A property has first year NOI of $1.5 million. NOI grows at 7% during the next two years. In year four, NOI goes drops 50% due to a lost tenant. You are very lucky and replace the tenant. Year five...

A property has first year NOI of $1.5 million. NOI grows at 7% during the next two years. In year four, NOI goes drops 50% due to a lost tenant. You are very lucky and replace the tenant. Year five NOI is 4X year four. (continues below…)

• What is year 5 NOI?

continue…You have a $10 million mortgage on this property, at 5% interest, amortization of twenty years. There are two partners who have invested $3 million total in the property. Partner A is the operator and has invested 20%. Partner B, the finance partner has invested 80%.  The partners share the cash flow in the following manner:

8% minimum return, pro rata to the amount of investment. The finance partner has a preference. In return for giving the finance partner a preference, the operating partner is entitled to twice their pro rata share of any excess cashflow.

• How much does partner A receive over the five years?


• How much does partner B receive over the next five years?