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can figure out who owns it ○ ● all these things make it desirable for securing credit/advances ● Disadvantages ○ Not very fungible ■ grain is grain -- you dont care if you get a bushel of this grain or that ■ RE is unique ○ Not easily valued ■ no way to know what the ‘market’ is really ■ each piece is unique ○ can’t move it -- cant send it to where it can be sold for better prices ■ while this can be an advantage -- personalty can dissapear overnight and w/e it secures can be at risk ○ liquidity issue ○ can’t use it for all w/e you want to use it for How do we know about the bundle of sticks -- as a potential purchaser lender ● to convey/transfer -- you need to own it, you can only transfer what you own. If you don’t have all the sticks, you can only transfer the sticks you have ● look to prior owners of the prop for the time they owned it ○ has to be in writing, and recorded to be an enforceable right as against a BPV or leinholder ● NC -- race CLosing ● lender typically wants a survey ○ zoning, restrictive covenants, is everything on their land? ○ Easement -- across rear lot line ■ say, what easement is that? ■ flip the packet and talk to them about a Title insurance comittment ■ Commitment to issue title insurance ● when closes -- we’ll insure that they have good title to the property ● also going to insure that the bank has a lien on the property which is a first lien on the prop for 144k ○ like survey, Tit Ins isnt a requirement, but lenders want someone to tell them and back them up that they have a first lien on the property ○ I can’t tell the difference between a forged and a non-forged document ■ i can’t tell who all the children were, who may have/had inheritence right ■ there are a list of about 18 things I just can’t tell you ■ I can’t tell you that the surveyor did the correct job, or didnt make even the smallest mistake ● lender is in the process of putting together a package once the loan closes so taht they can sell the loan to someone else
package is the only way you can make it economically possible for a third party to evaluate the loan exceptions ○ taxes due and payable ○ restrictions of record appearing at --■ currently not violated future violation will not cause a forfeiture HUD-1 ○ Second page -- 2 colums on right hand side -- paid from the bowers fund at settlement ■ paid from sellers fund at settlement ○ itemizing closing costs ■ commission to be paid to brokers ■ less deposit retain ● when put under K, deposit put down, held by listing (seller) broker ● listing broker simply retains ○ fees paid in connection with the loan ■ loan origination fee ● fee charged by bank for originating the loan, finance charge, bank collects and it helps them with admin cost of orgining the loan ■ appraisal fee ● POC -- Paid outside closing ● get rid of market risk ○ if you’re loaning 170, want to make sure you’re at least equally collateralized if not over-collateralized ● can’t insure the market risk -- appraiser says, in my oppinion ■ credit report fee ● dealt with the market riskt ● but i dont want to loan to a dead beat, i do NOT want to have to foreclose on a loan ● I’m not getting hte benefit of my bargain\ ■ tax service fee ● want to make sure that the taxes get paid and if they’re not that they send the bill to them ● Gov’t trumps all ○ Tax lien is first in priority always ■ items req’d by lender to be paid in advance ● int in advance at this closing -- charged so that when the first regular payment comes due on the loan, it’ll be a regular payment of the same amount everymonth towards amortizing it, in order to do that, with int being paid in arrears (being paid for after you’ve had the use of it) ● mortgage insurance premium ○ allowed to be charge on highrisk loan ■ borrower who has a questionable past
loaning a large amount of the purchase price ● LTV amount is high ○ no equity cushion ○ when/if they ■ need to foreclose -- they’re covered for their deficiency if any ● reserves ○ budgeting for the borrower ○ we got bills coming due soon (insurance bills and such) -we need to know you’re gonna pay them ■ if you dont pay the insurance and the house burns down we’re effed ■ if you dont pay your taxes and they foreclose, we’re effefed ○ you’re gonna pay a little extra every month, and we’re gonna put that in an account ■ no interest ● aggregate adjustment ○ under applicable fed lending guidelines -- banks required to reduce the escrows by an amount to take into an account that those two bills do not come due on the same day ○ only have to escrow enough for each when they come due ■ common funds, they’re pooled ■ don’t have to ahve enough money in the account to pay both bills at the same time ■ fees to the atty ● document prep ○ seller pays for prepping the deed ● repping the buying in connection with closing the loan/searing the title ○ prorate taxes for the year ■ seller is responsible for the time they own the property ■ credit to the buyer and a debit against the seller, b/c the buyer is going to be responsible for paying all the taxes when they come in 170k price, 3k of closing cost ○ credit for taxes ○ new loan of 144 ○ 147238- 173 = we need to write a check for some 30k if we wanna buy this house monthly payment statement ○ princ and int ○ tax escrow ○ hazard insurance
nope no deal? ○ illustrates ■ four blocks at top.saying its 143k.negative view. sin ○ would transfer interest for a loan ○ the income from the land was tantamount to interest ○ could buy it back ● problems ○ what if person wanted borrow money for improving property ■ particularly didnt work well with the concept that you would lose the property ○ we’ll take title the property.APR 7. expenses and costs ■ misled in what they were paying in financing charges ■ thought they were getting . do you really think this late in the game they’re gonna say -.1 ○ everybody has to disclose how much money lenders are making so that they can understand how much you’re paying in interest ■ every bank has to use the same form ○ in reality ■ all my furniture is in a truck coming from ATL to here.law TLA ○ advertising really low interest rates ■ but there were all kinds of fees. the loan is for 145k. ● the 2k got paid in the origination fee. but i’m sending them back 2 ● the APR is yielding more ○ still getting really 6 ⅞ ● 170 house costing you 300 some odd dollars History ● usury -.● ○ no flood insurance cuz you’re not int he flood zone ○ mortgage insurance truth in lending disclosure statement ○ 70s -. you pay rent or w/e but stay on the land. we’re looking at the loan and we’re saying that the loan on the note rate is 6.426 ● amount financed -. you lose your right to pay back for the property ○ little distressing if you tookt he money and you built the castle and your wagon looses a wheel on the way to pay the dude back and you lost your castle ■ lost your equity ○ “Law Day” ■ specific day by when all debts had to be paid ○ people went to courts of equity .7/8 percent ■ TLA -. bank is really only parting with 142k ● ive got check for 145k. then buy it back plus a little extra ○ day certain by which you have to pay back by the full amount of hte money ■ if you dont.05 but really getting .
what you’re really talking about is consequential damages ■ but that’s wishywashy ○ but if you say hey. if you dont i’m gonna have to hire a cab.obviously ○ not going to enforce an unenforceable obligation just b/c its in a mortgage ■ can’t have a mortgage to enforce a gift ○ can’t secure a pledge to the Nature preserve with a mortgage on the property ■ ■ . money split up between those of whom are owed dd ■ fair still -. when they’re prepared to pay it back and can pay it back.● ● seeking fairness you know -.proceeds are divided. you have to figure out how to monitize it ○ don’t have to know how much money you are owed on date mortage given ■ what’s critical is how much is due when you’re about to foreclose ■ might have an obligation that today you dont know how much is owed but when defautl takes place and you can calculate the amount.really not fair that if someone misses this payment by a day.proceeds -. then that is sufficiently monitized and you can secure that ○ if the bank agrees to loan you enough money to build the house ■ up to x. they don’t know from the outset how much that’s gonna be ○ can’t have a penalty clause -. and if its worth more than the loan then my equity is preserved now we have the certainty of sale and a protection of the borrower’s equity ○ borrower has right of redemption until property is sold ○ Can always pay back until sold off ■ we’re not going to kick people off the prop or deprive them of their prop w/o giving them the opp to pay off what is due on the loan in order to get the property back What can mortgages secure ○ have to be reducible to monitary amount ○ sale -.arguably the property is sold for what its worth. have to know what’s owed ■ its a financial transaction ○ you can monitize damn near anything ○ Go back to contracts -. for them to lose the property ○ became uncertain if you were the person who had loaned the money when the property became yours ■ I need a certain date ■ birthed is the mortgage ● in many JD -. and you’re gonna have to pay me back ■ if you want it to be secured by a mortgage.lien on the property ● in order to realize the benefits you have to foreclose ■ before this concept there was no ‘foreclosure’ of the prop b/c the Lended already owned the property ○ whoever buys the prop at the F’sale gets title.
that’s a penalty clause. take care of it if you have an obligation that’s clearly a monetary obligation ○ agreed to pay somebody 500 a month for the next five years. but this property is released want to get refi from state credit union on small piece ○ can get BBT to subordinate to the 500 k DoT held by state credit union They get the same quality of title that I had when the mortgage was given ○ when they foreclose ont he property. hey. you’re not buying from Me. when I buy the house I also enter a loan with BBT. you dont care what I did after that. whoever buys at that foreclosure sale.saying the mort hasnt been paid off -. there’s stilla cloud on the title ○ you’re not going to say. released. or subordinated to something ○ release ■ -.he still owes me money. pay it by the first of each month ○ that obligation is secured by a mortgage ■ if youre the party expecting the 500. that’s what’s owed in order to redeem ■ Hold a sale to SATISFY WHAT IS OWED ○ can only foreclose once ■ foreclosure wipes out the Mort/DoT under it ■ the buyer takes the prop free and clear ○ acceleration clause ■ balance of the obligation becomes immediately due and payable upon the event of default If you acquire property and record it.● ● ● ● ● ● ● ● practically speaking -. you’re buying from BBT ■ If BBT entered into subordination ● you’d find that under BBT in the index ● I (oliver) can’t do anything to affect BBT’s title Title theory . buys the property with the same title that is being sold at the foreclosure BBT forecloses ○ the state credit union DoT is cut off Owner originally ○ conveyed to Oliver (me) ■ I give DoT to BBT ● if you get from BBT. you acquire it free and clear of the restriction regardless of the fact that the owner may have signed that restriction before selling you the prop ○ I go buy a house. you’re only foreclosing on 500 bucks. and acquire it before the restriction is recorded.however ○ if you’re trying to sell your home and buyers do a title search and see you owe 1000 bucks for not picking up your old roommate. its non enforceable ○ the buyers are gonna say. borrow money from BBT to buy the hosue. DoT recorded at same time Deed is recorded ■ thereon my proper is encumbered by the DoT until its satsified.
but there’s an inference that that might not be a valid foreclosure sale. judge has to order the forclosure sale ■ 6 months -2 years+ availability in institutionalizing a credit is a phenomenon of the last 50 years or so ○ due on demand. ○ ○ ● ● ● Dragnet ○ this secure the loans from Oliver to the Bank in the amount of 500k AND any other loan Mr.● ● ● ● Legal title to land transferred to the trustee with BBT as beneficiary property sold by trustuee ■ power of sale ■ statutory provision.property would be sold by Lien holder/bank ■ lender can bid. discovery. 45-60 days ○ makes it easier for bank to buy at the foreclosure sale Lein theory ○ if mortgage -. due on maturity ○ due on sale payment in arrears ■ Payment in arrears is a term describing payments made after a service has been provided.any other property acquired by Oliver ■ AACOLL BOth make life difficult for me ○ I want to know what you owe and what all the property secures ○ Title search -. you should have rerecorded ○ People have to be able to rely on the record AACOLL ○ Even a little bit more insidious ■ what if I were to subsequently acquire a house at the beach ○ getting ready to sell the house ■ they do a title search . In this case use of the word "arrears" does not imply any breach. if you wanted it to secure more. a little more subject to attack ○ bring action on the mortgage ■ have a lawsuit. special proceeding. has to be in DoT. Oliver may ever get from the Bank ■ Any other loan he owes the bank alread or may ever owe the bank ○ obviously describes the property you used as collateral and seen in schedule a of DoT ○ DoT could also say -.look at the mortgage ■ I know theres a 500k that needs to be paid off ■ I want to finish the basement in my house ● 500K mortgage ● probably worht 625 after finish the basement ○ if it says plus whatever else Oliver owes ■ you dont know how much that mortgage is for Drag not looked upon with great favor ○ especialy not looked upon favorable from the K’ter comes in and says I relied on the 500k.
