I'm hoping someone can help me with a development model I'm working on for a real estate modeling class I'm taking. Just have a few questions that are really frustrating me:
Hard costs are 90 MM. Soft costs are 10 MM. Project costs are 100MM in total. Project will be completed at 36 months. Sale will be at 60 months. Split is GP/LP 30%/70%
(1) There is short term debt of 75% at 6% yr, amortized over 5 years with an I/O period of 3 years. There is long term debt at 80% cost, at 5% yr, amortized over 30 years. Am I assuming correctly that the short term debt is the construction loan? If this is the case, we'd pay off the entirety of the construction loan WITH THE LONG TERM LOAN at the point of refinance, the end of month 36, correct?
(2) The long term debt is 80% of cost. Does this 80% cost mean 80% of the entire cost of project (100 MM)? If so, we'd pay the entirety of the original loan (75MM), and have 5MM remaining, so does this 5 MM go towards the cash flow back to investors for that month, month 36? Additionally, how does this refi play into the cash flows for my waterfall model? This part of the model is really confusing me.
Would really appreciate the help! This is my first time attempt at a development model and waterfalls.