You are planning to make an offer on just under 1 acre of land (40,000 SF) to develop a retail project.

Based on your market research, due diligence and underwriting, you have arrived at the following project assumptions.

City code will allow a maximum FAR of 0.375.

The project will have a loss factor of 10%

Stabilized vacancy is projected at 5%

Land purchase price of $800k.

Development costs (Soft costs and hard costs) will run $3MM

You are projecting a market cap rate valuation of 8% after project completion, lease-up and stabilization. Since you require a 200 basis point spread, you must build to a 10 (10% yield on cost).

What is your minimum net rent for the project?

Hint: Net rent refers to tenants paid rent after all expenses on the property.

Group of answer choices

$40 PSF

$38 PSF

$38.63 PSF

$29.63 PSF

$28 PSF

There is not enough information to solve this