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MARYLAND
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001-35657
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46-0633510
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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Exhibit No.
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Description
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Purchase Agreement, dated August 8, 2018, by and among FYR SFR Purchaser, LLC, RHA 1 Inc., RHA 2 Inc., RHA 3 Inc., HavenBrook Partners, LLC, Rental Home Associates LLC and each of the unitholders of HavenBrook identified therein. *
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Amendment Agreement, dated August 8, 2018, by and between Front Yard Residential, L.P. and Altisource S.à r.l. †
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Loan Agreement, dated August 8, 2018, by and between FYR SFR Borrower, LLC, as Borrower, and Berkadia Commercial Mortgage LLC, as Lender.
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Press Release of Front Yard Residential Corporation dated August 9, 2018.
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*
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Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any of the omitted schedules or exhibits upon request by the United States Securities and Exchange Commission, provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, as amended, for any schedules or exhibits so furnished.
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†
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Portions of this exhibit have been redacted pursuant to a request for confidential treatment. The non-public information has been filed separately with the Securities and Exchange Commission.
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Front Yard Residential Corporation
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August 9, 2018
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By:
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/s/ Robin N. Lowe
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Robin N. Lowe
Chief Financial Officer
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TABLE OF CONTENTS
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Page
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ARTICLE I
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DEFINITIONS
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1
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Section 1.01
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Certain Defined Terms
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1
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Section 1.02
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Definitions
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9
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Section 1.03
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Interpretation and Rules of Construction
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10
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ARTICLE II
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PURCHASE AND SALE
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11
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Section 2.01
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Purchase and Sale of the Equity Interests
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11
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Section 2.02
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Purchase Price
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11
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Section 2.03
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Closing
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12
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Section 2.04
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Closing Deliveries by Sellers
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12
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Section 2.05
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Closing Deliveries by Purchaser
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12
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Section 2.06
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Purchase Price Calculation
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13
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Section 2.07
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Withholding
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15
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ARTICLE III
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REPRESENTATIONS AND WARRANTIES CONCERNING SELLERS
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15
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Section 3.01
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Organization, Authority and Qualification of Seller
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16
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Section 3.02
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Ownership of Equity Interests
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16
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Section 3.03
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No Conflict
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16
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Section 3.04
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Governmental Consents and Approvals
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16
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Section 3.05
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Brokers
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17
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Section 3.06
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Compliance with Laws; Litigation
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17
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ARTICLE IV
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REPRESENTATION AND WARRANTIES CONCERNING THE TARGET COMPANIES
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17
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Section 4.01
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Capitalization
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17
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Section 4.02
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Organization, Authority and Qualification of the Target Companies
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18
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Section 4.03
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Subsidiaries
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18
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Section 4.04
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No Conflict
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19
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Section 4.05
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Not An Investment Company
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19
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Section 4.06
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Financial Statements
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19
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Section 4.07
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Absence of Undisclosed Material Liabilities
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19
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Section 4.08
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Absence of Certain Changes or Events
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19
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Section 4.09
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Compliance with Laws
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20
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Section 4.10
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Litigation and Governmental Orders
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20
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Section 4.11
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Permits
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20
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Section 4.12
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Intellectual Property
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20
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Section 4.13
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Real Property
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20
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Section 4.14
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Employee Benefit Matters
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21
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Section 4.15
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Labor Matters
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22
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Section 4.16
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Taxes
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23
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Section 4.17
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Certain Contracts
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25
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Section 4.18
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Environmental Matters
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26
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Section 4.19
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Insurance
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26
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Section 4.20
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Embargoed Person
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26
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Section 4.21
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Owned Real Property Additional Representations
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27
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Section 4.22
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Brokers
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27
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Section 4.23
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Exclusive Representations and Warranties
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27
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ARTICLE V
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REPRESENTATIONS AND WARRANTIES OF PURCHASER
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27
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Section 5.01
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Organization and Authority of Purchaser
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27
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Section 5.02
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No Conflict
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27
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Section 5.03
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Litigation
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28
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Section 5.04
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Qualification
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28
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Section 5.05
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Brokers
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28
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Section 5.06
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No Outside Reliance
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28
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Section 5.07
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Investigation
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29
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Section 5.08
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REIT Status
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29
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ARTICLE VI
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ADDITIONAL AGREEMENTS
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29
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Section 6.01
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Release of Target Companies
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29
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Section 6.02
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Further Action
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29
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Section 6.03
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Payoff Letter
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30
