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May 31, 2024
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Generally the extension term for construction loans has some significant hurdles it needs to hit to be exercise-able. Usually the project needs to be complete with a certain % of units leased (in MF) or hitting a certain LTV and DSCR. Generally construction loan extensions are designed on the basis that you'll be done with the construction and for whatever reason need some time to get your perm financing. There is also more often than not an amortizing component to construction loan extension terms.
If you already new the above then in terms of modeling there's not much to it. You'll need to make an assumption about what LIBOR will be (like you have to for the original term of you construction loan) and plug in your extension fee and if applicable the amort.
If you have any specific questions I'll be happy to reply.
Agree with the above. Not that much to it other than assuming 4 or 5 year term vs. 3 year initial term, making sure you hit the extension tests, modeling in the extension fees, and make sure the loan starts amortizing down if that's how it's structured.
Got it. Thanks for the responses. In terms of modeling it, would you create an additional line item for the extension fees and some sort of =IF/THEN statement or just kind of wrap it into the initial debt service line item?
Where exactly are you getting tripped up? Just change whatever cell is driving your debt schedule...so if it's a 3 year term, but you want to underwrite an extension, change the 3 to a 4.
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