i’llto take an equity position in the property ■ I want to get paid back before they do ○ maybe can avoid being involved in a Bruptcy of the borrower doing this ○ prevent any junior liens on the property ■ I want title.they’re not going to be seeing a DoT recorded in Orange County NC ■ even if I buy it in hillsborough. after the Improvements to the property ○ when I give BBT a DoT. or lien creditors ■ may be enforceable as between me and the bank ● ■ wouldnt have the benefit relating back.● when they search the beach -. a title searcher searing the chain of title on the second house. I dont know about that other lien ■ not enforceable as to third party BPV. its a loan ○ deed in escrow ■ i’ll go record it if you don’t pay me back ○ both the absolute deed and deed in escrow are going to be looked at with great disfavor if you went into court and challenged the title of the the person who title through this ■ especially when there are things/documents evidencing both parities intentions and ideas about the transaction ■ sale transaction/ . doesnt have that priority -. bought later. and I’ll give you the title back when you pay me all the money you owe me ■ you can dress this up any way you want ● if its a loan.the property was after acquired. you don’t have a special proceed foreclosure infront of the clerk ○ get around anti-deficiency ● interest ○ a whole bunch of usury law/interest rate limitations on mortgages ○ why don’t we just not do a mortgatge? ● Allow appreciation/participation/co-ownership in prop ○ well I dont really want to loan him the money. and then improve the basement ○ They have alien on that ■ its part of hte real property that relates back to when their lien was first filed ● things that are not mortgages ● Mortgage substitutes ○ ways people try to have something that acts like a mortgage but avoid the foreclosure process ■ in many JD. if I bought it after buying the other house ● if it says all the property I may ever own in NC.
may find people trying to get around mortgage taxes ○ if you want to record a mort. i won’t transfer an interest whole or in party int he property to anyone else ● does htis mean you cant get a lien? no ○ but you damn werll dont wanna be the party who took a lien on the property in the face of this paper on the record that says the party you took a lien from was incapable of transfering that interest ● installment land contract ○ seller of the propery sells the prop but retains title to the prop until they receive the full purchase price ○ if you make the installment payments on the property on time and when you pay me all of it. and I’m inclined to treat you as an unsecured creditor and you can sue and get a Judgment Lien ■ mort subs that aren’t inherenly bad ● negative covenant ○ as long as I owe so and so money. i’ll give you title ○ problerms ■ owner goes Bankrupt ■ owner puts a mortgage on the property ■ either wont or can’t deliver the deed to me when it comes time for him to do so ● number of cases in NC. theres a tax to have it recorded What happens? ● if I loan the 100k and get the deed -. basically ○ why would borrower agree? ■ Have to ● In some JD -.ungrateful borrower ○ you can’t keep the deed to my house ○ ○ court’s gonna say. this is a disguised mortgage and you have a equitable lein ■ you can go through a judicial lien at best ■ but you tried to get around this act of redemption and all other rights.tax assessor says worth 500k ○ but I sold it to him for 50k and can buy it back for 60 ○ does that look like a loan or an outright sale ■ I gave him a deed to my house. If you sold the hosue. treated as equitable mortgages ○ have to be treated as such ■ require people to give you your equity of redemption ● . would you still be paying hte expenses? ● btw i took the 100k I ‘sold’ the house for and built a garage ● people trying to avoid the borrower’s rights. and never paid any rent ■ I paid all the expenses. lived there the whole time.
● ● many JD ○ require to be recorded ○ upon recordation. provide rights to buyer Trustee under DoT ○ doesnt have a really fiduciary duties as you think of them ○ Lender can be TTee -. but an opinion nonetheless ● 3-4 blocks from durham exprssway ○ small house on lot of 2. its always about someone’s opinion ○ we’re gonna talk about cap rates and what not but at the end of hte day its just an opinion. which may make it worth a lot more ○ best and highest use doesnt necessarily mean its constrained to its current use ● ● UNDERSTAND ○ when you start talking a bout whether its a good deal or not its a subjective opinon ○ comparison apprach ■ similar situated similarly constructed sell for? ○ comperables are starting to skew ■ if when the guy buys the house on franklin for a million .and then sub it outf protecting against risk Market risk Lender POV -.other sources of repayment other than the property Borrower/purchaser ● want tho loan the most they can and What makes this a good investment for borrower or what makes this good collateral for a loan is you’re the lender? ● have to understand the appraisal ● should appraise it at its HIGHEST and BEST USe ○ under the circumstances that we find it -.what’s the value of the property ● what is highest and best use? ○ No matter how we try to dress this pig up.how to protec against ● Lender wants to minimize amount loaned ○ dont want to loan money on project that arent going to be successful and buyers and investors are generally of the same mindset ● want to get paid back first on the returns of the property ● credit enhances -.5 acres ○ not in a great neighborhood ■ house isnt in best condition ■ that appraiser has made the assumption that highest and best use of the property is to have a small house in east durham ■ but zoning might allow some other sort of use. its a based opinion.
operating expenses ONLY ■ does not take into account the debt service ○ EBITDA ■ earnings before int. Since interest is paid before income tax is calculated.● ● ● ● ● well above what any house had been sold for ■ that’s ○ how do you know if comparable sales you’re seeing really reflect the market place or are they just a blip ○ still a valid approach ■ where you have willing buyers willing sellers and neither under a compulsion to buy other valuation methods Replacement costs ○ I want to build this exact house in a comparable spot ■ then adjust for age/use ■ if i know what a new one costs. principal payments on debt ■ The theory is that it measures the cash earnings that can be used to pay interest and repay the principal.you can’t replace them ■ aren’t a lot of lots there on east franklin street Income approach ○ need a property taht generates income or that COULD generate income ■ if could -. the debtholder can ignore taxes. amortization.gonna have to be able to make some sort of realistic assumptions about what kind of income could be made ○ arent gonna see it except in commercial context really TERMS ○ Cash Flow ■ take the revenue which is generated by the property (typically rents paid to occupy the property) subtracting the operating expense that the owner of hte property has to pay ■ if you had a triple net /absolute net lease then you would have to subtract expense. so i could replace it with a new one. They are not interested in whether the business can .it means annually unless stated otherwise ● have to have annuallized ○ NOI ■ rents revenues . tax. what is this one’s value in comparison to that ○ problem ■ alot of things -. depreciation. but if he doesnt ■ then subtract the debt service (principle and interest) ■ possible to have a negative cash flow ● have to ‘feed the property’ ■ RE generally deals in annual numbers ● tennant is paying rent at 15/ft -.
put 250k in ■ take the cashflow as a ratio to the amount you put in tells you a return on your equity investment ■ you’re getting that much money back on your equity -.that’s how much money I have coming out of the project ○ can tells you what your return is on the money you have invested ○ bought for 1MM.replace its assets when they wear out.1 on my money ● I get. borrowed 750k.and your rents are covering that ■ you’re using somebody else’s money and getting a return on it ● its not your money and you didn’t pay for it ○ idea that I can take someone else’s money and leverage it into a return for me ■ predominately borrowed money ■ could also find an investor who rather than loaning you money would give you an equity investment and would get a fixed return ■ preferred return of . therefore can ignore capital amortization and depreciation. ● ● ● ● ● Cashflow near and dear to owner’s heart -. after all the expenses are paid. .are you making money? ○ leverage ■ you’re paying 6 % on the banks money -.1 of my investment before you get anything and afterwhich we’ll split it Cash flow show return on Equity NOI will show you what your return on your costs is ○ can establish a ratio between NOI and what I paid for the property ○ on one level.5-8% ■ I can divide that by 7 ¾ % and I can get an Idea ● it reduces down to cost and NOI ● doesnt matter what their debt or their size ■ it tells you what people thought about that as an investment ● and it allows you to compare investsments that may not otherwise have all the same qualities . not very meaningful info ■ it has nothing to do with your debts ○ lets you start making comparisons with OTHER property w/o worrying about what other people’s debt are NOI/ cost or price ○ gives you a Capitalization rate find an appraiser ○ i’m trying to figure out what an existing office building is worth ○ I’m going to look at comparable office buildings and what they sold for ■ I can also find out what the NOI is for those other buildings with respect to that ■ I can start coming up with what the cap rate was with respect to those office buildings ■ when I compared the cap rates and they were between 7.
● ● ● Got an office ■ go to a bank get the to cover . Given the inefficiency of real estate markets.cost recovery ● . The debt is inflated like a balloon due to Compound Interest accumulating on the large sum. are usually compared to ensure that estimated revenue is being properly valued.5 =19% return on your investment ROE return on equity ● what if .x of building leased by enron -○ gone ○ went from 475 postive cash flow to 75k positve cash flow -.8 mill op expenses -.9 leased at 20/ft op expens at 6/ft gross rev at 1.75 ■ go to some friends and get you to cover the other . Depreciation ○ taxes -. multiple approaches are generally preferred when valuing a real estate asset. location and economic characteristics.2MM NOI/10MM cost ○ .not sleeping so well at night ● 1.2 vacant ● so if it increases that’s money straight to the bottom line ○ take the cap rate and compare it to your other investments ■ mathematically can come out with a range of when I go talk to the bank and my investment buddies and say compare this with your other investment opportunities ○ we’re not still talking apples to apples ○ Balloon payment ● The term balloon payment arises because if you hold back most of a debt and pay it only towards the end of the agreement.600k debt services of 725 a year postive cash flow of 475K ● invested 2. and particularly for "pure" income properties.25 ■ the office is already covering and its .12 cap rate cap rate ● Advantage ○ One advantage of capitalization rate valuation is that it is separate from a "marketcomparables" approach to anappraisal (which compares 3 valuations: what other similar properties have sold for based on a comparison of physical. both those last payments and the total amount repaid are much larger.475/2. actual replacement cost to re-build the structure in addition to the cost of the land and capitalization rates).5M loan) ● . This is more technically known as partial amortization. Capitalization rates for similar properties. 100k sqft ffice .5M (7.
1031 exchange -.valuing prop ● question .like kind ○ basis goes with you.owner occupied industrial. nothing IRR ○ internal rate of return ○ return based on tax situation.it just sits there ■ reduces your basis ○ deduct the interest you pay on the loan as an expense 68k tax free by 2008 ○ that amount of interest that you’re paying is less ○ going to paying taxes on more than you’re getting in cash flow ○ amortization will eventually beat depreciation ○ paying taxes on the amount you’re reducing the principle of the loan basically why people dont own buildings forever ○ this isnt as much fun ○ what can you do? ■ sell it and try and do it with another property ■ refinance int will go up. the more it means to you ○ what the overall yield can be based on the overall return on the investment ■ your put your 2.you’re talking about what it ‘could be worth’ ○ market risk -.land ○ fertile field -.5 in and you’re getting it back pretty quickly ■ and once you’re getting it back and you’re still getting a return substantial benefits associated with depreciation and and interest deduction ○ want to structure your investment to take advantage of it ○ want it to be a passthrough so that you can get the benefit of the taxes ■ active investor (have to be) comparable-. then you have the opportunity to reinvest it in somethingelse ■ the quicker you get your money back.● ● ● ● ● ● ● ● ● we think they ware out ■ can deduct (recover) from w/e income you ahve that depreciable portion of the cost ○ Improvements to RE -.for resi can depri for 28. pay taxes.typically resi replacement-.5 ■ non resi over 39.5 ■ if you so choose ■ so 1/39 of the value ○ land doesnt depreciate . its carries over ○ no realization event here. uniqueness of prop is prob not a large factor least susceptible of being valued appropriately by the appraisal -. leverage and everything else ○ net return divided by net investment taking into account the timing of your investment ○ if you get your money back quicker. you dont sell.
they get paid back first and dont care if they have to sell iit quick for 8 ■ they get theirs ■ dont give a shit about your money ● assignment of rents ● rights to have receiver appointed ● want some sort of credit enhancement ○ might look at borrower and say youve got a tennant who has .○ how is it that lenders are willing to let leverage take place ○ why loaning at 7. i’m only on hook for 20% (investment precentage or something) committment letter ● perm commit to make the loan as soon as posible ○ gonna enhance your ability to go get the construction loan ● looking for loan with fixed cost.find some partners to go in with you Market/value risk ● lender will want to be paid back first ○ small LTV as possible ○ credit enhancements.5 when i can get a return on my equity of 19 ● good for the goose.single purpose entity ○ nonrecourse -. they get paid back first ○ before anyone else gets paid back ■ if you’re an investor you get paid after operating expense and after debt servicing ■ lenders are focused on we get paid back first ● since they get paid back first. other credit enhacing ○ norecourse would try to be negotiated. nonrecourse.other partners ■ providing equity so that each person’s equity not so great ■ try to provide that they’re not fully guarantying loans.1 and it comes up for renewal next year ○ i want a LOC that says if they don’t renew and you don’t pay me down you’re going to pay me down nonrecourse also try and spread the exposure -.try and persuade that asset is worth the loan so not have to provide guaranty ■ Lenders are going to be looking for guarantys. good for the gander ○ also. obviously ○ borrowers try to spread their exposure -. so that we know what our exposure is -the value of hte asset . other sources of repayment other than RE if possible ● borrowers want to loan as much as possible ○ maximize leverage ○ limit their own exposure ○ structure the loan to expose as little as their assets as possible ○ SPE -. what they care about is relationship between amount of loan and value of prop ○ they want the LTV to be as low as possible ○ if youve got a 10MM prop-.
we can just dump the asset and only lose our equity Functions served ○ securitizes the sort term construction loan ■ makes sure the bank gets paid back shortly ■ when mr. bank feels good about making your loan -. zoning.instead of it being prime+2 it may become prime +1 ○ loan commitments help you get the tennants ○ committed tenants help you get the loan. guarantor for non-recourse carveout ● if you want amortized over 20. environmental ○ appraisal ○ deposit towards the purchase. paid back over 10 ● accept commitment ■ Lender ● can say we’ll lend on these terms ○ then borrower can accepts ● borrower can sy this this this this and this BUT most JD req com to be in writing ○ letter is important ○ . they just want to sit back and let the money roll committment ○ K between borrower and lender ■ I agree to make you a loan on such and such terms ■ You agree to borrow the money on such and such terms ○ do you have an agreement or an agreement to agree? ■ have to realize that its specific enough ○ loan application ■ we are sending you and application form. firm (at risk) ○ commitment fees ■ 50-100k spend on finding out whether or not you buy the prop ○ WHAT ARE YOU PAYING THE LENDER? ■ important ST financing ○ fairly high admin costs ■ req a staff of some size to deal with it ○ banks are set up for this ○ Life ins company dont like to have all this oversight.● ● ● ● ● we know if things don’t go the way we want them to. fill it out with borrower. etc ■ pursue all of them at the same time acquiring property ○ you’d want to know you had a perm lender lined up before you did the due diligence and paid for the due diligence to buy it ○ inspections ■ strucural physical.
