You are a Real Estate developer building a small office tower in Montreal. The construction will take one year and the units have all been pre$-$leased.

The stabilized NOI at opening will be $$750,000$ and comparable cap rates are $6\%.$

The construction lender is willing to finance the project based on the terms and conditions shown below.

a$)$ Based on the budget, calculate the oustanding construction loan at the end of the year.

b$)$ How much equity will you be able to withdraw at the end of the construction period if you take$-$out a mortgage with the terms and consitions shown below?

Please make your calculations to the "right of the data and rent roll" on this worksheet.

Upload your file onto Moodle by the deadline indicated on the course outline.

Development Budget: Land Cost $2,000,000$

Developpe cost:

Land $2,000,000$ Site Preperation $250,000$

Site preparation $250,000$ Hard Costs $800,000$

Hard costs $8,000,000$ Professinal fees $25,000$

Professional fees $300,000$ Permits $6,417$

Permits $77,000$ Project management $12,500$

Project management $150,000$ Other soft costs $16,250$

Lesing commissions $16,000$ Developpe cost: $1,110,167$

Other soft costs $195,000$ Interest Costs $109,000$

$10,988,000$ Commission $16,000$

Interest $109,000$ Sum of interest and commission: $125,000$

TOTAL $11,097,000$ Total development Cost: $3,235,167$

Cash flow:

Maximum Loan Amount: $2,102,858$

The land is purchased and site preparation occur in the first month. The soft cost $($excluding interest$)$ are evenly distributed over the $12$ month period. The hard costs are evenly dirtibuted over month $3$ to month $12.$ All cash flows occur at the end of the month. Equity Amount: $1,132,308$

Outstanding Construction Loan at the end: $2,208,001$

Value: $12,500,000$

Maximum loan that can be availed: $9,375,000$

Value of Equity: $3,235,167$

Construction loan:

LTC $65\mathrm{.}0\%$

Interest rate $5\mathrm{.}0\%$

Stabilized NOI at opening $750,000$

Comparable cap rates $6\mathrm{.}0\%$

Mortgage loan:

Term $($years$)5$

Amortization period $($years$)20$

Mortgage rate $5\mathrm{.}0\%$

Maximum LTV $75\mathrm{.}0\%$

Minimum DSCR $1\mathrm{.}25$