Scenario 1: A developer is considering developing a Class A office building. The developers preliminary estimate of value is $2-million. Initial discussions with lenders indicate that loans are available for this type of property at 9 percent interest and 30-year amortization periods, with monthly payments. Lenders have further indicated they are using a 1.2 debt coverage ratio or a 75 percent loan to value for Class A office buildings, whichever equals the lower loan amount. Recent sales for Class A office buildings have indicated that cap rates are in the 9.5 percent range. The developer's forecast of a stabilized NOI is $190,000, which reflects a 4 percent vacancy and $102,800 in operating expenses. 1. Using the owner's preliminary forecast, and the lender's underwriting criteria, what is the maximum loan amount that the developer can expect? maximum loan amount = $ Scenario 2: One of the lenders who is receiving the preliminary application package expressed an interest in the project but explained that their underwriting guidelines require a minimum 7 percent vacancy allowance. The lender asks the developer if this would be a dealbreaker. 2. After adjusting the NOI to reflect the increased vacancy, what is the maximum loan which the developer can now expect? (assume the increase in vacancy will not change or impact the operating expenses) maximum loan amount = $ 3. What information would you need about the borrower to determine if this loan would be acceptable