■ sets forth the conditions ○ duty to negotiate in good faith ■ terms and conditions not specifically covered in the comm letter ○ longer term between time in signing comm letter and closing ■ more reasons to incentivize the search for a reason to get out of the letter ○ Interest rates ○ debt-coverage ratio based on rents paid ■ we expect the project to be showing … X ■ especially if nonrecourse ○ can say subject to no changing in the financial status of the borrower and no material change to the financial change of the tenant int rates drop ○ client says -- what’s my exposure? ○ read the letter -■ probably required them to put down a deposit ■ if this loan doesnt close due to breach of borrow ● depos -- deemed liqui dam, lose it ■ could say -- to secure the lender against the damages they suffer ● could be good could be bad ● don’t auto lose the depo and they may not have any loses based on my defaulting ● could be damaged more ■ they lend at .06, nonrecourse - they don’t have any promise i was gonna pay ● but they have a prepayment premium ■ entitled to difference of .06 over life of loan and what you’d expect to return on gov’t securities ● you say, that’s fine, you could have reinvested that money in other areas at around 5 ○ we werent under loan, that term doesnt apply ○ deposits may cover due dili, lender wants to do it and control it failure of conditon of loan ○ DCR ■ a tenant blows out and you don’t cover it ■ not a breach by the borrower, theres just a breach of the comm ■ becomes really important to nego committment letter
Problem -150k sqft * .95 *18.5 = revenue of X 236350 150K * 5.75 * =862.5 debt service of x-opp-debt service = cash flow 925.50
4 million of equity .9255/4 = 23% ROE cash flow /Equity NOI = X-y rev-expense 1773750/12.5 =14. something cap rate (really high) NOI / Cost -- cap rate taxable income -- rev - expense - (680 in int, 8.5 in *.08) (11MM (can only depreciate the building, not the dirt)/39) 500 * .9 * x = rev 500*1.25 = NOI 1.85M/cap rate =13.3 if cap rate fo rhte office building is good cap rate for investment in RE today, all we care about is money we’re comparing NOI to NOI and that’s what we think money ought to cost highlights what deficiencies there are and the complexities accosicates with doing an income analysis like this ● says only currently opp expenses and current income are is what matters ● what’s going to happen to rev and what’s going to happen to expenses over a period of time things that can go wrong with commitments ● DCR ○ changes in opp expenses ■ can have it where the tenant picks up changes in opp after the lease starts butyou still pick up original cost ● comm may say, we’ll loan up to X, but not to exceed Y percentage of appraised value ○ options for that: ● mezzanine loan ○ secured by an interest inthe borrower but not an interest in the property ○ somewhere betweent - lender says here’s what I’ll do, I’ll loan you 1MM, but for collateral i’ll take security interest in ownership interest int he borrower ■ if you dont pay me back, i’ll step into your shoes and I’ll have the 7 million dollar loan ○ what people liek ■ 1st mort lender ● they dont have a second mort holder looking to be first ● mezzanine likes it b/c they just get to step in
● ● elements in the loan comittment ● lender friendly ● 360 days in a year in bank year 30 days in a month ○ talking about a balloon payment at some point/term ○ didn’t amortize fully over the term ● critical point ○ prepayment ■ prepayment restriction ● can’t until x date if at all ■ then if you do, you’ll tack on x percent ○ how is the fee calculated? ■ old fashion ● 10 year loan, cant reapay during first 5 years ○ 6 year -- 5% ○ 7 year-- 4% ○ 8 Year -- 3%, etc until last 90 days you can prepay at par ○ yield maintenance fee ■ i should be entitled to invest in a lot safer ■ i want to pretend that if you pay me off, i’m going to invest that in Tbills of a comparable material ■ should i have to pay a prepayment fee under any circumstnace ● condemnation or eminent domain ● i’m not going to have a make a prepayment premium if I didn’t chose to pay off the loan ● no prepayment from a casualty loss (it burns down and you dont rebuild) ○ baloon payment, 10 year term, 20 year amortization ■ client knew it was coming ■ but ■ refi hadn’t moved as swiftly as they thought ■ in the example -- you owe .04 of TOTAL amount OWED
they dont have to finance the prop as part of the foreclosure, they just step in and keep on being the borrower increase the value of the prop ○ master lease the space that isnt already leased ■ appraiser comes back and says youve got .4 vacancy so I can only value it at 10 instead of 12 ■ borrower can say i’ll master lease that .4 and pay rent on it, you can count what i’ll pay for rent as part of the ● full recourse to the borrower and potentially to the members of the borrowers ■ as i’m able to rent it to third parties i get excused mezz finance is pretty expensive
doesnt mean that we don’t have the right to enforce it against you prepay rent ○ cant go and say.2 discount ■ owner defaults and peaces out ■ they can come after you for that b/c those monies should have come to pay the loan first ■ cant get back extra rent. prepay rent tenant and I’ll give you . and insurance premiums and stuff 2. revenues inexcess of payments ● . i dont want the burden of knowing i’ve got that ontop of it ■ if you miss a payment and lender puts you in default ● accelerate full balance due ● interest rate goes from 7 to 12 ● default rate borrower is going to have to indemnify the lender from any environmental problem ○ i made you a non-recourse loan on an asset with no enviro problems ○ if there is an enviro problem. etc) do you really need it? ○ doesnt call for AUDITED financials though ■ they’re willing to accept just being prepped for the borrower ■ auditing is a significant expense fraud. misrep etc ○ carve out ○ misapplication of funds by borrower if there is a bond or obligation out there that you failed to meet and we have the right to enforce it. and then you’re in default on your 500MM corp finance loan mr lender. breach of trust. except for the carveouts (enviro.● ● ● ● ● ● ● want to go back to lender and say its ok. but say it shouldnt apply to a payment due on maturity. if you accelorate it. do you realy need FS n the borrower at this point? ○ if this is a nonrecourse. just b/c the loan is non-recourse.04 ○ getting financial papers in in 90 days is pretty quick ○ questions ■ do you have FS that are prepared within 90 days of the end of the year? ■ never want to be in a positiont where you technically in default with your lender ○ def dont want it to effect other obligations ■ corp finance obligations ■ promise them that they’re not in default of any obligation say inexcess of 15MM ■ don’t wanna have this 15mm dollar loan b/c you didnt get your FS in on time. i expect you to have it ○ i can’t really insure this risk escrows ○ by the first of the month you gotta get your shit in for taxes.
recover loan proceeds to the exten they have been misappropriated ○ basically saying ican come after you for the exten that I have been damaged for your failure ○ “bad boy” carveout DOESNT say that the loan becomes fully recourse ○ have two levels today ■ if you take rents you shouldnt take i can come after you for the rents you shouldnt take ■ what I don’t want the lender to be able to do is say if you take something you shouldnt have taken. the loan goes from nonrecourse to full recourse ■ econon risk for borrower becomes loan.01 . banks are willing to say ok to prepay if you’re paying from out-of-pocket from operations ● can’t go out and get another loan ● probably won’t enforce the prepayment if its a bonafide sale -.will probably and can require payment need to make sure your clients understand this and they’re ok with it and have thought about it ● questions -. breach of trust. plus administrative fees banks providing shorter-term perm financing.● ● ● like rev that was i excess of meating and paying costs for the period recover damages for fraud. zoning article 4 ● insurance ○ interesting prob for atty ● can’t let your client sign a loan comm that req’s a certain type of insurance coverage without someone reading who understands the insurance game ● flood insurance if any poriton is located w/in 100 year flood zone ○ easy discussion to have when negotiating comm letter ○ but much more difficult after signed comm ● all risk insurance .015 fee. Germain says you have to enforce courts ● pre payment fee on due on transfer clause? ● probably can ○ a lot of lenders are favorable to a 1 time right to transfer under certain conditions ● well negotiated will probably be about a . not just equity if you pull your equity out -.is this going to be compatible with what you have planned/forsee over the next 10-15 years construction ● i wanna know what kinda building its gonna be ○ i wanna know the arch has complied with the code.can trigger a recourse ● due on transfer clause Garn-St.
does that comply? ● anything you can get negotiating the comm makes life a whole lot easier art 5 -. A tenant often has duty under the tenant's lease. as a element of the due diligence process associated with the transaction. ○ ○ ● ● ● ● section 5 ○ prohibition ○ cant modify without consent of lender ○ LL can’t accept rents in advance of more than a month leasing commission ○ not enforceable against anyone other than the person who agreed to it ○ up unitl oct 1.replacement cost basis want to know that there’s an insurance policy that’s going to pay everything other than a pre-arranged deductible ● builders risk ● loss rent insurance ● which companies can you get insurance from? ○ may be spelled out in the comm letter ○ existing building would say -.leases ● lender says i’ve got to have certain leases in place before i can make a loan ● have to have certain assurances/credit with/in the leases ○ may req guaranty ● only way this loan is gonna get repaid is from the property itself ○ hows that gonna happen -. and its all correct ● Subordination ○ tenant’s right under the lease are subordinant are to the lender’s rights under the mortgage ○ non disturbance ■ tit for tat ■ tennat gonna req that lender sign this saying so long as they’re complying with terms of the lease that thtey wont kick them out if they have to foreclose ○ attornment ■ acknowledgment of the existence of the relationship of landlord and tenant. particularly in commercial leases.title insurance ○ w/ respect to securing the validity and priority of their lien .the leases that are in place! ● estopple certificate from tennant ○ certificate that says something of ‘least that’s attached to this is a true and accurate’ and there are no other agreements other than the obligations and terms and agreements enumerated therein ○ eveything is fine under the lease. to provide an attornment upon request. law didn’t allow liens to brokers for comissions 6 -survey 7.here’s the policy there already. and is required by a creditor or potential buyer of property from the landlord to establish the nature of existing encumbrances on and income streams flowing from a property.
lender have to hire the appraiser.ace will not be req’d to pay any further expeses fees. fees. or charges. but we don’t want to right blank check to another law firm repping the lender who has no incentive to keep cost fair ■ want to negotiate a cap ● bank says -. ■ paid by ace -. described in 11 ● The Borrower shall have reimbursed.● 8 ○ condition precedent to disbursement ■ built ■ first lien ■ bank’s lawyers have to sign off ● probably a commercial reasonables standard imposed with respect to this ■ most lawyers will go through and sprinkle in reasonable language ■ financing statements ● securing personalty on the prop k ■ borrower shall have reimbursed all expenses fees. costs ● what do you think it should reasonably cost for a lender to do this transaction ● we understand we’re gonna be responsible..a lot of that depends on you ○ if you sign w/e we send you it really wont cost all that much ● why don’t yall pick three lawfirms and we’ll pick who you work with atty’s will look at and make a semi opinion ■ valid easements in place ■ no enviro lien ■ public access to property ● who maintains them? ● prefer they’re maintained by gov’tal authority ■ no amterial adverse change in either borrower or property ● financing on prop ● sale of any int in prop ace has right to hire special counsel to rep them ○ ○ ○ congress passed law-. fees and charges of the nature described in Article 11 of this Commitment which have been paid or incurred by Ace and the Borrower shall have made arrangements satisfactory to Ace to assure that Ace will not be required to pay any further such expenses. and the appraise have to meet certain standards . all expenses. or shall have made arrangements satisfactory to Ace for the reimbursement of.
