A property is expected to have NOI of $${100}_{,}{000}_{?}$ the first year. The NOI is expected toThe Shawmut Bank has agreed to provide interim financing for the project. The bank

will finance all of the construction costs and site improvements at an annual rate of

$13$ percent plus a loan commitment fee of two points. The construction division

estimates that $60$ percent of the total direct cost will be taken down evenly during

the first six months of the construction phase, while the remaining $40$ percent will be

taken down evenly during the second six months of the construction phase. Kuehner

expects to obtain permanent financing from the Acme Insurance Co$.$ at an interest

rate of $12$ percent for $20$ years with a $2\mathrm{.}5$ percent prepaid loan fee and a $10-$year

call. Kuehner is expected to make monthly loan payments.Question $4(10$ points$)$

What will be the total loan amount that Kuehner must borrow $($including interest

carry$)?$

increase by $3\%$ per year thereafter. The appraised value of the property is current $$1$ million and

the lender is willing to make a $$900,000$ participation loan with a contract interest rate of $8\%.$

The loan will be amortized with monthly payments over a $20-$year term. In addition to the

regular mortgage payments, the lender will receive $50\%$ of the NOI in excess of $$100,000$ each

year until the loan is repaid. The lender will also receive $50\%$ 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 $10.$ Assume that the appraiser would estimate the value in

year $10$ by dividing the NOI for year $11$ by a $10\%$ capitalization rate.

Calculate the effect cost to the borrower $($to the lender$)$ of the participation loan assuming the

loan is held for $10$ years $($in decimals, rounded to $3$ digits$).$