1. (40 points) Your company, Badger Multifamily, redevelops multi-family properties. You are considering buying a property currently priced at $40,000,000. You anticipate putting in $20,000,000 in renovation costs during the year after you buy the property and then selling the property one year after you purchase it. You are hoping to get the following debt financing . $20,000,000 permanent loan at an annual interest rate of 4.5% with a term of 1 year and no payments during the first year such that the loan is negatively amortizing. The loan balance compounds monthly $10,000,000 construction loan at an annual interest rate of 4.0% plus one month LIBOR. The construction loan is a draw-down loan meaning that you do not take the full $10,000,000 in one installment but, rather, draw down on the loan month-by-month with the balance acecumulating accordingly. The $10,000,000 maximum does not include carried interest isuch that the ending balance can exceed $10,000,000 (a) (6 points) What is the balance on the permanent loan at the end of one year? 0 1 2 (b) 6 points) Assuming that you draw down the $10,000,000 construction loan in equal installments over each month of the year, what is the balance owing on the construction loan at the end of the redevelopment year if one-month LIBOR ias as in the following table? [You may complete the table below if it will assist you but you will be given full points if you provide the correct final answer.] End of Month LIBOR Ending Balance 1.50% 1.50% 1.75% 1.75% 4 2.00% 2.00% 1.60% 1.60% 1.60% 9 1.25% 10 1.25% 1.25% 1.25% 3 5 6 7 8 11 12 1. (40 points) Your company, Badger Multifamily, redevelops multi-family properties. You are considering buying a property currently priced at $40,000,000. You anticipate putting in $20,000,000 in renovation costs during the year after you buy the property and then selling the property one year after you purchase it. You are hoping to get the following debt financing . $20,000,000 permanent loan at an annual interest rate of 4.5% with a term of 1 year and no payments during the first year such that the loan is negatively amortizing. The loan balance compounds monthly $10,000,000 construction loan at an annual interest rate of 4.0% plus one month LIBOR. The construction loan is a draw-down loan meaning that you do not take the full $10,000,000 in one installment but, rather, draw down on the loan month-by-month with the balance acecumulating accordingly. The $10,000,000 maximum does not include carried interest isuch that the ending balance can exceed $10,000,000 (a) (6 points) What is the balance on the permanent loan at the end of one year? 0 1 2 (b) 6 points) Assuming that you draw down the $10,000,000 construction loan in equal installments over each month of the year, what is the balance owing on the construction loan at the end of the redevelopment year if one-month LIBOR ias as in the following table? [You may complete the table below if it will assist you but you will be given full points if you provide the correct final answer.] End of Month LIBOR Ending Balance 1.50% 1.50% 1.75% 1.75% 4 2.00% 2.00% 1.60% 1.60% 1.60% 9 1.25% 10 1.25% 1.25% 1.25% 3 5 6 7 8 11 12
