Construct a financial model: DHPH has been presented with the opportunity to acquire a 4-acre site that

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Question:

Construct a financial model: DHPH has been presented with the opportunity to acquire a 4-acre site that is 176,041 SF zoned industrial with a 2 FAR.

The site is currently encumbered with short term land leases (existing Rent Roll attached) and anticipates beginning a vertical development upon the expiration of the existing leases. Please assume the following assumptions in developing your model:

• Closing Date: 2/14/2018
• Purchase Price: $47,500,000
• Closing Costs: 2.5%
• Acq Fee: 1%
• Please use the attached construction costs for all construction costs
• Design/Engineering/Expediting (line item in construction costs) will take place 70% during pre- development and 30% during the development phase of the project
• The Construction will take 18 months to build and will begin 15 months after the acquisition
• The new building should be fully leased upon completion of construction
• The floors should be leased at $32 psf on the first 2 floors , $25 on the 3rd floor and $10 psf for the mezzanine area (see attached floor plan) -all NNN leases
• Please assume additional costs of:
o $100,000 Legal Costs
o $350,000 Marketing Costs
o 4.5% Development Fee – Hard Costs only
o Leasing Commissions- 7% for the 1st 3 years and 3% for years 4-10.

Assume 10 year leases
o Tenant improvements- assume office is 5% of the warehouse space and will be a $75 psf costs
• Hold the building for 6 months after stabilization and then sell utilizing a 5% Cap Rate and 4% Closing Costs
• Financing Assumptions:
o Acq Loan: ▪ 65% LTC
▪ L+425 (assume Libor is 250 bps)
▪ 1% origination Fee
▪ 1% Debt Broker Fee
▪ $350,000 Legal Costs
▪ 2.8% MRT o Construction Loan
▪ 65% LTC ▪ L+450 (assume Libor is 250 bps)
▪ 1% origination Fee
▪ 1% Debt Broker Fee
▪ $500,000 Legal Costs
▪ 2.8% MRT (on the spread)