Question: Use the information provided to answer the following question. A developer is considering developing a Class A office building. The developer s preliminary estimate of

Use the information provided to answer the following question.
A developer is considering developing a Class A office building. The developers preliminary estimate of value is $2,000,000. Initial discussions with lenders indicate that loans are available for this property type at 9 percent interest and 30-year amortization periods with monthly payments. Lenders further have indicated they are using a 1.2 DSCR ratio or a 75 percent loan to value (LTV) ratio for Class A office buildings, whichever results in the lower loan amount. Lenders typically select the lower amount and then round the amount down to the nearest $1,000.
Recent sales for Class A office buildings have indicated that capitalization rates are approximately 9.5 percent. The developers forecast of a stabilized NOI is $190,000, which reflects a 4 percent vacancy and $102,800 in operating expenses.
The Annual Debt Service using debt service coverage ratio (DSCR) is $___________.

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