How much he should pay for the site

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Reference no: EM132740377

Question - As a real estate analyst, a prospective developer approached you to value a building along that occupies a site measuring 60x20m2. The planning for area allows a plot coverage of 75% and a plot ratio of 7.0. The parking is to be done in the basement. Modern offices in the area let for shs 200 per m2 per month with a service charge of 10%. The car spaces rent for shs 500 per month, the provision being one car space for every 20 m2 of office floor space. Current construction costs average shs 4,800 per m2 and the construction period would be 36 months. The prospective developer expects to receive his future income for the next 50 years. The following is added information:

i. Cost of capital (@20% for 12 months

ii. Professional fees @ 15 %

iii. Disposal costs (legal fees, commissions, etc) @10% of developed value

iv. Developer's profit at risk@15%

Required - Advice a prospective developer how much he should pay for the site if he expects a return of 18%.

Reference no: EM132740377

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