Assume that you are looking to refinance a commercial property that you purchased 5 years ago for
Question:
Assume that you are looking to refinance a commercial property that you purchased 5 years ago for $25,000,000. The original loan was a traditional 30-year amortization, with a 5-year term (balloon note). It was a constant fixed-payment loan with an 80% LTV (Loan-To-Value) ratio, and a 5% interest rate with monthly payments and a required DSCR (Debt Service Coverage Ratio) of 1.20. The new loan will be a 65% LTV with a 7.5% interest rate and a required DSCR of 1.40. The new loan will be a 25-year amortization, with a 5-year term.
What was the original loan amount 5-years ago?
What was the original monthly loan payment 5-years ago?
What is the original loan balance after 5-years of payments?
What was the required annual NOI on the original loan using required DSCR?
Assume that the property is an absolute NNN (Triple Net) lease with 50,000 square feet of leasable space, how much annual rent per square foot would be required for the original loan?
What is the new loan amount for the refinancing using the new LTV requirement assuming the property is now worth $5,000,000 less than 5-years ago? (Ignore original outstanding loan balance.)
What is the new monthly loan payment for the refinancing?
What is the new required annual NOI on the new loan after refinancing?
Assume that the property is an absolute NNN (Triple Net) lease with 50,000 square feet of leasable space, how much annual rent per square foot would be required for the new loan?
How much new equity (additional down payment) would you need for this refinancing to take place? (Hint: Examine original loan balance after 5-years compared to new loan requirements.)
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay