Cash Flows

One oddity of development in China is the lack of pre-construction market research by many developers/investors and the inability for pre-lease or pre-sale opportunities. The manager (a finance graduate) saw a need to be filled in his office, so one of the tasks I have been assigned for my intern duties is to propose some problems to the staff which cover some basic finance principles. Because of such great instruction, I had no problem with the task. We are using one of our customers as an example and calculating vacancy rates, monthly and annual income, property management fees, and taxes so that the staff can understand some of the financial requirements of their customers and how the picture really looks. Next week, we will discount the cash flows to present value figures and arrive at NPV for the project and calculate the IRR and perhaps some other calculations. Figuring required rate of return on the retail podium of a 35 storey office building which has not been completed yet may be a bit of a challenge. I may calculate it based on the price of pork.