runs in with due-on-encumbrance ● you know in the hotel that the sec int is in ‘all the assets necessary’ ● not going to be interested in foreclosing on a hotel with no beds or tvs or w/e ■ a lot of that stuff wears out before the loans does ● i’d love to sell the old stuff or at least give them away ● i dont want that to be an event of default ■ i’d like to finance the news ones maybe . are you going to be transfers that the lender ought to go ahead and ok? ■ involuntary ● death ● condemned ■ hotel -.lication send 15k ■ non refund. its to pay them to review the app ○ then ■ expect a depo when you send the comm let back in to secure us b/c you’ve now said ok we’re doing this ○ rate lock ■ i’m making you a loan at 270 BP more than LIBOR ● were not locking the int rate in now ■ pay a deposit at locking in point ● 12.lender req’s deposit from borrower. to act as security to ensure they can pay for people they hire in connection with the job if borrower bails ● application fee ○ not really a deposit ○ may be termed an application depo ■ protects us against the diff fees early on ○ tiered ■ when you send us an app.03 ○ retention on deposit ■ shall not act as liquidated damages ■ we’re not giving you an opt out ■ this is not an option to retain a loan ● its not an option fee ● its not an contract to keep an offer open ● when you have substantial uncompleted space or building that need substantial capital expenditures coming up ○ i want to escrow some reserves for replacement or repair of the roof ● due on transfer clause ○ we are making a loan to you ■ you can’t transfer directly or indirectly without our consent and that’ll be an event of default ○ have to think with your client.
i’m getting ready to buy x ■ some are 5.● ● ● i dont want to own it for the next 15 years ■ i don’t want to pay your exceleration ■ won’t you agree to allow me to transfer one time ■ so long as their a qualified operator ● this is nonrecourse. the change in membership/stakes even triggers ■ can’t I give ownership interests around ● banks pretty receptive. now they want their kids to own a part of the LLC that they own ● as drafted. a very interested party with the means to find something wrong with the way they did this and to move from second to first in priority ■ well-funded adversary ■ a borrower in default doesnt have the resources to figure out and fight why I don’t ○ also.01 ○ brokers and finders’ fees ○ borrowers will call these people and say. so long as controling ownnership of LLC doesnt change ○ death ■ from the lenders point of view ■ if he’s not around we’re not too keen about this loan ● we will give you aperiod of time to come up with a new acceptable member ○ probably have same situation with guarantors ■ only have a claim against the estate of the decedent if the loan is in default within 6 months of his death ○ if you havent provided for a process in finding a substitute guarantor ■ int rates go from 5 to 15 percent. and they don’t give a shit ■ lose the ‘vested’ borrower that you had before 19. how much to you really care who I am? ○ transfers that you may want to do for a personal purpose ■ LLC owns it.1 ○ Restriction on foreign investor ○ require borrower that they are’t terrorists and stuff like that 20.triparty . lender may be saying i’ve got a good chance of getting rid of this terrible low loan int rate loan second mortgages ○ bank cares b/c theres someone out there. some are somewhere between that ○ what can you get me a loan for? ○ buy/sell . hey. some are 10. and the LLC is owned my H and W and they have 2 kids who have now grown up in the hotel ■ worked at the desk and stuff. borrower has gotten their equity out.
and I’m trying to get it but i want to get started ■ show me a grading permit so that we can close and we’ll dispurse funds necessary for grading ● provided that you ahve an arch that tells us we’ve turned in plans and they should be substantially approved whenever they get around to it ● ○ why would lender take the risk? ■ trying to get the loan tomorrow -. its november. them mechanic has priority over prior in time leins if its a new loan.● ● ● ● ● ● bank’ll make construction loan perm lender will buy it out ○ assign it over con lender gonna want to be in privity with takedown ○ mortgages taxes ■ maryland. 404 dredge and fill ■ erosion control/Storm water runoff ● typically not gonna get a grading permit without this though ■ air quality . florida ○ avoid it ■ borrower likes it for this mechanics lien questions ○ if the mortgage is put on the prop before any work is done ○ priority of lien if bought should relate back to the time when it first goes down ○ mechanics will be behind ■ optional-obligatory doctrine ■ if mortgage loan advances merely optional. we can do a lot of site work from now till thanksgiving iif we dont get site work now. ○ bank is going to req that you make the lien go away before they lend how to make a lender how so they’ll close the loan ○ property complies with land use requirements ■ show us a building permit ■ well what if i dont have it yet. we need to get it done till april/may before we can finish it up ■ going to deliver this building a lot later than we thought ● oh btw our tennat says we need to be in on time ○ enviro permits of one kind or another ■ wastewater ■ industrial pharma plant ● does the local wastewater treatment plant allow that kind of dumping? ■ ACoE permits? ● JD wetlands.weather is so nice now.
zoning endorsement ■ insuring that the ordinances will allow ■ ALTA ● american land title asc ● 2 endorsements ○ one called 3.○ ○ ○ ○ how do you know that once completed it still complies? ■ Cert of Occu ● practical problem ○ most dont retain them for an extended period of times ■ lucky if you can find one that’s over 5 years old ○ if you’re buying an existing one.gov’t not bound by it ○ if somebody missed that the building was out of compliance with sidage setback ○ fact that you’ve got a cert of occu doenst mean the gov’t has waived that lenders will be looking for some type of site assessment to be done ■ phase ones and phase 2s ■ astm standards ● enviro engineers ● 1 -. you can prob get a better letter title insurance -. you’re probably not going to find one absent a property owner who has kept records of all such things ○ on the other hand.take down an as built survey.0 ■ prop is zoned for xyz and it allows these uses ■ that’s about all it says ○ 3.recognized enviromental conditions (RECs) ○ inspection of ○ review of historical data.1 with parking . or something kept here ● typically not very invasive ■ if there are RECs recommend pahse 2 ● invasive testing typically follows to determine the extent how do you know intended use and such will comply ■ ask the city ● city is reluctant to say hey you can do this only to find out that they missed something ● not that they’d be bound. but there’d be repercussions ■ use to be -. ○ review of enviro ■ history of spills. can you tell me that what i’m showing you complies with and I can get a letter for that ● smaller jd. had they not gotten one this building would not have been occupied if they didnt have one ● mistaken issued -.
gonna wanna see certificates ● most lenders are pleased that if you can give them a 3.they can lay it off ● if they do it.lines go in two directions ■ same line same angle on that compass bearing n/w and s/e ■ calls are reversed b/c you’re going in a direction ■ Cert of Compli lender is going to want insurance that they have a vlid first mortgage on the property ○ owners policy ○ lenders policy ■ specific execptions. if the lender gets paid back. gonna wanna see the zoning report (from a private company that did research). you’re calling to a monument ■ don’t leave any gaps between it b/c you go to the line ○ cord bearing.● ● ● ● ● ● improvemtns as constructed comply with zoning and the uses ■ title insurance comp is gonna want to see w/e letter you’ve gotten. it has to cause a loss ● as it relates to lender. nothign general or vague ○ simultaneous issued in NC. pay for both in one policy will describe the property insured insure marketable title ○ access ■ doesnt ○ what specific endorsement would you want? ■ enviromental lein endorsement lenders say i dont want to even think about that teh change in interest rate will change the validity or priority of my lein ■ . it means they get to write the policy at a premium plus the zoning prem ■ title insurance company is confident ithat it can deal with claims ● if it turns out not to be true.1 they’re all good ○ life insurane comp doesnt care about finding it out ■ they just need to hear that its fine ○ title company ■ insurance company -. the title insurance doenst get dragged into it even if there is a zoning issue title insurance company ○ will look at survey ○ take a look at pages 204-5 description from a survey ○ ID’d a beginning point from a known monument ■ intersection of a street ■ by calling sombody else’s property line. distance between two points straight line intersecting the curve ■ arc line ○ page 204 -.
5and you havent rec’d that ● dont want to lose priority as to those 200 BP ○ future advance endorsement ○ usury endorsement ■ says loan int rate and fees aren’t usurious ■ may be looking for an oppinon from you. cars going both way can turn into lot ● prb cant insure that city wont put up a median there or something ○ utility availability ■ has util availably to it from publicly dedicated lines ○ may see people ask for deletion of creditor’s rights ■ we insure you’ve got valid lien ● except ○ if there were inad consid on ○ or determined fraudulent in BR court ○ we dont insure what happens in BR court ■ we want you to take that out ● today its virtually impossible to get that exception removed ● they can’t do the due diligence necessary not going to give you a zoning endorsement cuz you call up and say i’d like one ○ they’re going to expec you to provide things necessary on which they can base it ○ zoning endorsements may or may not cost money ○ usury endorsement typcially do title insurance rates vary wildly based on JD ○ florida. that loan isnt usurious ○ zoning endorsement ○ comprehensive endorsement ■ usually always req’d in comercial ■ comprehensive endorsemtn -. that has a light infront of it.● ● ● ● ● may want an endorsemtn aas to that ■ dont want the int to change from 3 . atty in trans.anything that would be sown by a survey ■ restrictions on the prop ○ specific access endorsement ■ yes the prop has access but what kidn/type ■ prob can’t get one that gives you the way you can get to that access ● i have an auto shop.state bar says can rep seller and buyer as long as atty doesnt perceive that a conflict is arrising ○ . what’s expected WHO ARE YOU REPPING?! ○ as a practical matter -. the rates are set statutorily pay the premium once ○ does not insure against claim that arise after the effective date ○ does not protect against claims caused by its insured got to get down and say.don’t represent both parties in aclosing ■ in a resi trans -.
bankrupcy ■ no matter what the loan says -.opinion of borrower’s counsel to lender ○ due execution and delivery ■ the people who signed. b/c it’ll prob be your last what is the atty’s duty? ○ Atty wasn’t liable. he sure as hell isnt closing any more of those loans for the client -.lenders gets amount of money necessary to compensate them for their loss in the security.what are white v.● ● ● ● ● ● ● ● if you agree to close the loan you’ve agreed to follow the instructions ■ doesnt mean you agree to represent the letter ○ if you haven’t agreed. you need to make sure people understand that you’re not their lawyer if they think you are and youre not lenders can require an insured closing letter ○ insureing the aty will follow the closing instructions of the lender ○ FULL DISCLOSURE case in the book -. that’s in the statutes ○ basically just want the atty on the record that the borrower doesnt have anything up his sleeve last two are the ones they’re really looking for remedies ○ are they adequate or customary to protect the lender? ○ . were those authorized to do it ■ and they were executed and delivered unconditionally ○ atty opinion as to “did you review the doucments” to make sure they’re a valid entitydo you know who has to sign it ■ watching people sign ● might be comfortable with notary ● might know their signature enforceability opinion ○ enforceable as to their terms ■ i wanna know i ahve an enforceable power of sale ■ assignment of rent ■ personalty ○ excepting public policy. b/c client had been contributorily negligent in their failure to pick up on the change ○ particularly interesting question with today’s technology ■ if you’ve got them both up there electronically just read that shit ○ the client who sued and didnt win. you better make sure its a good one. pinn ○ talked about where you had the documents that lawyers had. thought they had fully negotiated ○ changed the prepayment penalty that he had not seen his client signed ■ what was the lawyers duty to pikc up on all the chagnes int he documents ○ if you’re going to send documents to people w/o telling them youve made changes.
to review and make sure that the shit they’re sending out is up to snuff ○ who has authority to sign are there loan transactions that take place where their are alternatives to interest ○ share of rev. and you’ll pay int at .● ● ● ● ● ● ● are you aware of any claims or pending litigation against your client that would or could affect their ability to pay this loan? conformity opinion ○ do the loan documents conform to the committment? where it gets hairy ○ multistate eliments ■ your client is a LLC organized under North Dakota ○ you have to associate counsel to give you opinions from the JD that you need opinions from knowledge ○ when i want to say i’m not aware of any claims or pending litigation ○ go through some trouble to define knowledge ■ atty may mean ‘I” dont know ■ may mean i’ve asked around in my firm ○ what knowledge am I supposed to have if I’m generally recognized as general counsel for the lcient and had knowledge of stuff ○ real question -. you have an open gambit as far as investing concern as to recharacterization of transaction ○ ability to foreclose under the DoT? probably compromised ○ you’ve got a 10MM mort 6 int. i want to share in it ■ run the risk of becoming an equity investor and not a loan transaction ● got a preferred return and then later you got a precentage return based on some other term ■ typically dont find institutional lenders willing to take that type of risk ● if you’re willing to run the risk and not concerned about whether your transaction is characterized as debt or not ○ once you abandon the idea that you’re making a loan.5 of the appreciation and you’re not going to cancel your mort till you get that .06 ■ but if your project is highly successful. and if prop sells for more than 12MM you .how to define the knowledge ■ limit it as much as possible ■ don’t want to be constructively charged with someone’s knowledge that didn’t give it to you who signs opp letters? ○ practical issue ■ who actualy signs the letter ■ fairly common practice that letters to lenders like this are signed in the name of the law firm and not the individual attorney ■ firm committee -. gross revs in the profit ○ I will loan you 10 mill.