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Section 6.04
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Retention Bonuses
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30
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Section 6.05
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Internal Restructurings
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30
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Section 6.06
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Purchaser REIT Covenant
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30
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Section 6.07
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Non-Solicitation
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30
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Section 6.08
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Audited Financials
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31
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ARTICLE VII
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EMPLOYEE MATTERS
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32
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Section 7.01
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Directors’ and Officers’ Insurance and Indemnification
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32
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Section 7.02
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Employee Matters
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33
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ARTICLE VIII
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TAX MATTERS
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34
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Section 8.01
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Tax Returns
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34
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Section 8.02
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Cooperation on Tax Matters
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35
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Section 8.03
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Contest Provisions
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35
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Section 8.04
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Tax Treatment
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36
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Section 8.05
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Tax Refunds
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36
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Section 8.06
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Straddle Period Taxes
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36
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ARTICLE IX
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INDEMNIFICATION
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36
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Section 9.01
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Survival of Representations and Warranties
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36
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Section 9.02
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Indemnification by Sellers
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37
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Section 9.03
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Indemnification by Purchaser
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37
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Section 9.04
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Limits on Indemnification
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37
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Section 9.05
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Notice of Loss; Third Party Claims
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38
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Section 9.06
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Exclusive Remedies
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39
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Section 9.07
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Manner of Payment
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39
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Section 9.08
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Treatment of Indemnity Payments
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39
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ARTICLE X
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GENERAL PROVISIONS
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40
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Section 10.01
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Transfer Taxes and Related Expenses; Other Expenses
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40
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Section 10.02
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Notices
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40
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Section 10.03
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Public Announcements
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42
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Section 10.04
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Severability
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42
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Section 10.05
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Entire Agreement
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42
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Section 10.06
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Assignment
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42
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Section 10.07
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Amendment
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42
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Section 10.08
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Waiver
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42
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Section 10.09
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No Third Party Beneficiaries
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43
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Section 10.10
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Neutral Construction
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43
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Section 10.11
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Governing Law
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43
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Section 10.12
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Waiver of Jury Trial
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43
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Section 10.13
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Specific Performance
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43
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Section 10.14
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Counterparts
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44
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Section 10.15
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Time is of the Essence
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44
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Section 10.16
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Legal Representation; Waiver; Attorney-Client Privilege
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44
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Section 10.17
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Appointment of the Seller Representative
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46
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“
Agreement
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Preamble
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“
Auditor
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Section 2.06(d)
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“
Base Premium
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Section 7.01(d)
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“
Cap
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Section 9.04(a)
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“
Claim Notice
”
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Section 9.05
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“
Closing
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Section 2.03
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“
Closing Date
”
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Section 2.03
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“
Closing HB Balance Sheet
”
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Section 2.06(b)(i)
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“
Closing HB Net Working Capital
”
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Section 2.06(b)(i)
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“
Closing RHA Balance Sheet
”
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Section 2.06(b)(ii)
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“
Closing RHA Net Working Capital
”
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Section 2.06(b)(ii)
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“
Continuing Employees
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Section 7.02(a)
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“
Covered Persons
”
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Section 7.01(a)
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“
Current Year Taxes
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Section 2.08
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“
Determination Date
”
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Section 2.06(d)
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“
ERISA
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Section 4.14(b)
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“
Estimated Closing Statements
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Section 2.06(a)(ii)
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“
Estimated HB Closing Statement
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Section 2.06(a)(i)
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“
Estimated HB Net Working Capital”
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Section 2.06(a)(i)
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“
Estimated RHA Closing Statement
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Section 2.06(a)(ii)
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“
Estimated RHA Net Working Capital”
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Section 2.06(a)(ii)
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“
Final Closing Statement
”
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Section 2.06(b)
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“
Financial Statements
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Section 4.06
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“
Fundamental Representations
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Section 9.01
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“
HB Partners
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Preamble
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“
HB Purchase Price”
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Section 2.02(a)
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“
HB Sellers
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Preamble
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“
Indemnification Contracts
”
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Section 7.01(a)
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“
Indemnification Documents
”
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Section 7.01(a)
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“
Internal Restructurings
”
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Section 6.05
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“
IRS
”
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Section 4.14(a)
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“
Liability Threshold
”
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Section 9.04(a)
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“
Material Contracts
”
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Section 4.17(a)
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“
Notice of Disagreement
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Section 2.06(d)
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“
Owned Real Property
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Section 4.13
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THE RHA COMPANIES
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RHA 1 INC.
