The real estate company Aviator Co. is considering purchasing an office building located at the downtown CBD. Based on the extensive market research, the current property is evaluated at $10 million with the following estimated net operating income from year 1 to year 5: Year NOI 1 $1,000,000.00 $1,030,000.00 $1,060,900.00 $1,092.727.00 $1,125,509.00 Aviator Co. now is negotiating with the lender for a convertible mortgage. The property will be financed with a $7.000.000 (70% of the property value) convertible mortgage that allows the lender to acquire 65% of the equity ownership in the property at the end of the fifth year. The loan will be amortized over 30 years with monthly payments. Property increases in value at 3% per year and the holding period is five year. We assume the interest rate on the loan to be 8.5% versus 10% for the conventional loan. The lender is willing to accept the lower interest rate in exchange for the conversion option. a) How much is the annual debt service? (5 points) b) What is the loan balance at the end of year 5? (5 points) c) What is the property price at the end of year 5? (5 points) d) Should the lender convert the loan balance to 65% of the equity ownership of the property? (5 points) e) Please list the before-tax cash flows of the property to the real estate company from year 0 to year 5.6 points) The real estate company Aviator Co. is considering purchasing an office building located at the downtown CBD. Based on the extensive market research, the current property is evaluated at $10 million with the following estimated net operating income from year 1 to year 5: Year NOI 1 $1,000,000.00 $1,030,000.00 $1,060,900.00 $1,092.727.00 $1,125,509.00 Aviator Co. now is negotiating with the lender for a convertible mortgage. The property will be financed with a $7.000.000 (70% of the property value) convertible mortgage that allows the lender to acquire 65% of the equity ownership in the property at the end of the fifth year. The loan will be amortized over 30 years with monthly payments. Property increases in value at 3% per year and the holding period is five year. We assume the interest rate on the loan to be 8.5% versus 10% for the conventional loan. The lender is willing to accept the lower interest rate in exchange for the conversion option. a) How much is the annual debt service? (5 points) b) What is the loan balance at the end of year 5? (5 points) c) What is the property price at the end of year 5? (5 points) d) Should the lender convert the loan balance to 65% of the equity ownership of the property? (5 points) e) Please list the before-tax cash flows of the property to the real estate company from year 0 to year 5.6 points)