A property is expected to have NOI of $$124,000$ the first year. The NOI is expected to increase by $5$ percent per year thereafter. The appraised value of the property is currently $$1\mathrm{.}25$ million and the lender is willing to make a $$1,137,000$ participation loan with a contract interest rate of $5\mathrm{.}5$ percent. The loan will be amortized with monthly payments over a $20-$year term. In addition to the regular mortgage payments, the lender will receive $50$ percent of the NOI in excess of $$124,000$ each year until the loan is repaid. The lender also will receive $50$ percent of any increase in the value of the property. The loan includes a substantial prepayment penalty for repayment before year $5,$ and the balance of the loan is due in year $10.($If the property has not been sold, the participation will be based on the appraised value of the property.$)$ Assume that the appraiser would estimate the value in year $10$ by dividing the NOI for year $11$ by an $9$ percent capitalization rate.

Required:

Calculate the effective cost $($to the borrower$)$ of the participation loan assuming the loan is held for $10$ years. $($Note that this is also the expected return to the lender.$)$