You are developing a 100,000 sqft industrial building. The bank is financing 60% of the total...

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?

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago

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