Question 1

After obtaining the approval to redevelop the J mall into a 40-storey mixed development at Jurong East central site, the company would like to aim for the BCA Green Mark Platinum award for this new development. However, the Investment Director raised a concern that by achieving sustainability the profitability of the development will be impacted.
(a) Demonstrate your understanding of the sustainability efforts in the Singapore Construction industry.

(b) Discuss the concerns of profitability of the development raised by the Investment Director.

Question 2

with the redevelopment of J Cube Mall into 40-story residential cum two-story commercial space, the marketing team is working with the project manager on the design and planning approval.

Using the marketing mix: Place, Product, Price, and Promotion, appraise the FOUR (4) levels of marketing decisions to enhance the attractiveness of this mixed development.

Question 3

Cap company has previously done a preliminary study on the return of the alternative option of an office building on the same site. With more information gathered during the feasibility study stage, the company would like to work out the return using the discounted cash flow method. The
land cost shall be S$1.7 billion including all the transfer costs and taxes.

The latest market report shows that the current market rent of office space in that area is S$ 125/sqm per month and is expected to escalate at 3% p.a.

The consultant team advises that the development can still achieve 90% of the Gross Floor Area (GFA) for Net net lettable area (NLA). The construction period including design and tender is 36 months and the construction cost has increased to $ 3,800/sqm on GFA due to rising BPM303 Tutor-Marked Assignment Two  SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 3 of 6 labor and material costs. The Professional and authorities’ fees are estimated to be 15% of the construction cost. The total construction cost and fees are spread equally over a year’s construction period.

Cap company’s facilities team forecasts the monthly operating expense to be S$27/m2 on NLA with an escalation of 5% p.a. from the commencement of operation of the facilities. The occupancy rate for the tenanted areas is 70%, 80%, and 95% in the first, second, and third years respectively. The occupancy rate of facilities will be stabilized at 95% thereafter.

This investment will be held for four years after the construction and targeted to dispose of the commercial building at a 5% capitalization rate to a fund at the end of the holding period.
Analyze the above information and answer the following questions.

(a) Apply the appropriate technique to project the cash flow for the project in Appendix I. You can ignore taxes and debt servicing.

(b) Appraise the Net Present Value of the project with a weighted average cost of capital of 9% in Appendix II and the PVIF table is shown in Appendix III.

(c) Using an investment Excel template, construct the cash flow for the project and analyse the project IRR and equity IRR. Cap company will use the equity to fund the land transfer from the parent company and the remaining will be funded by a bank loan at an interest rate of 8%.

(d) Demonstrate your understanding that using the bank loan will enhance the return of the project and under what circumstances the bank loan will adversely impact the return.