(Hybrid Financing with a Lookback IRR) An investor acquires a property with expected operating cash flows (PBTCF) shown below. In addition to a senior permanent mortgage loan, the capital structure includes a mezzanine loan with the following features: $15 million loan, 10-year term, 1% upfront fee, 7% annual interest and annual payments. Payments are interest-only payments in years 1 through 5, Principal payments, in addition to interest, start in year 6 and are specified as a function of PBTCF as follows: year 6 = 10% of property operating PBTCF, year 7 = 20%, years 8, 9, & 10 = 25% of PBTCF. In addition, at the end of year 10, the investor must make a lump sum payment such that the mezz lender receives a 14% internal rate of return on the mezz loan investment. This lump sum includes the principal or balance owing on the loan plus a bonus to bump the expected total return to 14%. Based on this information and the property cash flows, show the expected loan cash flows and determine the size of the lump sum and the bonus that must be paid. [Hints: Answer this in Excel either using trial and error with the =IRR() function or alternatively using the Solver or Goal seek tool. Note that the mezz lenders initial time zero investment is $14.85 million because of the upfront 1% fee, though interest payments are based on the full $15 million principal amount]

	1	2	3	4	5	6	7	8	9	10
PBTCF	6,746	9,894	10,505	11,283	11,780	12,348	12,920	13,438	14,201	14,694