A new loan pays off the old one. If the new loan is bigger, the extra goes back to the investors. If it is smaller, the investors put in the difference. Drag the loan and the valuation, and watch the middle bars.
Investors' return on the $7.0M they put in
Realized MOIC0.56x0.21x+0.35x
Unrealized MOIC1.57x1.91x−0.34x
Total MOIC2.13x2.13x+0.00x
Cash in hand versus still in the building
Today
2.13x
After
2.13x
Realized: cash in handUnrealized: still in the building, cash only when it sells
Investors' return on the $7.0M they put in
Realized MOIC0.56x0.21x+0.35x
Unrealized MOIC1.57x1.91x−0.34x
Total MOIC2.13x2.13x+0.00x
TodayWorth $26.0M, owes $12.6M, equity $13.4M
The new loan, at closingOne loan of $15.0M, used two ways
After the refiWorth $26.0M, owes $15.0M, equity $11.0M
$0$10M$20M$30M
Old loan balance$12.6MEquity$13.4M
New loan$15.0M
Pays off the old loan$12.6M
New loan balance$15.0MEquity$11.0M
Old loan $12.6MNew loan $15.0MWorth $26.0M
Value$26.0M
Equity$13.4M
Old loan balance$12.6M
Where it comes from
New loan$15.0M
Where it goes
Sent to the investors$2.4M
Pays off the old loan$12.6M
Value$26.0M
Equity$11.0M
New loan balance$15.0M
Swipe sideways to see all three bars.
TodayWorth $26.0M, equity $13.4M
Old loan balance$12.6MEquity$13.4M
The new loan, at closing$15.0M loan, $2.4M out
Where it comes from
New loan$15.0M
Where it goes
Pays off the old loan$12.6M
After the refiOwes $15.0M, equity $11.0M
New loan balance$15.0MEquity$11.0M
$0$10M$20M$30M
LoanEquitySent to the investorsNew cash from investors
Old loan $12.6MNew loan $15.0MWorth $26.0M
$26.0M+$6.0M since the $20.0M purchase
$10.0M$36.0M
$15.0M+$2.4M against the $12.6M old balance
$8.0M$26.0M: the building's whole value
What just happened
The investors get $2.4M back at closing. They have now realized 0.56x of their money and still have 1.57x in the building: 2.13x in all, the same as before. The refi moved money out of the building and into their pockets without creating any, and the loan is bigger than before.
Relevant formulas
Equity todayvalue minus the old loan$26.0M − $12.6M = $13.4M
Cash to the investorsnew loan minus the old loan$15.0M − $12.6M = $2.4M
Equity aftervalue minus the new loan$26.0M − $15.0M = $11.0M
Realized MOICcash already distributed plus the cash out, divided by what the investors put in($1.5M + $2.4M) ÷ $7.0M = 0.56x
Unrealized MOICequity after, divided by what the investors put in$11.0M ÷ $7.0M = 1.57x
Total MOICrealized plus unrealized0.56x + 1.57x = 2.13x
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