This is part of a Series in eight parts. Here are the other posts.
- On commercial Real estate
- Defining project Value in CRE
- Identifying Risks in RE
- Sample table Project development
- On Construction contracts
- Essential types of project development
- Capital funding
- 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 name | Test object 1 | |
| Location | Stuttgart | |
| Object type | Commercial | |
| Seller | Otto | |
| Land price | 7.800.000 | Eur |
| Max. possible Land price | 9.800.000 | Eur |
Technical description
| Technical lifespan | 70 | Years |
| Rentable surface | 6.400 | m2 |
| RE Interest rate (income p.a./buying price) | 5,25 | % |
| Remaining lifespan | 70 | Years |
Buying price
| Total acquisition costs | 21.400.000 | Eur |
| Rents together | 1.070.000 | Eur |
| Market rent pro m2 | 18 | Eur |
| Contract rent pro m2 | 14 | Eur |
Assumptions
| Purchase | % | Eur |
| Broker commision | 72.000 | |
| Notary costs | 45.000 | |
| RE tax | 4,20 | 384.000 |
| Legal expenses | 104.000 | |
| Expert committees fee | 30.000 | |
| Buying fee | 1,00 | 80.000 |
| Other acquisition costs | 12.500.000 |
Running costs
| Relative (m2) | Absolute | |
| Maintenance Building | 2 Eur | 12.800 Eur |
| Maintenance Parking | 0 Eur | 0 Eur |
| Loss of rental income | 3% | 42.000 Eur |
| Administration extern | 1% | 14.000 Eur |
| Administration intern | 3% | 32.000 Eur |
Yield
| Initial yield | 5,32% |
| Post tax yield | 6,33% |
| Gross initial yield | 5,32% |
| Netto initial yield | 4,71% |
| Purchase price multiplicator | 18,80 |
| Internal interest rate | 8,22% |
| Performance | 9,36% |
Rental Income.
| Renter | size | Eur/m2 | Eur | Duration |
| Company A | 3.400 m2 | 15,60 | 53.000 | 06.2025 |
Management costs
| Sales | 15.000 Eur | ||
| Administration | 3,00 % from | 1.400.000 Eur | 41.000 Eur |
| Loss of rental income | 3,00% from | 1.400.000 Eur | 41.000 Eur |
| Maintenance costs | 2 Eur | 6.400 m2 | 12.800 Eur |
Profitability
| Gross profit (sum of market rents) | 1.400.000 Eur |
| Management costs | 111.000 Eur |
| Netto income | 1.280.000 Eur |
| Share of land value (7.800.000 x 5,25%) | 410.000 Eur |
| Share of the Building of Nett income | 860.000 Eur |
| Building earning capacity (over Lifetime) | 16.000.000 Eur |
| Land value | 7.800.000 Eur |
| Earning capacity | 24.000.000 Eur |
Market value
| Earning capacity | 24.000.000 Eur |
| Additions, deductions | 400.000 Eur |
| Market value | 23.600.000 Eur |
| Per m2 | 3.600 Eur/m2 |
Acquisition costs
| Netto buying price | 7.900.000 Eur | |
| Building buying price | ||
| Land buying price | 7.900.000 Eur | |
| Agent | 72.000 Eur | |
| Notar | 45.000 Eur | |
| Property transfer tax | 4,20% | 384.000 Eur |
| Legal costs | 104.000 Eur | |
| Other Consultants | 30.000 Eur | |
| Purchase fee | 1,00% | 78.000 Eur |
| Rental costs | 410.000 Eur | |
| Vacancy assumption | 270.000 Eur | |
| Cost of construction | 12.100.000 Eur | |
| Sum Costs | 13.500.000 Eur | |
| Added value tax | 19% | 3.000.000 Eur |
| Acquisition costs gross | 24.000.000 Eur | |
| Acquisition costs nett | 21.000.000 Eur |
Construction costs
| Start of construction | End of construction | |
| Interim interest rate | 5,00% | |
| Land work | 51.000 Eur | 51.000 Eur |
| Construction work | 7.800.000 Eur | 7.800.000 Eur |
| Additional costs | 13,56 % | |
| Acquisition interest rate | 8.430.000 Eur | 1.020.000 Eur |
| Unplanned costs | 8% | |
| Project management costs | 1,5% | |
| Building fee | 1% |
Miha Hillenkamp 