ABC, a newly established master developer, owns a prime land located in a coastal city with an area of 1,200,000 sqm. ABC, the developer, is planning to develop a mixed use community that has the following asset classes:
– Residential components (villas and apartments).
– Retail – malls and shopping centers.
– Hospitality components – few numbers of 4 and 5 star hotels with the intention to give these
hotels to international operators.
The land was valued at SAR 750/ sqm. Moreover, based on the latest design and preliminary masterplan, the proposed land use percentage is 55% and the FAR (Floor to Area Ratio) is 1.5 on the net (used) land area.
based on the market evidence, the proposed cost assumptions per sqm are:
The assumptions should cover the proposed BUA, number of Keys, dedicated facilities and amenities, in addition to the F&B components. Also, the proposed scenario should include the target ADR (Average Daily Rate), RevPar (Revenue per Available Room), OpEx (Operational Expenses) which includes the management fee, and NOI (Net Operating Income).
Assume the cost escalates at 3% annually, and the project is funded at 70:30 (D:E) ratio at cost of debt of 7%, and the project is discounted at 9%, please develop and financial feasibility to check the viability of this project. In addition, once the project is completed, and after selling the residential components, what would be your optimal exit strategy for the other components? Feel free to provide several scenarios/ proposal that you believe can be applicable in this case.
Finally, assume you are asked to renegotiate the funding matrix with a new lender, what would be the main elements that you need to revise in order to achieve a better deal?
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