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By:
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/s/ Harin de Silva
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Name:
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Harin de Silva
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Title:
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President
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RHA 2 INC.
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By:
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/s/ Harin de Silva
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Name:
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Harin de Silva
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Title:
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President
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RHA 3 INC.
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By:
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/s/ Harin de Silva
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Name:
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Harin de Silva
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Title:
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President
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HB PARTNERS
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HAVENBROOK PARTNERS, LLC
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By:
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/s/ Miles Adams
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Name:
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Miles Adams
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Title:
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Chief Financial Officer
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PURCHASER:
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FYR SFR PURCHASER, LLC
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By:
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/s/ Ercan Gurhan
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Name:
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Ercan Gurhan
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Title:
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Authorized Representative
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SELLERS:
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TOBI II LLC
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By:
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/s/ John J. Lee
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Name:
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John J. Lee
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Title:
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Authorized Person
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SEMS, LLC
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By:
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/s/ Robert A. Lee
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Name:
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Robert A. Lee
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Title:
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Manager
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RENTAL HOME ASSOCIATES LLC
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By:
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/s/ John J. Lee
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Name:
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John J. Lee
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Title:
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Authorized Person
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GUARANTOR:
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PIMCO BRAVO FUND II, L.P.
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By:
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PIMCO GP XII, LLC, its general partner
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By:
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Pacific Investment Management Company LLC, its managing member
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By:
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/s/ John J. Lee
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Name:
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John J. Lee
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Title:
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Executive Vice President
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a.
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Section 20.13 of the Agreement is hereby amended as follows:
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b.
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Section 20.14 of the Agreement is hereby amended as follows:
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i.
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Section 20.14(a) of the Agreement is deleted in its entirety; and
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ii.
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Section 20.14(b) of the Agreement is amended as follows:
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c.
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The following shall be added as a new Section 20.15:
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d.
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Section 2 of Exhibit 1 of the Agreement is amended as follows:
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i.
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To replace the definition of “Change of Control” with the following definition “
CHANGE OF CONTROL
. The term “
Change of Control
” means (i) the consummation of any sale, lease, transfer, conveyance or other disposition by Residential, in a single transaction or series of related transactions, within a twelve (12) month period, of all or substantially all of the assets of Residential and its subsidiaries, taken as a whole, to any other unaffiliated “person” or “group” (for purposes of this definition, as such terms are used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the date hereof) and which is not, immediately after giving effect thereto, a subsidiary of Residential, solely if such sale, lease, transfer or other disposition is made within two (2) years after the occurrence of the circumstances in (ii) or (iii) of this definition ; (ii) any person or group shall have obtained the power (whether or not exercised) to elect a majority of the board of directors of the Corporate Parent; (iii) any person or group is or shall become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date hereof), directly or indirectly, of
[***]
percent (
[***]
%)or more (on a fully diluted basis) of the combined voting power of the Corporate Parent’s outstanding capital stock; or (iv) the current members of the Corporate Parent’s board of directors as of the date hereof (the “
Incumbent Board
”) shall cease to represent a majority of the directors of the Corporate Parent’s board of directors (provided that any person becoming a director subsequent to the date hereof, whose election, or nomination for election by the Corporate Parent’s shareholders, was approved by a vote of a majority of the directors constituting the Incumbent Board shall be considered as though such person were a member of the Incumbent Board).”
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ii.
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To include the following definition of Retail Property:
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iii.
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To include the following definition of Subject REO Properties:
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e.
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The table set forth in Section 2 of Exhibit 2 of the Agreement is hereby amended as follows:
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i.
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To change the Service Period for Renovation Services (Schedule A-2 to the Services Letter) from “15 years” to “See Section 3.1 below”.
