In: Finance
You are developing a 100,000 sqft industrial building. The bank is financing 60% of the total project cost, interest-only at 4%, while the balance is funded by the MP. The draw schedule is as follows
July 2020: 2.0M
August 2020 - March 2021: $1.0M/month
The total budget is $10.0M
Assume the construction interest for a given month is equal to the monthly interest rate times the prior month outstanding balance plus current month draw, for example, October interest = monthly rate*(loan balance in September + October draw). The construction interest is accrued through June 30, 2021. What is the estimate of total construction interest paid by capital partners?
Date | Loan Balance | Draw | Interest | |||
Jun-20 | $ - | Monthly Interest Rate | 0.3333% | |||
Jul-20 | $ 2,000,000.00 | $ 2,000,000.00 | $ 6,666.67 | |||
Aug-20 | $ 3,000,000.00 | $ 1,000,000.00 | $ 10,000.00 | |||
Sep-20 | $ 4,000,000.00 | $ 1,000,000.00 | $ 13,333.33 | |||
Oct-20 | $ 5,000,000.00 | $ 1,000,000.00 | $ 16,666.67 | |||
Nov-20 | $ 6,000,000.00 | $ 1,000,000.00 | $ 20,000.00 | |||
Dec-20 | $ 7,000,000.00 | $ 1,000,000.00 | $ 23,333.33 | |||
Jan-21 | $ 8,000,000.00 | $ 1,000,000.00 | $ 26,666.67 | |||
Feb-21 | $ 9,000,000.00 | $ 1,000,000.00 | $ 30,000.00 | |||
Mar-21 | $ 10,000,000.00 | $ 1,000,000.00 | $ 33,333.33 | |||
Total Interest paid by Capital partners | $ 180,000.00 |