4. Sample table Project development

This is part of a Series in eight parts. Here are the other posts.

  1. On commercial Real estate
  2. Defining project Value in CRE
  3. Identifying Risks in RE
  4. Sample table Project development
  5. On Construction contracts
  6. Essential types of project development
  7. Capital funding
  8. Components of project development

I am still studying the book mentioned in the previous posts. Here is a sample project calculation from the book. I will review it sometime later, as many things are still not clear to me.

Project description

Project nameTest object 1
LocationStuttgart
Object typeCommercial
SellerOtto
Land price7.800.000Eur
Max. possible Land price9.800.000Eur

Technical description

Technical lifespan70Years
Rentable surface6.400m2
RE Interest rate (income p.a./buying price)5,25%
Remaining lifespan70Years

Buying price

Total acquisition costs21.400.000Eur
Rents together1.070.000Eur
Market rent pro m218Eur
Contract rent pro m214Eur

Assumptions

Purchase%Eur
Broker commision72.000
Notary costs45.000
RE tax4,20384.000
Legal expenses104.000
Expert committees fee30.000
Buying fee1,0080.000
Other acquisition costs12.500.000

Running costs

Relative (m2)Absolute
Maintenance Building2 Eur12.800 Eur
Maintenance Parking0 Eur0 Eur
Loss of rental income3%42.000 Eur
Administration extern1%14.000 Eur
Administration intern3%32.000 Eur

Yield

Initial yield5,32%
Post tax yield6,33%
Gross initial yield5,32%
Netto initial yield4,71%
Purchase price multiplicator18,80
Internal interest rate8,22%
Performance9,36%

Rental Income.

RentersizeEur/m2EurDuration
Company A3.400 m215,6053.00006.2025

Management costs

Sales15.000 Eur
Administration3,00 % from1.400.000 Eur41.000 Eur
Loss of rental income3,00% from1.400.000 Eur41.000 Eur
Maintenance costs2 Eur6.400 m212.800 Eur

Profitability

Gross profit (sum of market rents)1.400.000 Eur
Management costs111.000 Eur
Netto income1.280.000 Eur
Share of land value (7.800.000 x 5,25%)410.000 Eur
Share of the Building of Nett income860.000 Eur
Building earning capacity (over Lifetime)16.000.000 Eur
Land value7.800.000 Eur
Earning capacity24.000.000 Eur

Market value

Earning capacity24.000.000 Eur
Additions, deductions400.000 Eur
Market value23.600.000 Eur
Per m23.600 Eur/m2

Acquisition costs

Netto buying price7.900.000 Eur
Building buying price
Land buying price7.900.000 Eur
Agent72.000 Eur
Notar45.000 Eur
Property transfer tax4,20%384.000 Eur
Legal costs104.000 Eur
Other Consultants30.000 Eur
Purchase fee1,00%78.000 Eur
Rental costs410.000 Eur
Vacancy assumption270.000 Eur
Cost of construction12.100.000 Eur
Sum Costs13.500.000 Eur
Added value tax19%3.000.000 Eur
Acquisition costs gross24.000.000 Eur
Acquisition costs nett21.000.000 Eur

Construction costs

Start of constructionEnd of construction
Interim interest rate5,00%
Land work51.000 Eur51.000 Eur
Construction work7.800.000 Eur7.800.000 Eur
Additional costs13,56 %
Acquisition interest rate8.430.000 Eur1.020.000 Eur
Unplanned costs8%
Project management costs1,5%
Building fee1%

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