i’ve got to do something with that money that I wouldnt otherwise had to have done ○ bankers ■ 1) will moan and groan about how nobody pays their loan back ■ 2) will moan and groan about how everybody paid back early ● all banks want is their interest ○ NC -. then give me enough money now so that I can go put that in T bills and by the end of the term i’ll have the same amount of money ■ you need to make up that difference in interest rate.its w/e parties who are knowledgeable and capable of representing themselves in transactions agree to ■ so long as they were capable of knowing what they were agreeing ○ some caselaw saying there has to be some reasonable relation between the benefit of prepaying to the prepaying party and the detriment suffered by the lender ○ some case law saying we’ll enforce it if it doesnt shock the conscious ● yield maintencance fee -.loans were not prepayable ○ lender’s POV ■ if you pay me early.is there a restriction on a fee that can be charged for prepayment ○ some caselaw that talks about -.you defease the mortgage ○ give a substitute investment like a present value of tbills that’ll pay so that they get the same money in the end when they were supposed to ○ pay money .really the only thing used ○ if you prepay. could be treated as ‘interest interest’ and be in violation of the usury law ■ prepayment penalties ● common law -. statutes are prepayable ● question becomes -. and then give me the PV of what i would have been paid under the loan minus what you already paid ● loan doesnt get paid off . your excess int (ownership position in the prop).unless loans specifically provide otherwise. surrenders the right to redeem the loan following defualt to avoid loss of the mortgaged property ● Mortgagee must exercise its foreclosure rights to extinguinsh the mortgagor’s right to redeem if its stays as a loan.○ we’re going to call it clogging the equity of redemption and its an uneforceable term ● public policy dictates that ourts protect aganist agreemtns by which the mortgagor at time of the original loan transaction. then we need to be able to take money that you prepay us and get to the same benefits ■ we ought to be able to reinvest in something very very safe and you make up the difference ■ you pay off the loan.
its just me and the borrower. Generally.○ Defeasance of a securitized commercial mortgage is a process in commercial real estate finance by which a borrower substitutes other income-producing collateral for a piece of real property to facilitate the removal (defeat) of an existing lien (entailment of the property) without paying-off (through a transfer of liquid assets) of the existing note.they say that money is going into Tbills but bullshit bankruptcy remote entitles ○ you want to be a SPE to be the borrower ■ idea they can confine their liability exposure to the entity that was entering into ○ lenders also like SPE to be the borrower ■ they want a guarantor for their nonrecourse carveout ■ but other than that. the only one who would benefit from that would be the borrower ■ and he agreed to it ● give me the benefit of my bargain! trying to do as borrower ● how bout letting me pick the title company ● OR if you’re deadset on picking. the note still exists ○ it just doesnt attach to the property anymore ○ nor do you have any obligatin to pay the loan ○ know that the lender isnt getting any more money ■ whereas under the prepay -. the borrower can’t be put into BR by himself (takes three creditors to involuntarily put them into it) ○ BR court -. will you capt the costs ○ lenders are receptive to this ○ get competitive bids secured by the prop? . a basket of United States treasury obligations is the only collateral “acceptable” for this type of substitution ● ● when you defease a loan. they’re soleyly interested in their non recourse loan ○ 506b BR court ■ has authorityi to reduce fees and expenes with prepayment ● they have the equitable power to do that ■ BR court don’t exist soley to help borrowers ● they’re for the orderly administration of the estate of teh BR ○ if i’m the lender making a NR loan secured by an office building ■ i’ve got a borrower SPSAE (single purpose single asset) ■ req that its a a BANKRUPTCY REMOTE entitly ● no other obligations to anyone else ● also have some other restrictions ■ isolate the borrower.you need to reduce this fee ■ NO YOU DONT -. so that you’re that borrower’s only creditor ● here.
don’t want to become partners with their borrower ○ if anything starts to look like its not a debtor creditor relationship ■ borrower might start staying this is an equity investment ○ if you do jump in. youre probably going to want to have a receiver appointed holder of the mechanic lien isnt going to ahve a very good argument if the lender forecloses and brings less than they’ve advanced ○ don’t want to be there where does lender draw the line at invovlement ○ lender needs to ID the major K’s they need to complete the contract ■ look at them. taxes etc ○ payment bonds ○ periodic lein waivers as they do work on the job ■ up to date equitable lien that can be asserted ○ while they might now have a lien right that would have priority over construction lien on trust ■ recorded before work ■ had a property future adavance ○ HOWEVER ■ may be certain circumstances that the person doing work. may be able to assert lien rights with priority over that of the lender ■ k’ter could engage in conduct that would give them an equitable right to funds over construction lender ● call up construction lender. you’re unjustly enriched! ● equitable lien con lenders start to want to be really involved ○ dont want to advance money that didnt get done ■ have to be careful -. am i gonna get paid ○ lender doesnt want to foreclose on a hotel w/o the electrical work ○ and tells him of course you’re going to get paid ■ leaves out all that other shit about how they’re worried about funding and that they’re thinking its going to go bust ○ estopped from claiming priority ○ we relied ■ lein on funds ■ even if we didnt rely ● we did the work. and we’re doing the elctrical work. but i’m realy not excited about any more work if i’m not gonna get paid ● do you have money. approve them . your collateral is worth more after we did the work ● if you foreclose on it without paying.● ● ● ● ● things in front of construction loan ○ mechanic liens.
we’re exercising our collateral assignment in K. hey don’t you think you could get a fixed cost of a cost-plus with GMP ○ collateral assignment of those K ■ if your borrower is in Default. you can go to hell on that LoC Bonds diligent about how you disburse funds ○ getting a pay application ○ and we’ll pay it. but we need a lein waiver ■ how can we use financing ti generate additional cash for borrower ● refi’s or secondary financing ● why want to refi? ○ lower int rate ○ in order to provide more capital for the project ● building or prop doing really really well ○ I would like to be able to take that cashflow and go to another lender saying I will loan you a lot more money b/c I like how much money your property is making ● reschedule the obligations you have under the loan ● financing is tax-free ○ at one level. you’re gonna owe taxes ■ even if you dont get any money ● COD income ○ still do get the time portion of the value of that money for free .● ● ● ● cost-plus. even though we have accelled the loan. we’re acceling the balance. complete this work in accordance with the K neogotiation that sometimes takes place ○ also whn trying to get lein waver. some people look at refi’s as a tax free way to sell property ○ if they foreclose and take the hotel. lein sub ○ i’m fine with my K being assign ■ but I still don’t have to perform for you unles s I’ve been paid. go to k’ter says treat us as owner. lender says. and if the person you’ve been contracting with and spending it on something else. however. we’ll pay it ■ we’re NOT going to allow you. w/in 30 days of being owed ● and we agree if we can’t get it paid in x days. when I come over and say give me this and that and you say pay me for the last 6 months. that’s the risk you’ve taken and you take ■ you could have put in your claim of lien on funds and then it’ll be my problem ○ compromise ■ you tell us when you havent been paid on time. ○ lender says blow it out your ass ■ ive been amking disbursements.
1MM second ○ i want to know if he’s defaulted on a 60k payment. and get my money back. lender how much do you want a second ○ 2nd -.● ● ● ● what if you cant refi the first? ○ prepayment fees or foreclosed to prepay blended cost of having a second and a first mortgage ○ may be less that refi-ying ○ even if you have a low first mort ■ you still need money. higher rates on 200k is probably gonna be less than 5-6MM refi moving from 6-8 prohibitions on encumbrances. you’re in defualt with us ○ lender -. foreclosure doesnt hurt you. if borrower has to pay back 7 i may be sol ■ unlikely that the 1st will blanketly agree ● but the second can have an agreement with the borrower not to make a change ■ 1st might agree to a list of things they wont change ● bu tthat depends upon the facts and circumstnaces . vis-a-vis money owned on first mort ○ your second rate is always going to be higher but.I dnt want their to be any changes unde the 1st that I dont consent to ■ i dont wan the int rate to go up w/o my consent ● i agreed to be behind a 5 not a 7 ● may cover the 5. due on encumbrance? ○ go talk to the first ○ why would they let you? ■ they may know you really need the money ■ you’re about to get a new tennant but need to put some money in to make some changes ■ lender maysay ‘i’m delighted’ to let you get some money and put it into the property and bring in a new tenant ○ well need consent for second or messanine financing typically INTER-CREDITOR AGREEMENT ○ if you’re the holder of the 2nd you want some things from the 1st ■ if there’s ever default. i’m inclined to pay 60k to keep the loan from defaulting then having to go bid a the sale to protect my position ● also gives me a chance to foreclose ○ i can assure you that I’ve got a provision that says if you’re in defualt on the first.why should I give you better deal than the borrower? ■ well. you end up with a better borrower ■ Lender says -. I want notice ■ additionally. would you give me an opportunity to cure for them ● 10MM first.you should let me.
8 ○ its a better investment for you ● accountant tells them ○ you can sell it. except for interest. sell it for 100k an acre ○ but you dont have to pay for it until you get it ○ when you get paid its capital gains. we’ dont believe there are zero percent loans ■ either there’s a gift going on OR ■ some portion is interest ● imputed interest ● different rates for diff maturities and loan ● cash down ○ MAKE SURE YOU HAVE IT ○ incase you have to forclose ○ when it gets rezoned for this fabulous mixed use the tax rates are going to go way iup ■ and the county tax assessor will be wanting his money. reed is the regional vice ■ and he said they’re excited ■ did anybody mention anything about you subordinating your interest ○ so you’re not going to have a first mortgage loan you’re gonna have a second ■ well let’s talk about PM mort . regardless who owns it ● has he told you how he’s gonna finance these imrovements ○ says he’s getting a loan from BBT ○ mr. etc ○ subordinated Purchase Money loan ● seller-financing ○ you agree to take back a note secured by a mortgaged ○ typicall this is what they mean in the RE arena ■ seller financing their own prop ● or any loan that secures the purchase of property ○ ○ ● bank account pays . that’s regular income ○ installment sale reporting ● if i gotta pay ordinary income on the int ○ why don’t we up the price from 100k/ acre to 125/ acre ○ irs is going to say. notice of defualt.● 2nd might want to have a right to purchase the first loan in the event of teh default mess finance secured by int in the borrower ○ you’d probably have similar concerns ■ cross defualt. 7.025 ○ cd pays 1-2 ● i’ll pay you 6.
not a big deal. and the mortgage in favor of BBT for the amount he owes ■ very difficult for an layman seller of prop to takeback subornated PM financing on a basis that makes any sense ● you’ve really got to know what you’re doing ○ have done it though ■ mr. x for such and such a price ■ I’m gonna give you back a lease where I’m going to continue to lease those property for $x/ft ■ completely net basis lease ■ . ○ need you to release the RoW so i can build access ■ gotta give an easement for the sewer line ○ if you’re banking on the BBT loan to enjhance the value of hte prop you have the sub’d loan on you need to make sure that the money the disburse gets spent on improvement ■ you also need to know how they’re planning on paying them back ■ what is the bbt release ● they should have money left over to pay us ○ they’d just have to know way too much and be way too involved ■ And I don’t want to babysit them. with the rezone and higher tax.in NC. developer will pay 2MM and 1MM down ● we’re already tickled to sell it for a million ● if we dont get the second M its not the end of the world. company with excellent credit ○ can do it internally or find a third party that likes to own prop ■ i want to take all my retail stores and convey them to mr. ● judgment lien can jump infront of a refi in priority ○ gotta get in there to the judgment/clerk index ● inchoate marital interest ○ gotta get the spouse to relase her interest ■ otherwise she could disavow the will and take her spouses share ○ seller financed doesnt req the signing for this otherwayus to pull out money ● credit tenant lease financing-.Bond Lease ○ sale-leaseback ○ here. they’re by law NR ● 45-21. windfall if we do ● maybe not take back a subordinated interest but take back a first priority mort on a smaller chunk of the property ○ dont want to sell him the front part of the property and lose all your access to the balance to your property on which you hold your mortgage.38 ● in event of default you can only foreclose ○ you’re behind the bank and then you have foreclose.
