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A developer wants to finance a project costing $ 2 million with an 8 0 percent, 1 0 - year loan at an annual interest

A developer wants to finance a project costing $2 million with an 80 percent, 10-year loan at an annual interest rate of 8 percent. The mortgage payment is by annual and it is a partially amortizing loan with a balloon payment of $137,000 scheduled at the end of year 10. The projects NOI is expected to be $314,670 during year 1 and the NOI is expected to increase at an annual rate of 3.5 percent thereafter. The lender will require a debt coverage ratio of at least 1.20 for year 10. What would be the maximum loan amount that the lender would make based on the NOI and the DCR?

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