed property will have a NOI of $2 million when stabilized and the permanent mortgage is underwritten. This developer expects that the propertycapratewillbe6%andthatlenderswillrequireaminimumDCRof1.6andwill loan up to 60% of appraised value on a first mortgage. If the mortgage interest rate is 5%, paymentsaremonthly,andtheamortizationperiodis30years,whatisthemaximum-sized loan the lender willadvance?

10. A developer borrows $100 million in a 30-year fixed rate fully amortizing mortgage with 6% interestrate.

1. What is the monthly payment on thismortgage?
2. What is the outstanding loan balance in this mortgage after 10 years ofpayment?