Mixed Use Apartment Building Project in LA Advice Needed

[Andrew Pliska]

We have a C2 zoned lot approx 1.2 acres that is flat with nothing on it. We just got the project fully entitled for an apartment building and a separate commercial building with restaurant/retail (ground floor) with offices on 2nd story. We plan to build the commercial building mostly as a shell building.

The apartment is being built on ground level with a concrete podium and two stories of wood floors above it. 3 stories total. 

We are now at the point where we need to get proposals for civil, electrical, structural, green, landscaping etc in addition to the architect’s final set of plans to finish our “soft costs”. 

We are also trying to engage contractors and build dialogue for how much it’s going to cost to build.

My questions are what is the best technical method to predict the fully built project value. I was advised that you take NOI and divide by the cap rate of similar buildings around. Is that a pretty safe approach? Or is there another good method?

Secondly what do you think is a fair price per square foot for the hard costs to construct the building? I’ve been hearing $200 for medium level quality finishes. But I’ve heard you can get it done cheaper too. Is that price multiplied by the total building square footage or are there exclusives to the equation?

The goal is to estimate the value of the fully built and rented project and compare to the total soft and hard costs. We are very close to have our final soft costs numbers.

Thanks everyone.