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Dean Hotel Investments, an S-corporation, has identified a potential investment property near a major New England airport. The 302-room Blackstone Hotel is a recently DE franchised upscale hotel asset that has been lender-owned for several years and fallen on hard times. Dean Hotel Investments is proposing converting the independent hotel to a major limited-service brand, which would provide brand recognition and an increased customer base. The property has been on the market for two years and the current asking price is $8,000,000, which is well below comparable sales in the area. The airport market has seen a slight drop in occupancy and ADR over the past couple of years due to the struggling economy. Experts have estimated that as soon as the economy begins to rebound, so will occupancy and ADR. Dean Hotel Investments plans on converting the property to a limited-service brand, thereby creating the market leader in a price-sensitive marketplace. The planned renovations and reflagging the investment should result in a total project cost of $11,535,000. Dean Hotel Investments has identified an equity investor willing to invest 35% of the total project cost. Dean has also found a lender, Star Bank, willing to provide 50% of the project cost, and a second lender, Prize Bank, to provide a mezzanine loan for the remaining 15%. The following terms were offered by Star Bank: â–  Interest Rate: 7% â–  Loan Term: 10 â–  Points: 4 points up front â–  Collateral: Hotel owned by Dean Hotel Investments The following terms were offered by Prize Bank: â–  Interest Rate: 12% â–  Loan Term: 5 â–  Points: 2 points up front â–  Collateral: Subordinated claim of the Blackstone Hotel 1. Calculate the amount of the loan from Star Bank, payment amount, and effective interest rate. 2. Calculate the amount of the loan from Prize Bank, payment amount, and effective interest rate. 3. Analyze the terms offered by both banks. If you were Dean Hotel Investments, what terms would you negotiate, and why?