Ajax Investment Company is considering the purchased of land that could be developed into Class A office. Ajax believes that the site could support a 300,000/SF building with the following projections Office Rentable/SF 300,000 Rents/SF $30.00 Operating Expense Ratio 40% NOI growth 3% Required Return 12% Cost/SF $150 a) What is the estimated value of the land?
b) If rents are expected to grow at 4% what would be the value of the land? What is the % change in value from a)?
c) If rents are expected to grow at 1% what would be the value of the land? What is the % change in value from a)?
d) Suppose the land owners wants $15MM for the land? Given the assumptions in part a) is this feasible?