You are invited to evaluate the effectiveness of an investment project...

You are invited to evaluate the effectiveness of an investment project related to the construction of a commercial property in St. Petersburg.
The following types of commercial real estate are available (please see the attached file to find out what option is assigned to you):
Production premises: total area - 40,000 sq.m., rentable area - 35,000 sq.m., occupancy - 80%, construction cost 30,000 per sq.m., construction period - 4 quarters
Investment projects can be considered in the following city districts (the types that can be considered in the district are indicated in parentheses). Also, check the attached file to see what district is assigned to you.
Vyborgsky district (all)
Your task is to:
1. Forecast the required investment
2. Predict the cash flow from the rental of premises. You determine the rental rates yourself on
the basis of market analysis (you need to analyze rates in a given area).
3. Forecast the cash flow from the sale of the property at the end of the projection period. The sale price will be determined by the growing perpetuity formula with a growth rate of long-
term inflation (see Ministry of Economic Development forecasts).
4. Evaluate the effectiveness of the investment project using the indicators of investment
attractiveness (2-3 indicators).
The operating costs of property owners are defined as follows:
1. Tenants pay the housing & utility costs by themselves.
2. Real estate management costs (tenant search, etc.) account for 5% of the rental income.
3. The cost of insurance is determined as a percentage of the cost of construction according to
the tariffs existing in the market (you need to analyze the tariffs yourself).
4. Property tax is paid as a percentage of the cadastral value of the property. In this case, we will assume that the cadastral value is also equal to the cost of construction of the property, the
tax rate should be applied according to the current tax legislation.
5. We will consider that the owners of the object of commercial real estate and tenants do not
pay VAT and profit tax.
6. The discount rate is set at 15%.
7. The planning step is 1 quarter. The duration of the forecast period is determined as nominal
payback period plus 1 quarter. The property is sold at the end of this quarter.
The result of your work should be a MS Excel file with a forecast of the cash flow for the project and evaluation of its efficiency.
Performance criteria (0.05 per item, total 0.25):
1. Project investment forecast is correct (investment part of the project);
2. Income forecast and the determination of the rental rate is correct (operational part of the project);
3. The forecast of project costs is correct (operational part of the project);
4. The estimation of selling value of the property and the duration of the forecast period are correct;
5. Performance indicators calculation is correct (investment attractiveness of the project);
6. Input data validity
Important: All calculations results should be easily verifiable (connected with the input data with formulas). For all the inputs that need to be clarified from open sources (rental rates, inflation, tax rates, etc.) , it is necessary to put a link to a source.