Modeling Construction Loan Extension

Like the title, how do you model a loan extension (3+1+1 or 4+1)? I've never had to do this before and there is an extension fee attached to the option. Anybody able to give a quick and dirty explanation on how this is to be structured?

 
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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.

 

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