You, the investor partner, and a sponsoring partner are acquiring a landmark office building in NYC for $800,000,000. The building is 1,300,000sf and is substantially leased. The rent roll is presented on the attached. A banker is proposing a $600,000,000 first mortgage, 10-year term, with a coupon of 4.25%, monthly pay based on a fully amortizing 30-year repayment. The loan is locked for the first five years. Prepayment is only permitted commencing month 61 with a yield maintenance penalty.

In addition to the minimum rents presented, the following is additional information to underwrite the cash flow in Year 1 of the building.

• Recoveries are equal to 20% of the minimum rents
• Other income is 5% of minimum rents
• A vacancy/credit loss of 7.5% is applied to TOTAL INCOME
• Expenses are underwritten at $22.00psf
• TIs reserves are underwritten at $4.00psf per year
• LCs reserves are underwritten at $1.50psf per year
• Minimum rents grow at 2% per year after Year 1
• Other income is expected to grow at 3% per year after Year 1
• Expenses are expected to grow at 2% per year after Year 1

As indicated above, you own this building with a sponsoring partner. After this financing is complete, the partners total equity will be $200,000,000, 90% of which was provided by the investor partner. Because of this, the investor partner receives a cumulative preferred return of 8%. After the preferred return is paid, cash flow is split 50/50.

Finally assume the building is sold at the end of year 5 based on Year 6 NOI capped at 6%. Assume selling expenses are 2% of the reversion price. Finally, assume reinvestment yields are 3%.

Answer the following (3 points each)

1. Compute the Net Cash Flow from the property for Years 1 to 5.
2. Determine the amount of Yield Maintenance.
3. Determine the Net Proceeds from the sale.
4. What is the amount of Tier I distribution to the Investor Partner in Year 1?

What is the total distribution to the Investor Partner in Year 1?