(35) You are a banker structuring a ten year, fixed-interest rate CMBS loan on a mixed-use property in Los Angeles worth $250MM. The borrower is pushing for a first mortgage of 75% loan-to-value. To make it work, you decide to divide the whole loan into a 60% LTV A Note that will be sold in a CMBS Securitization and a B-Note for the remainder of the whole loan that will be placed with a REIT investor seeking higher risk / higher investment yields.

On an LTV basis, the B Note represents leverage points from (a) _____% LTV to (b) ____%LTV

The 10-year swap interest rate is 2.68% and, for the whole loan, you want to price in a spread or margin over the swap rate of 197 basis points. What is the overall interest rate coupon youll quote for the whole loan (ie the loan as a whole, in its entirety)? (c) ______%

If you think you can sell the 10-year A Note into a securitization at an interest rate of 10 year Swaps + 136 bps, what will the interest rate be on the B Note assuming the whole loan interest rate is 10 Year Swaps + 197 bps?

(d) ____%

For question (d), you may find it helpful to populate this box when backing into the B Note Interest Rate.

	Principal Balance ($s)	Interest Rate / Coupon (%)	Annual Interest ($s) (Ignore amortization)
A Note
B Note
Whole Loan

If Kimco REIT, which owns and buys LA mixed-use buildings, is currently paying a dividend yield of 4.68%, do you think they will find the B Note investment attractive? (e) _____ (Yes / No)

(36) What would the yield maintenance penalty be if you prepaid the following loan?

The interest rate on the existing loan is 6.2% and theres a remaining term of 3 years. The three year U.S. Treasury Rate is 0.82%. Note: assume the principal balance of the mortgage is $100that simplifies the calculations.

a) Whats the difference between the current loans interest rate and the three year U.S. Treasury rate? _________

b) Whats the number of monthly payment periods remaining on the loan? _____

c) What periodic discount rate ( i ) should you use for discounting the monthly yield maintenance cash flows to Present Value?