This document provides an overview and financial model for a proposed real estate development project in Dubai. The project involves constructing a mixed-use retail/residential building. Key assumptions in the analysis include net operating income projections and capitalization rates. Special attention should be given to these assumptions as they are important factors in determining the financial feasibility of the project over a 10-year holding period. The model outlines sources and uses of funds, cash flow projections, returns for investors, and other development costs and metrics.

1. Real Estate Development Financial Model
Author: Imran Almaleh
Date: August 23, 2014
Jumeirah Village Circle, Dubai
Phone: (971) 52 940 6601
Email: imranalmaleh@gmail.com
Summary
The purpose of this spreadsheet model is to determine the financial feasibility of a development project of
the subject property for a 10 year holding period. The uncertainty in this model lies in the many construction
& economic factors. The most important assumptions in this analysis are the Net Operating Income
assumptions (Annual Gross Rent, Vacany, and Operating Expenses) and the Cap Rates. Special attention
should be given to these assumptions.
Keywords: Real Estate, Property Valuation, Dubai

2. Project Overview
PROJECT SUMMARY
Project Discription: A multi-story Mix use retail/residential building in JVC
Building Uses:
Retail 6,050 SqFt 10%
Multi-Family Residential 54,450 SqFt 90%
Total Gross Square Footage: 60,500 SqFt
Site size: 24,200 SqFt
Floor-Area Ratio (FAR) 2.5 :1
Total Project Budget 18,847,691 Dhs
Sources & Uses of Funds
Sources Amount %Own. Uses Amount
Investors Equity 10,000,000 53% Land Costs 14,200,000
Developer Equity 8,847,691 47% Hard Construction Cost 1,786,800
Tenant Improvements 1,000,000
Soft Costs 1,555,101
Contengency 305,790
Total 18,847,691 Total 18,847,691
Investor Returns
NPV IRR
1 Year (4,095,880) -0.3%
5 Year 1,739,942 11.9%
10 Year 6,980,295 14.6%

3. Cash Flow Projection Model Formating
Red Requires further attention
Depreciation Period (whole project) 30 years Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Year number
Design &
Construction 1
Design &
Construction 2
Design &
Construction 3 1 2 3 4 5 6 7 8 9 10
Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Income
Gross Operating Income 3,416,405 3,518,897 3,624,464 3,733,198 3,845,194 3,960,550 4,079,366 4,201,747 4,327,800 4,457,634
Operating Expences (Paid by tenents)
Retail Tenents 88,580 90,352 92,159 94,002 95,882 97,800 99,756 101,751 103,786 105,862
Residential Tenents 2,001,332 2,041,358 2,082,186 2,123,829 2,166,306 2,209,632 2,253,825 2,298,901 2,344,879 2,391,777
Total - - - 5,506,317 5,650,607 5,798,809 5,951,029 6,107,382 6,267,981 6,432,947 6,602,399 6,776,465 6,955,272
Expenses
Construction Costs (2,323,845) (1,394,307) (929,538)
Land Cost (14,200,000)
Operating Expenses (2,089,912) (2,131,710) (2,174,344) (2,217,831) (2,262,188) (2,307,432) (2,353,580) (2,400,652) (2,448,665) (2,497,638)
Draw Against Investors Equity 10,000,000
Draw Against Developers Equity 6,523,845 1,394,307 929,538
Total - - - (2,089,912) (2,131,710) (2,174,344) (2,217,831) (2,262,188) (2,307,432) (2,353,580) (2,400,652) (2,448,665) (2,497,638)
Net Cash Flow - - - 3,416,405 3,518,897 3,624,464 3,733,198 3,845,194 3,960,550 4,079,366 4,201,747 4,327,800 4,457,634
Depritiation (628,256) (628,256) (628,256) (628,256) (628,256) (628,256) (628,256) (628,256) (628,256) (628,256)
Net Profit - - - 2,788,149 2,890,641 2,996,208 3,104,942 3,216,938 3,332,293 3,451,110 3,573,491 3,699,543 3,829,377

4. Building Mix Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Retail area 6,050 SqFt
Residential area 54,450 SqFt
total 60,500 SqFt
Retail Size (SqFt) % Allocation # of Shops Total Area Rent (Dhs) Total Rent
Shop style A 500 45% 5 2,500 65,000 325,000
Shop style B 1100 55% 3 3,300 125,000 375,000
Total 100% 8 5,800 190,000 700,000
Aditional Area (SqFt) 250
Residential Size (SqFt) % Allocation # of Units Total Area Rent (Dhs) Total Rent
Studio 500 15% 16 8,000 47,000 752,000
1 BHK 1 BR 800 20% 13 10,400 60,000 780,000
1 BHK 2 BR 850 10% 6 5,100 64,000 384,000
2 BHK 1 BR 950 25% 14 13,300 67,000 938,000
2 BHK 2 BR 1100 20% 9 9,900 71,000 639,000
3 BHK 2 BR 1600 10% 3 4,800 78,000 234,000
Total 100% 61 51,500 387,000 3,727,000
Aditional Area (SqFt) 2,950
Rent Per SqFt 77.26
Retail 115.70 Dhs
Residential 68.45 Dhs

