Carson Equity was recently given the opportunity to bid on an attractive development site in the...
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Carson Equity was recently given the opportunity to bid on an attractive development site in the downtown Wichita Falls. The executives at Carson Equity believe there is growing demand for high-end office towers due to the growing demand by home health firms in the area. The investors at Carson Equity expect to achieve an 11% return on development projects and do not wish to begin developments if such return cannot be achieved. Jackie is the Head of Development at the firm who was given the task of assessing the feasibility of the Carson Equity Office Tower project. Below are the cost and income data Jackie has collected for the project: Below are the cost and income data Jackie has collected for the project: Land Cost Hard Costs Soft Costs Total Development Cost Rent Operating Costs Stabilized Occupancy Loss Factor D $37 per GSF (building gross square foot) $73 per GSF $35 per GSF $145 per GSF $38 per Leasable Square Foot $12 per GSF 94% of Leasable Square Footage 30% of GSF a. Calculate the expected return on cost (build to return/yield on cost/going in cap rate) for the Carson Equity Office Tower development project. b. Does the expected return meet the investors threshold of 11% return on cost? c. What is the minimum replacement rent per gross SF and per leasable SF that Jackie must expect for the development to meet the investors expected return? d. Given that FAR for this site is 5, how much should Jackie be willing to pay per acre of land and still meet the return threshold set by the investors of Carson Equity? Carson Equity was recently given the opportunity to bid on an attractive development site in the downtown Wichita Falls. The executives at Carson Equity believe there is growing demand for high-end office towers due to the growing demand by home health firms in the area. The investors at Carson Equity expect to achieve an 11% return on development projects and do not wish to begin developments if such return cannot be achieved. Jackie is the Head of Development at the firm who was given the task of assessing the feasibility of the Carson Equity Office Tower project. Below are the cost and income data Jackie has collected for the project: Below are the cost and income data Jackie has collected for the project: Land Cost Hard Costs Soft Costs Total Development Cost Rent Operating Costs Stabilized Occupancy Loss Factor D $37 per GSF (building gross square foot) $73 per GSF $35 per GSF $145 per GSF $38 per Leasable Square Foot $12 per GSF 94% of Leasable Square Footage 30% of GSF a. Calculate the expected return on cost (build to return/yield on cost/going in cap rate) for the Carson Equity Office Tower development project. b. Does the expected return meet the investors threshold of 11% return on cost? c. What is the minimum replacement rent per gross SF and per leasable SF that Jackie must expect for the development to meet the investors expected return? d. Given that FAR for this site is 5, how much should Jackie be willing to pay per acre of land and still meet the return threshold set by the investors of Carson Equity?
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Answer rating: 100% (QA)
a Step 1 Leasable Square foot Formula 1GSF1Loss factor 1103 107 07 GSF Step 2Sta... View the full answer
Related Book For
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
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