Consider the investment evaluation of a real estate development in which the property to be built is projected to reach stabilized occupancy at the end of Year 2 (two years from the time the investment decision must be made and construction will begin).The project is speculative in that there are no leases signed as of Time Zero (the present, when the investment decision must be made).
The property level opportunity cost of capital is considered to be 9% for stabilized investments, and 10% for assets not yet stabilized (lease-up investments).
Which of the following is true?