5. Investor Returns Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Year Developers Equity Investors Equity Net Profit
Total Profit -
Sale at year 1
Total Profit -
Sale at year 5
Total Profit -
Sale at year 10
Design & Construction 1 (6,523,845) (10,000,000) - (16,523,845) (16,523,845) (16,523,845)
Design & Construction 2 (1,394,307) - - (1,394,307) (1,394,307) (1,394,307)
Design & Construction 3 (929,538) - - (929,538) (929,538) (929,538)
1 2,788,149 18,706,065 2,788,149 2,788,149
2 2,890,641 2,890,641 2,890,641
3 2,996,208 2,996,208 2,996,208
4 3,104,942 3,104,942 3,104,942
5 3,216,938 24,926,734 3,216,938
6 3,332,293 3,332,293
7 3,451,110 3,451,110
8 3,573,491 3,573,491
9 3,699,543 3,699,543
10 3,829,377 35,189,303
IRR and NPV Calculations
IRR Sell at Year 1 -0.3%
Sell at Year 5 11.9%
Sell at Year 10 14.6%
NPV at 10% Sell at Year 1 (4,095,880)
Sell at Year 5 1,739,942
Sell at Year 10 6,980,295
Invester Return Assuming Sale At Year 1 At Year 5 At Year 10
Net Operating Income 1,326,493 1,583,006 1,959,995
Terminal Cap Rate 8.00% 7.0% 6.0%
Fair Market Value 16,581,163 22,614,371 32,666,589
Cost of Sale 4% 663,247 904,575 1,306,664
Sale Price Realized 15,917,916 21,709,796 31,359,925
Project Equity 15,917,916 21,709,796 31,359,925
ROI
Investors 84% 115% 166%
Developers 84% 115% 166%

6. Operating Income Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Rentable SqFt Factor 85% Black Cells containing a title or calculation on the same sheet
Retail Rent/SqFt Rentable SqFt Annual Rent
115.70 5142.5 595,000
Vacancy 5% (29,750)
Gross Operating income 565,250
Residential Rent/SqFt Rentable SqFt Annual Rent
68.45 46282.5 3,167,950
Vacancy 10% (316,795)
Gross Operating income 2,851,155
Total 3,416,405 Dhs
Operating Income Forecast 1 2 3 4 5 6 7 8 9 10
Retail 595,000 612,850 631,236 650,173 669,678 689,768 710,461 731,775 753,728 776,340
Residential 3,167,950 3,262,989 3,360,878 3,461,704 3,565,556 3,672,522 3,782,698 3,896,179 4,013,064 4,133,456
Retail - Loss to Vacancy (29,750) (30,643) (31,562) (32,509) (33,484) (34,488) (35,523) (36,589) (37,686) (38,817)
Residential - Loss to Vacancy (316,795) (326,299) (336,088) (346,170) (356,556) (367,252) (378,270) (389,618) (401,306) (413,346)
Total 3,416,405 3,518,897 3,624,464 3,733,198 3,845,194 3,960,550 4,079,366 4,201,747 4,327,800 4,457,634
Rent Growth 3%

7. Retail Tenant Costs Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Year Rent Utilities Other OpEx Total tenent costs Utilities + Othet OpEx
1 595,000 38,517 50,063 683,580 88,580
2 612,850 39,288 51,064 703,202 90,352
3 631,236 40,073 52,085 723,394 92,159
4 650,173 40,875 53,127 744,175 94,002
5 669,678 41,692 54,190 765,560 95,882
6 689,768 42,526 55,273 787,568 97,800
7 710,461 43,377 56,379 810,217 99,756
8 731,775 44,244 57,507 833,526 101,751
9 753,728 45,129 58,657 857,514 103,786
10 776,340 46,032 59,830 882,202 105,862
Total 7,790,937 969,928
NPV of Payments for 10 years (in year 0) 3,274,984
Retail tenent Discount Factor 11%
Utilities Growth rate 2%
Other Operating Expenses growth rate 2%
Utilities & Operating Expences / Year / SqFt
Energy 5.3
Water 0.65
Wastewater 0.56
Other Utilities 0.98
Total Utilities 7.49
Repairs & Maintenance 1.7
Security 0.5
Garage Operations 0.9
Management fee 0.4
Real Estate Taxes (5% of Rent) 5.79
Insurance 0.45
Total Operating Expenses 9.74
Total Costs 17.23

