REAL 4830 Lecture Notes - Lecture 8: Nnn Lease, Real Estate Investment Trust, Construction Loan

• School: University of Guelph
• Department: Real Estate and Housing
• Course: REAL 4830
• Professor: Unknown

Document Summary

Test #3: financial feasibility (financial analysis: considering lender criteria and investor return requirements. What makes a (cid:862)good project(cid:863) from developer"s perspective: a(cid:271)ility to (cid:862)fi(cid:374)a(cid:374)(cid:272)e out(cid:863, no equity-requirement. Land, work-to-date as equity: ability to obtain a loan for more than the cost of the project. Get back some cash already put into the project. Start something else: lowest possible risk, pre-lease/pre-sale, management intensity. Hotel vs. industrial building with nnn lease: constraints on competition. Financial concepts review: debt and underwriting formulas, ltv (loan to value ratio)= loan amount / final value estimate, dcr (debt coverage ratio) = noi / annual debt service, cap rate = noi / value. Investor profitability measures: ror (return on total cost) = noi / total cost, roe (return on equity) = net cash flow / equity. Irr = internal rate of return: npv = net present value.