A 5 storey office block is in the market for R 50 000 000 (including transfer duties,
administration and commission expenses). The following information is
applicable:
? The office block consists of 5000 m2 lettable space.
? You realize upon looking at the drawings that there is a possibility to add
another floor consisting of 1000 m2 lettable space. (The height restriction
for this particular property is 6 storeys).
? The development cost for the additional floor will amount to R10 000 000
over a 6 month construction period.(For purposes of this question, assume
that this payment is only made at the end of the 6 month period)
? A financial institution offers you a mortgage bond of 80% on the total cost
of the office block, including the new additional floor. The amortization rate
is 11%, monthly compounded. Bond payments will be made at the end of
each month.
? You gather from the current rental market that you may ask
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