they’ve got all that debt off their books. but based on the credit of hte comp that’s there ○ for this to work -■ can’t be any repurchase rights for a nominal amount misused term ○ net. etc synthetic lease ○ captive company of their own ○ establish a lease. to buy ■ oh. but making it not a RE loan. quad net ■ trip -.net as to what? ○ bond lease -. tenant has it all ■ we want all the responsibility to be where the credit isd ■ nothing excuses the tenant from paying rent ● tenants responsbility to do everything.taxes. unclogging toilets ○ or changing roof ■ net lease -. maintenance ● what does maintenance mean? ○ changing lightbulbs. insurances. you’ll have a lien ○ loan isnt being made on basis of what the prop is worth ■ its being made on the credit of the company going to lease from a balance sheet perspective.● ● ● ● ● responsible for everything ○ i expect to be paid at a really really low cap rate for those rents. except for the one year lease ○ basically taking a RE loan.net as net can be ■ LL has NO responsibility.have the insurance. the terms of which. btw. triple net. -. rebuild the building. b/c i’m no credit risk ○ i have essentially sold the prop but havent given up possession or responsibility ■ but I’ve cashed out the buyers call up and say have I got a deal for you ○ IBM has guaranteed to me that they’re gonna lease for x years ○ can I get a loan from you. will be treated as a capital lease ■ as if they own the property and they can deduct depreciation and take advantages of ownership ○ captial lease for IRS pruposes ○ but treat it as an opperating lease for accounting prupose ■ (bond lease is opp on both irs and accounting leases) ■ limit on how much rent and discounted options to repurchase ● if the rents are really and you have a nominal fee at the end to buy ● you own the damn thing ○ you don’t have to show the liability for the loan or the asset on your company’s balance sheet .
and is given just enough independence so that it can be taken off the operating company's balance sheet. for tax purposes. ● alternative methods of getting cash tax benefit financing ● bond financing ○ gov’t entitles wiling to issue bonds to a lender who will then make a loan as directed under the bond program ■ if I want to build a industyr in halifax county ○ the govt may issues bonds to go to raymond james. depreciation of the asset need not be charged against income of the operating company. we’ll give you a bond ○ tax-exempt financing ■ essenitally. The special-purpose entity is usually owned by the lessee / operating company.financed with tax exempted financing ■ interest isnt taxed.○ ● have to have the company with the appropriate credit to provide a loan and the loan’ll be repaid with the lease ● for financial accounting purposes (under pre-2003 U. the asset is owned by the operating company (or the special-purpose entity is consolidated with the operating company. The asset is thus recorded as an asset on the balance sheet of the special purpose entity. financial accounting rules).S. we arent gonna let you finance willy nilly anything you want to unless we think its a qualified public project ● keeps getting a little shorter ● at one time you finance a sports arena ○ no longer can get a tax exempt bond financing for this type of project ● certain gov’t entitles can borrow money at a lower int rate ○ NC board of nursing ○ recently built new HQ -. the operating company can deduct depreciation of the asset for tax purposes. the lease payments are recorded as an expense on the income statement. not of the lessee / operating company. so that the two are treated as a single entity for tax accounting purposes). Thus. only bond payments are made ■ so when they get their interest they’re not taxed on it ○ obvi gov’t cant issue bonds for anything ■ has to be w/in the confines of their governning documents ● city charter/county/states ● what can they encumber themselves in ■ IRS says. Thus.we will issue you tax credits based on a formula and your investment ○ rural development . generally on an accelerated depreciation schedule. so they got really favorable rates ● project that qualify for tax credits ○ estabed largely by fed gov’t ■ if you build certain types of things we want to have -. the asset is owned by a special-purpose entity and leased to the operating company under an operating lease. Instead.
as receiver ■ this is an equitable remedy ■ not entitled to as a matter of law ● it will be very very helpful that your loan documents allow for one to be appointed. in front of judge. mortgage. turing into a drug dealing spot ○ we want you to appoint x.○ ■ farmings homing ■ certain people who need housing assistance rental assistance too ■ if you rent to the people you say you’re going ot rent to. they’re gonna say fine ■ who do you want to be the receiver ■ probably will ask you to appoint a bond to secure the performance of the receiver ■ can typically take control of prop ● including accounts related to the running of prop . you made life so difficult for the tenants they moved out ● seek to have a receiver ○ court appointed person to take possession of prop ○ can seek it exparte basis ■ judge we’re the lender. fact that you fixed 50 doesnt mean shit to me. or when we thinkg we might not getting paid ○ understanding when we think we’re at risk f not being paid ■ we start worrying about our collateral here ■ who is our lender ■ worried when we drive by and all the windows are busted out or when the insurance calls and say you didnt pay ● are we comfortable that the borrower really cares enough. putting evi. dependant upon the collateral having value ■ they wont fix the broken windows. i only recall there were ‘3’ windows that were broken. we’ll help subsidize them when things start to go wrong ● from lender’s view ○ when we don’t get paid. but the courts aren’t req’d to appoint ■ may want to call the guy ○ typically. or can care enough about our collateral ○ lenders look and say we need to take control of this before it gtes out of hand ● always provisions that say lender can come and take possession to ensure the protection of their collateral ○ nobody wants to do it ○ once you do this. professional management comp. when you get around to suing your borrower ■ they said. even in affidavit form.
the trial court is saying. wouldnt you feel like you got shitted on if they extended out principal.● ● ● ● judge’ll say i wanna hearing in the next 10 days. can’t do it ■ lender has some options ■ he may in this situations. people arent going to be too happy. add it to the balance. sorry man. notice given to borrower. lost value in the land and now you’re really on the hook ○ even if loan documents say you dont need their approval ■ practical matter. don’t want to mod th eloans without the written consent of the guarantor that the mod doesnt effect their responsibility to repay ■ .i dont want any agreement that’s going to adversely effect my lien possition on the prop ■ dont want to jeopardize my ability to collect on the loan for anyone whose responsible for it ○ lender ■ if you’ve got guarantors. you’ll be in default under the lease ○ sometimes this wakes the borrower up ■ can’t we work something out ○ can we go interest only for a little while? ○ mod that int instead of 6 is 3 for the next year but we’ll still accrue the only 3. the gov’t bailed you out. and then reamortize couple of things to think about ○ lender -. it does not work for the lender ■ req’d to file reports ● typically gets courts to confirm/ratify decision its made on a periodic basis ○ lender has not taken possession of property ■ it was an offfical of the court ■ receiver has no liabilities beyond conducting its receivership duties assignment of leases and rents ○ always in the loan documents ■ notice to tenant that borrower agreed and you’re now exercising that ■ if you dont pay us.35 drop in prop values from 06 yo 09. bout time you start bailing some other people out ○ guartor may say. to see if this receiver will stay and if the bond is enough ■ receiver works for the court. say we’re foreclosing lien priority ○ if you’re gonna mod the note and the mort agrement ■ a lot of people concerned if you walk into a clerks ○ if you want the title ins still to be good ■ you’re gonna need to file a new DoT legal answer ○ .
you take the title subject to that have to make sure that they dont file br in 90 days ○ could be taken as a preferential transfer ■ can’t pay on an antecedent debt ○ insider -. particularly in a DoT state ■ title was transferred to the trustee. you lowering your interest rate really hurt me ■ however.or is there a deficiency ○ . if you foreclose your title relates back to the date you got that DoT ● perfect the title ■ if you take a deed in lieu you’re buying at that time ● if there is an intervening lein.1 year why ever take one? ○ probably can satisfy yourself that is unlikely they’ll be filing ■ especially if they’re single purpose single asset entity that’s br remote borrower ○ what are the tax consequences ○ deed in lieu has greater chance of income from forgiveness of indebtedness CoD ○ for homeowners -. if you go interest only. can i just give it back to you? ○ if its nonrecourse or even if its not ■ i dont have anything ○ i’ll just give you a deed in lieu principle of how mortgage’s work ○ the principle is at the time you get the mort or DoT.there have been some recent acts passed for this to protect them from CoD income terms need to be defined ○ are you giving the property in satsifaction of the indebtedness -. and Jr leinholder with judgment lein and say the note you are foreclosing on was amended and modified and it hurt me ■ it was my understanding that the principle was to be paid down at a regular amount ● the principle ought to be a lot lower ○ if you had been tougher with him there wouldnt be such a large mortgage in front of me today ● don’t find it very compelling but its not inaccurate ○ what need to do ■ amend and mod note and DoT ■ talk to your Title insurance borrower says.● ● ● ● ● ● ● if the mod you do doesnt increase the amount secured or increase the liability ofht eborrower ■ the DoT still secures an indebtedness as evidenced by the note as it may be modified ○ also hard for a Jr LH to say.
must accelerate ○ lable it due and payable ○ documents should say loan can be acceled w. you need to make them a party to the lawsuit ● borrower. you can still foreclose after jumping through the hoops req’d by the BR court ○ if theres a JL that pops up afterwards.o notice ■ internally even ○ typically.friendly foreclosure ○ there’s too much stuff we can’t control too many interevening interests out there ■ we’re not comfortable buying the property ○ has to be cafefule there is no collusion in the bidding process for the sale ■ you can agree to limit or not to seek a deficiency ■ dont want to agree about who can buy it at the sale ● bank has a buyer.so you couldnt work it out ● 1 -. you still foreclose Foreclosure -. we’re acc’ing as provided in the document ○ in NC ■ we’re going to seek to enforce the provision of hte loan that provides atty ● . whoops you forgot about me. the lesser title held as benificiary of the DoT merges into title held by the deed and the mortgage has merged into the deed and has been extinguished by merger ■ make sure you take it in a separate entity ■ if the BR sets aside the transfer. the whole shebang ● . all of it ■ you’ve got to come up with all due under the note ● two types ○ judicial ■ file a lawsuit and one of the remedies you seek is the ability to foreclose to cause the prop to be sold to satisfy the indebtedness ■ if you want any party to be bound. notice is sent ■ you’re in default. but want to buy from fore so they get free and clear ● so we’ll bid it up to a certain price and let them take it ● back to DiL ○ don’t want to take it in the name of the lender ■ set up an entity that can take title to it ● dont want to give up your mortgage until you’re confident youve negotiated all the perils that may happen afterwards ● if you take title in same name that the person whose the lender under the loan -MERGER kicks in ○ Doctrine.15 of loan ● notice. and have to give borrower five days ○ once the loan is accellerated its due. junior leinholders.
disbursed money in this way ■ files notice of foreclosure with Register of Deed’s office what can be different? ○ in addition to right to appear at limited ○ can file for injuctive releif ○ file for appeal from findings of clerk ■ but judge here still constrained by the limited proceeding available defenses ○ fraud on the deed ○ if lender acelled indebt cuz you didnt pay on time ■ if you can show the lender has routinely been accepting late paymetns ■ they waived and are now estopped ● UNLESS .● ● ● ● ● lengthy process ○ special proceeding -. but it can highten the responsibilities ○ at least 20 days notice of hte Notice of Sale ■ in addition -.have to send notice to anyone who’s requested notice for sale stat requires a deposit of .file a notice of hearing before the Sup Court CLerk in county where prop located ● certain parties specified in statue as to who is entitled to notice ○ record owner ○ any party to whom you think you’re goint to collect money from after foreclosure ■ deficiency ○ any party with a record interest ● have to get 10 days before the hearing ■ clerk ● was notice given and received ● is the party seeking to foreclosure the holder and owner of a note and dot ● power of sale ● default ■ hearing is limited to those matters and legal defenses to those ● not equitable defenses ● need to file for an injunction and a hearing before a superior court judge ■ Dot can’t waive statutoryily requirements. ttee conveys the prop after receiving hte money ○ files final report of sale ■ got x money.upset bid period ttee -○ after period.05 ○ 10 days .power of sale ■ trustee -.
saying we’re stopping this late payment nonsense ■ all contract marshalling -. leinholder ■ if the lender has two tracts ■ one with my jr.2MM ● wrap around ○ indicates that its for an amount equal to first and second ■ but when you bid in you’re only bidding in on the second ■ the portion of that wrap.equitable ○ require the lender to foreclose on some other prop ○ if i’m a jr. which is in addition to the first ○ cali case ■ never rely on implied warranties as to habitability fitness. lein and one without my junior lein ○ its inequitable for them to foreclose on this first reverse order of alienation -.you find someone else to bid more.38 PM.● ● ● ● notice given. ○ .has the prop been tainted since they made the loan on the property ○ enviromental contamination ■ needs to do due dili bout this ○ lenders typically take title in the name of a diff entity than the actual bank itself . or you go bid it in ○ lender has to be the one to bid the prop in ■ fact that they let it fly to someone else for less than ‘fmv’ doesnt matter ■ its about preventing a windfall to the bank got to doyour due diligence before you get ot the sale at the sale ● bidding at a foreclosure for 2nd mortgage. and there’s a first mort of 1MM ○ 1. zoning etc of prop coming out of foreclosure sale ■ only in cali ● hopefully your lender client did their due diligence when they made the loan ○ exception -.equitable ○ i buy one of the lots and it didnt get released from mortgage ○ forclose on the other lots first ■ foreclose first on the lots that were sold first deficiency ○ have to be brought w/in one year of foreclosure ○ .36 ■ in credit bid ■ borrower can contend that the lender didnt bid th FMV of prop ■ deficiency shouldnt be this big ○ guarantors can’t ue ■ theory -.2MM is what you think prop is worth ○ dont bid more than .