8. Residential Tenent Costs Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Year Rent Utilities Other OpEx Total tenent costs Utilities + Othet OpEx
1 3,167,950 254,091 1,747,241 5,169,282 2,001,332
2 3,262,989 259,173 1,782,186 5,304,347 2,041,358
3 3,360,878 264,356 1,817,829 5,443,064 2,082,186
4 3,461,704 269,643 1,854,186 5,585,534 2,123,829
5 3,565,556 275,036 1,891,270 5,731,862 2,166,306
6 3,672,522 280,537 1,929,095 5,882,154 2,209,632
7 3,782,698 286,148 1,967,677 6,036,523 2,253,825
8 3,896,179 291,871 2,007,031 6,195,080 2,298,901
9 4,013,064 297,708 2,047,171 6,357,943 2,344,879
10 4,133,456 303,662 2,088,115 6,525,233 2,391,777
Total 58,231,021 21,914,025
NPV of Payments for 10 years (in year 0) 26,346,207
Residential tenent Discount Factor 10%
Utilities Growth rate 2%
Other Operating Expenses growth rate 2%
Utilities & Operating Expences / Year / SqFt
Energy 4.8
Water 0.15
Wastewater 0.06
Other Utilities 0.48
Total Utilities 5.49
Repairs & Maintenance 2.2
Security 1
Garage Operations 1.4
Management fee 0.9
Real Estate Taxes (5% of Rent) 31.30
Insurance 0.95
Total Operating Expenses 37.75
Total Costs 43.24

9. Costruction Costs Schedule Model Formating
Red Requires further attention
Blue Input cells
Gross Development Value 39,182,000 Dhs Green Cells linked to another sheet
Rental Value (/Year) 4,310,020 Dhs Black Cells containing a title or calculation on the same sheet
Item Value Discription
Land Value 14,200,000 Dhs
Hard Costs
Building Costs (/SqFt) 18.6 1,125,300 Dhs
Landscaping 121,500 Dhs
Other external costs 180,000 Dhs
Site Clearance 120,000 Dhs
Site Preparation 240,000 Dhs
Total Hard Costs 1,786,800 Dhs
Soft Costs
Architects 10% 112,530 % of building cost
Quantity Surveyors 5% 56,265 % of building cost
Legal Fees on sale 2% 783,640 % of Gross Development Value
Legal Fees on letting 2% 86,200.40 % of rent
Letting Agents 2% 86,200.40 % of rent
Civil Engineers 5% 56,265 % of building cost
Planning Permission 60,000 Dhs
Building Regulations 30,000
Total Soft Costs 1,271,101 Dhs
Other Costs
Contingencies 10% 305,790 % of Construction costs and fees
Total Contingencies 305,790 Dhs
Tenent Improvements 1,000,000 Dhs
Legal Fees on site purchase 2% 284,000 % Land Value
Total Costs 18,847,691 Dhs
Year number Design & Construction 1 Design & Construction 2 Design & Construction 3
Year 2015 2016 2017
% Costs Allocation 50% 30% 20%
Total construction Costs 2,323,845 1,394,307 929,538 4,647,691
Total

10. Risiduale Land Valuation Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Cap Rate 12%
Operating Income (1st Year) 3,416,405
Gross Development Value 28,470,042
Hard Costs
Building Costs 1,125,300
Landscaping 121,500
Other external costs 180,000
Site Clearance 120,000
Site Preparation 240,000
Total Hard Costs 1,786,800
Soft Costs
Architects 112,530
Quantity Surveyors 56,265
Legal Fees on sale 783,640
Legal Fees on letting 86,200
Letting Agents 86,200
Civil Engineers 56,265
Planning Permission 60,000
Building Regulations 30,000
Total Soft Costs 1,271,101
Other Costs
Contingencies 305,790
Tenent Improvements 1,000,000
Total Other Costs 1,305,790
Develper Profit at 0.2 20% 5,694,008
Total Construction Costs 10,057,699
Availiable for land 18,412,342
Legal Fees on site purchase 284,000
Risidual Land Value 18,128,342 Dhs
Land Selling Price 14,200,000 Dhs

11. Sensitivity analysis Model Formating
Red Requires further attention
Blue Input cells
Green Cells linked to another sheet
Black Cells containing a title or calculation on the same sheet
Cap rate and Terminal CF impact on Equity
Cost of Sale 4%
Base Cap rate 6% 1,788,835 1,844,160 1,901,195 1,959,995 2,018,795 2,079,359 2,141,740
Base Terminal CF 1,959,995 5.5% 31,359,925 32,329,820 33,329,711 34,360,527 35,391,343 36,453,083 37,546,676
Change Factor 3% 5.6% 30,419,128 31,359,925 32,329,820 33,329,711 34,329,603 35,359,491 36,420,275
5.8% 29,506,554 30,419,128 31,359,925 32,329,820 33,299,714 34,298,706 35,327,667
6.0% 28,621,357 29,506,554 30,419,128 31,359,925 32,300,723 33,269,745 34,267,837
6.2% 27,787,725 28,647,139 29,533,133 30,446,529 31,359,925 32,300,723 33,269,745
6.4% 26,978,374 27,812,757 28,672,945 29,559,737 30,446,529 31,359,925 32,300,723
6.6% 26,192,596 27,002,676 27,837,811 28,698,774 29,559,737 30,446,529 31,359,925
Standard Deviation 2,700,457 Dhs
Range 11,354,079 Dhs
Equity Value
Terminal Cash flow
TerminalCapRate