Key Terms

Construction loan

20-year Commercial Mortgage

Availability

Upon contract signing

After 3 steps are fulfilled:

·      Complete the construction,

·      Receive occupancy permit;

·      Sell Main Street and Shenandoah Road assets to minimize mortgage.

Interest rate

5.5% is floor. Actual rate is prime (currently 3.25%) plus 1.

5.5% is floor.  Actual rate is 3.25% plus 5 year Treasury Bond rate (currently 2.27%).  Reset every 5 years. Maximum 2.0 percentage point change at each reset.

Term

Up to 24 months

20 years

Payment cycle

Monthly

Monthly

Monthly payment

Outstanding loan balance X daily interest rate (5.5%/365) X number of days in month

Fixed monthly payment based on 20-year amortization schedule.

Monthly payment example

On a $1,000,000 outstanding loan balance for the month of January 2011: 1,000,000 X 5.5/365 X 31= $4671

On a $750,000 mortgage at 6%: $5,373

Prepayment

NA

No prepayment penalty.  With prepayments, we can choose to keep the current monthly payment rate and pay off the loan faster, or recast the loan with the new lower principal and reduce the monthly payments.