dragnet on the first ■ ought to be able to get the holder of the second can get a statement of what’s owed on the first ● midwestern ○ states have 1 year redemption periods ■ can’t waive your right to it ○ how do you ever know ■ you’ve got good title if the dude can swoop on in ● installment land/contract for deed ○ where the guy misses a payment. don’t hjave the facts argue the law. argue the facts. state can’t take away your federal rights ○ Turner v.you’ve contracted. can still go ask the sherriff tokick them out. there is no constitutional protection ■ it would be a purely private sale ■ if you bought the property from somebody and they won’t leave. argue the constitution ● no consitutional issue with judicial process providing for foreclosure process ○ so long as it has the lawsuit req’ts and there was notice and service to all those people ● power of sale foreclosures are a little more challenging right to receive notice and right to have a hearing ● procedural due process ○ determining factor ■ Whether or not there is state action involved in the power of sale ● have to follow the 14th amendment to make the 5th amendment applicable ● If there is sufficient state action involved. dont have thelaw. can the guy just say you’re not missing your payment anymore ■ doubtful that if they miss one payment and have made the previous 20 ○ 2010 gs47g ■ regulates contracts for deed ■ it sets out stat framework for how the Ks can be enforced ● intended to provide consumer protection if you have the facts. that’s not state involvement in the sale ○ where have courts been willing to look and imply state action? ■ courts were willing to extend themselves to find rights where they tought people were deprived of their rights that were not voluntary ■ when you sign a mort and a DoT ● you’ve decided the terms ○ . then the 14th amendment kicks in. Blackburn ○ there is state action b/c even then there was a hearing called for before the clerk of court before the foreclosure ○ If no state involvement -.
interests why did bankruptcy in constitution ● so there would be no debtors prision ○ court can relieve you of your debts ● to split up the debtor’s assets equally or fairly among the creditors ○ chapter 7 ■ liquidation ○ Chapter 11 ■ reorganization ■ typically business bankruptcy ○ Chapter 13 ■ wage earner plan ■ simplified form of 11 for individuals ■ only for individual ● only for individuals with a certain amount of debt. adams ■ USSC prop taxing authority couldnt foreclose on prop tax lein w/o notifying holders of jr. who will distribute it monthly to the creditors on a pro rata basis ○ chapter 12 ■ reorganization plan for farmers ● 362. leins on theproperty ○ second mort. mechanics ■ doesnt req that notice be given ■ does provide that once foreclosure takes place that those interest will be cut off ○ minnite bord of -. morts of the foreclosure and that would cut them off ○ prop tax -■ was a state action foreclosure ■ that’s not the same thing as what we do in NC ■ in NC any holder of a jr. int has a right to file request for notice of sale ● simply publishing notice inthe paper isnt adequate ○ b/c its unsure how it would come down ■ more and more judicial foreclosure when there’s substantial jr.v.■ but we’re not going to let shoping centers deprive people b/c of their status ● ie jews cant shop here ● ■ interesting issue in NC ○ NC stat doesnt req that notice of hearing be given to jr. up to a level ■ 13 trustee ● set aside a portion of the income to the trustee. automatic stay ● 544 ○ moment the bankruptcy is filed ○ trustee or debtor in possession has a BPV standard .
US SC said there’s no foreclosure sale where it sells at real price ● distressed sale ■ so long as correct procedure is correctly followed and its not flawed. they coudl set it aside ● particularly inclinded to set it aside if you rented it back to me for a dollar a month if you’re the lender in these trans. you will either have that money or something you bought with it. net worth with you’re fine.boils down to whether or not there’s a lack of adequate protection ○ Look. and everything is done ○ how do i know that the borrowers not going to file a bankruptcy? ■ several years ago. youve got to worry about the ttee or Debtor in possession who can seize that opp to turn them into unsecured creditors preferential transfer fraudlent conveyance ○ if you’ve enen finished the foreclosure ○ go all the way through. then 458 doesnt get to set aside a completed forclosure if its not avoided or set aside.● ● ● ● ● ● 547 preferential payments ○ 90 day ○ insider -. just like something before ● cant have the it paid on an anticedant debt ■ if i conveyed you my 500k house for 100k w/in a year. you don’t lose your lean debtor is discharged from debts personally ● loans become non-recourse loans relief from stay ● good cause -. here’s the deal ■ all that and nobody is looking after the property ● ability to pay taxes. this loan will get more and more in default ○ interest is sitting here accrueing and my deficit is getting bigger ○ property value is declining ○ there is no equity in the prop ○ allowing me to foreclose isnt going to affect anyone else ○ BR court. insurance .1 year ■ transfers include a mortgage on the property (only on an antecedent debt) 458 ○ fraudulent transfer ○ inadequate consideration ■ sweetheart deal ■ if i loan you the money the day before you file.
if i as owner can show that im brining new value new investments to property ■ can show that i have equity ■ can show that the property is necessary to an effective reoganization 120 days to file a plan ○ very rare finding a br court to get rid of stay in that period ○ basically sacrosanct ■ sans risk of rapid devaluation ● lender liability -. they’ll be new tenants with new money ○ I’m providing evi that iv’e paid the insurance through 6 months. outstanding balance of 600k ● at foreclosure 1.4MM ● my problem is.■ ■ and I’m the only creditor here’s an appraisal for the prop. not borrower claim against ht lender ○ developer obviously isnt in a position to fuss ■ more often than not . they’re gonna give me so new money and i’ll pay some or all of the int going for ○ so in 11’s -. see if there’s something that the client can use to put the lender at risk so they’re not simply putting the client at risk ● look for classic bad faith moves/claims you can make ○ guarantor on loan made to entity ■ trying to estab that bank made loan for develop of resi project ■ future advances on the loan to install infrastructure for resi develop ■ at closing. ○ they’re going to provide me the money ○ the property will be worth more. and the taxes are paid and arent due for another 6 ■ my new investors have also said.afirmative claims against ● look around. even if you let them keep the prop. they’re not going to get a new loan or sell the property for enough money to do anybody else any good 11 ● i’ve got new people coming in. i dont knwo where the 800K went ● i dont see any roads or street lights ■ believe it got advanced by the bank under this loan to the partner to pay off other loans that the partner had with the bank ● bankers make promises that they didn’t keep ● some people have tried to contend that banks have fiduciary duties where banks have special position of trust when they make loans ○ app courts arent a big fan of this line of though ○ we were relying on BBT to follow their procedures and they wouldnt advance money unless it was due and work ahd been done ● we thought we were partners with the bank ● typically third party claims against the lender.
what they’re spending money on.● ● ● pendlyn case ○ bbt Ba were lenders for devlopers who had pretty much a ponzi scheme for deveoplemnts ■ sued by a lot of people who bought lots ■ sued bbt saying they’re in collusion with the developer to sell the deficient lots can’t claim ‘they should have known better and not loaned me the money” if you’re a loaner ● need to make sure all your communications with respect to the loan are purely business in nature ○ dont get friendly ● dont get mad if/when things go south ○ as ledner only threaten to do those things you will do in the furtherence of collecting your debt ○ and if you say you’re gonna do something. what their financials look like ■ shouldnt be giving them advice on what to do ● you can tell them when they’re running afoul of the loan docs but dont tell them how to do their business ■ you can become an insider for bruptcy purpose ○ where lenders get in trouble ■ be predictable about what you’re going todo ● give notices ■ there’s a real temptation to say we need to go ahead and take his bank accounts and he’ll probably pull all that out and use it to hire a BR lawyer ■ fine. professional ● if you say i’m gonna foreclose on you if you dont pay ○ you better have the ability to do it ○ and you better go ahead and do it ● hard line to walk v. neat. you may owe him three times w/e it is you take ■ you took all my shit and kept me from paying all my stuff back ● having said that ○ if you have a client whos in jeopardy on a project and need to get a receiver important ■ go on and do it ■ file the ex parte ■ make it happen ○ follow a process . set off ● BUT here is the procedure and we have to follow it out ● if we don’t. orderly. go ahead and do it ○ dont beat around the bush -. if you wanna set off. being fully informed in what youre client is dong and involved in what they’re doing ○ want to know what they’re doing.don’t nice.
i’ve had a passport all my life ● in today’s climate ○ advise client to try and avoid juries ■ don’t want to be BofA in a jury trial ○ in NC and many states. we’re making a loan on the entire mall ○ most of them have at least two places where you can get glasses.but what is the ‘premises’ .I’ll live without another kiask but i can’t live without hudson belk. I dont care -.somethign ■ matter of public policy ○ can provide for private arbitration Even in owner-occupied.if your lender has policies about collecting loans. ○ you go. typical that it will be a lease from dewlegal properties to dad. all they have to do is look to the lease it ○ start to enjoy having lenders look ■ particularly in the process of negotiating the lease ○ belk knows you need them in the mall ■ belk knows you know that ■ they will extract a good lease from you ■ Belk would love for belk to have an exclusive on sale of all optical ● not acceptable for us as a lender. i wasnt peacing out on town. what is a financiable lease? ● one a lender will loan on ● owners get incensed about how lenders get involved in the leases ○ if the borrower doesnt do very well.i dont care if they have an exclusive thing and ● if you’re repping a lender and they want you to review them for them ● prepare a lease abstract ○ summary of the terms of the leases you would normally do ● lease abstract form or checklist and you’ll go through and say are these in there? Checklist -● IMPORTANT ○ what’s being leased? ■ is the premises clearly defined? ■ clear that they’re leasing building -. then FOLLOW IT ○ don’t make an exception when you do that -. can’t preemptively waive a jury trial ○ GS 26.hje’s gonna say i got discriminated against for no good reason. plus the kiasks ● guys my lender isnt going to allow this ○ enlist 1 500lb gorrilla to help you fight the other 5000 ○ lender can be a big help with respect to owner lender -● can also start raising points about leases that as a developer as a property. and i’ve got all my other leases ● Owner syas -.
or any other legal purpose ■ tennant says.● ● ● ● ● clear that the JS shoes is is going to occupy the store in exhibit a if i only have right to parking at a site over there described on exhibit b -what if owner decides to do something else ● does this imply that you can’t change any of the parking spaces in exhibit b ● if i put an ATM out there. there is science behind running a mall Assigning a lease ■ . you can’t lockem down -.you’ll be the only one who can predominately sell raincoats ● in the future you can promise london fog that no one else’ll come in and be in the busi of predominately selling raincoats ● but JS shoes can sell a rain coat every now and then ○ tenant wants it to say ■ do x. we cant compete. and courts are good with that ■ tenant mix is a HUGE deal. does that give them a right to break th lease b/c i took away their right to park there? who is the tenant? ○ when you sign a lease with REI are you signing a lease with REI or a franchisee of REI or a single purpose LLC set up by REI to run this store ○ how do you get to the money? ■ i want the tenant to be the company with the money OR ■ get the comp with the money to guaranty ● may be more prepared to have contingent liabilities on their blance sheet than direct liability ● gotta have the credit at least some place on the lease. the subsidiary of REI what is the ‘permitted use’ ○ want to see on behalf of lender/landlord ■ use ONLY FOR ‘x’ permitted use ■ if you leased to shoe store x ● limit lease to seling shoes and shoe related accessories ○ but primary use has to be shoes ● that shoe store x ■ helps lender/landlord to say to London fog -. doesnt necessarily have to be the tenant ● also comes up in insurance ○ general liability insurance ○ if the insurance that covers REI going to cover the tenant here. but it does mean they can’t do it without them letting you restricing sublet ○ i’m not interested in having you in competition with me ○ so locking them down on use helps that ■ if you’ve got a restrict that only using shoes ■ and a thing saying -.consent to sublet won’t be unreasonably witheld ● my reason is they don’t sell shoes. we want to sublet to someone else ■ if its a nordstroms. i cant sit here and say i’m only ever going to sell shoes ● what if JS shoes merges with another company that sells rainoats ● Belk is kicking our ass selling shoes. you’re probably going to lock them down ● it doesnt mean you can’t let them do something else.if its a js shoes.
