2) Assume that you were given an opportunity to purchase a real estate project using an equity participation loan. The NOI for each year of the holding period are shown below: Year 2 Year 4 Year 1 NOIT 124,787 Year 3 139,954 1 132,225 148,468 2 Annual payments are being used to make the problem easier! Page 2 of 3 Additional information: Purchase price = $1,900,000 Estimated value of land = $500,000 Anticipated mortgage terms: a) Loan to value ratio = .80 b) Interest rate = 5.5% c) Years to maturity = 30 d) Points charged = 2 e) Prepayment penalty = 2% of outstanding balance f) Level payment, fully amortized g) Fixed interest rate, monthly payments Participation terms: a) Share of NOI = 15.0% over $125,000 b) Share of Appreciation = 20% Future sales price = $2,150,000 Estimated selling expenses as proportion of future sales price 5% Client's minimum required before-tax rate of return on equity = 12% 25.000 6) 7) inges $21520% Calculate The before-tax cash flows and the before-tax equity reversion (you do not need to calculate the after-tax cash flows or reversion) b. The before-tax net present value to the investor