well I cant restrict property I don’t own ○ if i’m the lender and i’m making al oan on the streets ■ and you see owner has said owner owners a shopping center three miles away and has an agreement with bonefish that he wouldnt have a seafood restaurant on his other property in a 5 mile area ● As a lender you ahve to have pause ● he’s not gonna give a shit if your foreclose on him. and the streets isnt his prop anymore. and he’s gonna open up a seafood restaurant there ■ have to think about all the possibilities of these going wrong ○ ○ . and NC courts say that’s fine if K is silent as to assignment in general ○ then tenant can assign routine compromise is that tenant cant without consent.● ● ● ● ● you’ve not got a competitor -relates back to use -. or delayed ○ so what is unreasonable ■ some things are clearly reasonable -. and bonefish says we want an exclusive on being a seafood restaurant ■ you know that’s theres at least one lease out there that could potentially turn into seafood restaurant ○ a lot of times aty’s dont see how hard it is to manage and admin the streets at southpoint so Are their restrictive usage or exclusives? ○ are they in sync with everything else that’s out there? ■ is there a potential problem with somehting else out there?/could their be a problem ○ so tell LL all the time. such consent not to be unreasonably witheld.b/c ■ LL can’t unreasonably withhold consent ■ My reasons is that its not the reason we leased it to them if the lease says -. really hard to expect certain kinds of tenants to say i need to be assured that i’m not going to put all this money in to come and then get half my busi cut out from under me ○ have to READ THEM CAREFULLY ■ their troubling but manageable ● you have an owner for a shopping center who is the LL granting leases under all these exclusives ■ it gets more difficult if they’re not under common ownership or may not always be under common ownership in the future ● gave someone an exclusive they can be only Seafood at Streets ● then you start granting out down ○ you need to make sure to put those restrictions on them ○ owner of the property says. don’t ever grant a restrictive or exclusion if you can help it ■ on the other hand. conditioned. bonefish.tenant cannot assign w/o consent and there is no standard for consent -○ LL can be say i dont want to rent to them.i i cant be renting space to target and then ok target’s credit if they want to sublet to roses i’m review this lease for a lender and i’m about to loan ○ i find theres a tenant that got by and they can use their property for the sale of shoe or for any other lawful purpose ○ and we’ve also go a restaurant.
and tenant can sue the LL for breach. but he can’t get out of his lease and the lendor isnt liable for it ● if you end up making it personal as between the ● lender is thinking only about how does that restriction affect my asset if you dont have the credit in the tenat. but I wont be first ■ gotta make you know what they’re guarantying ● if its just the rent but the lease has a lot of maintenance responsibilities. then that shit doesnt really matter lenders have to get after their LL’s ○ have you amended in any way ○ is there a letter you’ve given saying since your busi is seasonal that you can pay 300 some months and 700 others ■ or have you waived rent b/c of construction for a few months ■ you need to have ALL the loan documents ○ Lender gets tenants to execute an estopple ■ most leases require them to do so upon request ■ lease requires the tenant to tell them all the facts about their lease ● My entire agreement is attached to this estopple ■ also want to get the Ten to say LL has performed all obligations to date ● especially as it pertains to construction responsibilities as it pertains to the lease ○ also get them to state that the tenant hasnt prepayed the rent ■ or if they have what they’ve paid it up through ■ so you as lender can make your adjustments ○ a lot of times. and then you’re obilgated to accept it or the tenant is out ■ you may be fine accepting it to keep the tenant but you want it to be YOUR OPTION . you need a guaranty ○ what does the guaranty say? ■ i’ll guaranty only the payment of the rent if you cant collect from the tenant then we’ll talk. tenants see estopples as a way to renegotiate the lease ● Rent ● ● ● read through and make sure they dont have any free rents if there are percentage rents ○ how does it work ○ is it enforceable? Do rents go up? ○ do they go up in a predictible way ○ options to renew at “market rates” ■ what can that market rate be? ● is it detemined by appraisal method ● determined by LL ● determined by tenant ○ lender -.● ● if they do go wrong it measn that tenant has a right to terminate their lease ■ make it a covenant between LL and tenant.I dont care so much that the rent goes up and how it goes up ■ what i DO care about is that it doesnt go down ■ down allow it to be subject to a formula or appraisal and the market says it should go down.
they’re gonna be looking ○ estopple document ■ Lender wants to get in the SNDA ■ won’t pay more than 30 days in advance ● if you prepaid. it wipes ■ Tenants are pretty up to snuff. if the lender forecloses two months later.no right to set off against rent ○ if you’re supposed to provide me with heat/air/electricity ■ and its not there for awhile i can’t use my property ● I ought to be able to abate ■ or if it snows and the LL doesnt clear the parking lot ○ lenders tell LL to tell tenants ■ you can sue me.the new owner becomes obligated to the duties that the LL had. sometimes youll see something like if fran comes through again and we’re without power for 2-3 weeks. you still have to make your rent ○ not that it doesnt ever happen. the lender would not be obligated to do the things LL was ● when the lender forecloses. but I still have to make my mortgage payment. be attached to the owners estate ● if the owner encumbers that property thereafter. the lease is still above ○ Non-disturbance ■ agree they wont disturb to right as tenat so long as they’re in compliance with lease ■ if we have to foreclose. then you can wipe but. though ● if you the lender become the owner or someone else becomes owner through forclosure -. from the moment they become owner ● pretty acceptable compromise ○ attornment ■ tenant recognizes as the LL under the lease the new owner as a result of the foreclosure ○ how rent ties in ■ the estopple is nothing more than a snapshot ● these are the current terms and circumstances regarding the lease at the moment its signed if tenant prepaid for a year. but if you’re without power for 3-4 hours.● ● ● ● ● Lenders ○ MAKE SURE -. otherwise. dude . sorry wnat to make sure that there arent concessions for rent ○ rent is 500 a month BUT ■ nobody will be able to get in and out for two weeks b/c of the state fair and noone’ll be able to get in or out for two weeks ■ so you’re no rent then SNDA ○ subordination ■ rights under lease sub to LL’s rights under mortgage ■ lease would. too bad. we won’t disturb you so long as you’re all good how is it differnt from letting the lease just be first ○ theoretically -■ Lender would not have all the obligations of the LL under the lease ● though tenant can stay in possession.
taxes. he’ll charge you enough to cover mort. you’ve got to go change these provisions in the lease ■ not real easy to do ● Lender will try or req that leases be amnended in order to find them financiable ■ how are certain expenses handled underneath the leases ● typcially ○ common area maintenance ○ taxes ○ insurance ○ utilities ● some will be shared in common with other tennants. etc and a little on teh side for him ○ OR ■ some areas are bigger than other ■ passthrough the expenses based on a prorata basis ● rent + ● challenge ○ wen you have leases entered into over time ■ some bozo has a lease drafted that says the fees are collected on a lease year ■ others are collected on a calendar basis ○ and it can be difficult to keep up ● at the least it needs to be clear who’s responsible for expense . not ground ○ if carmax built the facility themselves. if you wnat us to make a loan. and the building got destoryed ■ carmax gets to keep the insurance proceeds ○ so LL. some will be exclusive as it relates to the area being leased ○ who pays to pick up the pizza boxes out of the common area? ○ Lender just wants to make sure that someone ispaying for it other than the owner of th prop ■ OR if the owner is paying. cover expenses.deal changed ■ originally going to rent carmax the ground to build a facillity on ● LL says i’ll provide the money to build improvement if you pay a return on the money i provide to do that ■ now you’re leasing improvements. what are they paying ○ can say owner is responsible for common areas ■ so when he rents.● ● you signed the document that said i wont pay in advance I understand that I can’t mod the lease w/o the lender’s consent ● if there’s an unscrupulous owner and you borrowed a bunch money onthe prop and everyone signed their estopple ● but owner then goes around amends the lease saying you can cancel with 30 days notice for like 150k to me ○ thats not rent its a cancel fee ○ can put these in the estopple or the SNDA or both lenders also see estopple as a chance to amend the lease ○ someone had taken a ground lease form for something that wasnt a ground lease ■ possibly why -.
they’ll stick around ● if not. need the anchors to have them far in excess of their terms ● what are the renewal options ○ LL hate renewal options ■ they have no control over a renewal ■ especially if its for a stipulated amount of rent ● well if they want to say there. how much money is available to pay debt services ○ so you can figure out the cap rate. but not even half repaid ● need to be concerned with the 10 years and that at the end of the 10 years you have a property that’s marketable enough to pay off the loan ● either through paying it off out of pocket or refinanced ■ not reasonable to have leases for 15 years ● will be looking for the anchors to have that. each of us will hire an appraiser and we’ll average them ○ each will hire and the two appraisers will hire a third and we’ll average the two closest ● baseball arbitration ○ each party gives a number ○ and a third party looks at the two and they pick one and that binds them . and they can open for busi during any time during hte first year of the lease ● need to get in there and read this ○ as a lender i care about the time this loan is being repaid PLUS some ■ if i’m the perm lender givng a loan for 10 years with 20 years amortization ■ in 10 years. ○ it says its a seven year leas ○ BUT ■ if after 5 they can terminate with notice ■ thats not really a 7 year lease. then they won’t stay there anyways ● its lose lose ○ we’re going to be negotiated ○ unless its a rent to be negotiable ■ agreements to agree are not enforceable how do you decide rents if you dont stipulate ● if you dont stipulate what rents are gonna be ○ if we can’t agree on what the rents are gonna be. paid down substantially.what is the NOI. and how much you want to loan real question of the lender ○ with the leases in place. they’re going to want to stay there at the end of term and we can negotiate it then ■ if the tenant looks around and if the stiuplated amount is great deal. will the property support the loan? ○ TERM ● how long are the lease payments going to be made ○ doesnt have to be a rocket scientist to figure out how long the lease is.● so you can get back to -. its a 5 year lease ● what if it says it runs from 2011-2018 ○ BUT the rent doesnt commence until the tenant opens for business.
we want your consent. its important they’re there ○ also. noone is beating down your door to rent occupied space ■ and assuming that you did a good job drafting your lease and the rents are market rates.is this an marketable option to renew ● will it adversely affect the value of the building and the amount i’m willing to loan assign/sublet ● need to make sure you’ve got something that covers it all ○ if you’re renting to a corp. you’ve still got he the spance and if you’d mitigate your damages i shouldnt owe you so much ○ i dont want to have to sue you ever month or every sixth months ■ and i dont want to have to spend all my time in lawsuits with you saying i’m not doing a good enough job trying to re rent.tennancy clauses ■ the only way i’m going to be in your development is if ‘x’ is there ● if and when they’re gone. if they’re perceived as being critical to your success ■ like a harris teeter or something ○ co . hey. a tenant can waive the req’t LL mitigate damges .in NC obligation to mitigate dam would be implied in any circumstances ■ in a comm lease. and they transfer a controling interest in their corp to someone else. that violates ○ if they come to you and say. we’re in the rent receiving business ■ we’ll give you 1-2 times a year to give you notice ● and after that if it happens again you’re gone ● need to understand the types of properties you have ○ if you have property that its req’d that the tenant occupy and use ■ if they go dark their gone ○ if you have a tenant on precentage rent. you’re not going to kick them out ● differnce between monetary and non monetary defualt ○ you want them to be responsible for paying their rents on time ○ what if it gets lost in the mail ■ compromise ● if there is an occasion that you dont get your rent on time.■ i have to pick the winning number lender looking at that -. especially when you’re the one who defaulted ○ for awhile -. that would be covered ○ need to make sure people can’t do indirectly what they can’t do directly ● even if you have a great one and it says that if its sold. which btw we’re going to do anyway b/c its a lot more important than this one little store ○ and even in great RE markets. lender has given youthe money and all of it ■ on a lease. i’m gone ● would love to have an accelleration of rent on default ○ tenants are not keen on this ○ a loan. then well give you notice and then give you a few days ● but we’re not gonna make a habit ○ we’re not in the rent collection business.
i’m willing to discount them down for TVM. we want to be able to move along and we don’t want anything to inhibit this preemptive rights ○ right of tenant to expand or contract space ○ what about right to expand ■ that property has to sit stagnant or in short term leases to keep that up ■ affects the marketability ● ● ● ● NEED TO MAKE COUSIN VINNY references ● . but yo’ve got ten years on which you can do with tthe space. can’t have them ○ can’t have unless they subordinate these rights ○ can’t have purchase options ■ lender isnt going to be happy. its my opinon that i can rent all those other before irent your space. you’ve just capped the value of this property ■ only reason the tenant is gonna buy is b/c its a good dead ■ even if the purchase option price is more than the rent term ○ right of first refusal ○ right of first offer lenders arent interested in anything that makes the property less marketable ○ fom lender. if we foreclose. i’ve already rented your space NO-NOs from a lender’s POV.● properly drafted acell ○ have to provide that it would be reduced to a present value ○ but a court would prob uphold it ○ provide some credit for fair rental value of the property over the period of time ■ you kick a tenant out over the next ten years. shouldnt they get some credit for what you can do on that space ○ if i’ve got other empty spaces.
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