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ii.
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To change the Service Period for Leasing and Property Management Services (Schedule A-7 to the Services Letter) from “15 years” to “See Section 3.1 below”.
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iii.
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To change the Service Period for Asset Management Services (Schedule A-1 to the Services Letter) and Acquisition and Sales Services (Schedule A-5 to the Services Letter) from “15 years” to “until completion of the sale of the Subject REO Properties.”
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iv.
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To change the Service Period for Property Preservation and Inspection Services (Schedule A-3 to the Services Letter) and Valuation Services (Schedule A-4 to the Services Letter from “15 years” to “(a) as to the Subject REO Properties, until completion of the sale of the Subject REO Properties, and (b) as to the Retail Properties, until completion of the sale of the Retail Properties.”
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v.
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To change the Service Period for Insurance Services (Schedule A-6 to the Services Letter) from “15 years” to “four (4) years from the Omnibus Amendment Effective Date”.
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vi.
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To include a reference to the Retail Property Asset Management and Disposition Services (as defined in Schedule A-8 to the Services Letter). The Service Period for the Retail Property Asset Management and Disposition Services shall begin on the Omnibus Amendment Effective Date and expire upon completion of the sale of the Retail Properties.
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f.
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Exhibit 2 of the Agreement is hereby amended to add the following new Section 3:
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g.
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A new Exhibit 3 of the Agreement is hereby added as set forth in Attachment C to this Omnibus Amendment.
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2.
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Amendments to the Services Letter
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a.
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The Asset Management Services SOW (Schedule A-1 to the Services Letter) is hereby amended as follows:
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b.
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The Renovation SOW (Schedule A-2 to the Services Letter) is hereby amended as follows:
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i.
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Section 4.1 (Provision of Renovation Services) is amended and restated as follows:
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ii.
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Section 4.2.1 (Initial Screening Assessment) is deleted in its entirety and replaced with the following:
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iii.
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Section 4.2.2 (Renovation Estimate Assessment) is deleted in its entirety and replaced with the following:
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iv.
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Section 4.2.3 is deleted in its entirety.
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v.
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Section 4.3.2 is hereby deleted in its entirety and replaced with the following:
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vi.
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An incorrectly numbered Section 4.3.2 currently titled “Renovation of Property” is hereby deleted in its entirety and is (a) corrected to have a new section numbering of Section 4.3.3, and (b) replaced with the following:
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vii.
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An incorrectly numbered section heading for Section 4.3.3 currently titled “Management of Change Orders” is hereby amended to be correctly numbered as Section “4.3.4”. All other sequential sub-section numbers in the corrected Section 4.3.4 are also hereby amended to have the root section numbering of 4.3.4.
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viii.
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An incorrectly numbered Section 4.3.4 currently titled “Turnover to Leasing” is hereby amended to be correctly numbered as Section “4.3.5”.
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ix.
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A new Section 4.3.6 is hereby added as follows:
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x.
|
Section 7.1 (Controlling Provisions) is amended to replace the word “None” with the following: “As of the Omnibus Amendment Effective Date, (a) the provisions of Section 8.1 (inclusive) shall be deemed to not apply to Residential
in connection with Altisource’s provision of, and Residential’s receipt of, Renovation Services, and (b) the provisions of Section 8.2 of the Agreement
|
c.
|
The Property Preservation and Inspection Services SOW (Schedule A-3 to the Services Letter) is hereby amended as follows:
|
d.
|
The Valuation Services SOW (Schedule A-4 to the Services Letter) is hereby amended as follows:
|
e.
|
The Acquisition and Sales Support SOW (Schedule A-5 to the Services Letter) is hereby amended as follows:
|
f.
|
The Insurance SOW (Schedule A-6 to the Services Letter) is hereby amended as follows:
|
i.
|
Section 7.1 (Controlling Provisions) is amended to replace the word “None” with the following: “In addition to Altisource’s obligations set forth in Section 4.10 of the Agreement, as of the Omnibus Amendment Effective Date, Altisource will, at Residential’s request (which request may not be made more than once per calendar year), conduct pricing surveys with participation of Residential in determining the market participants in the pricing survey (the “
Title Insurance Pricing Surveys
”) related to the fees charged for title insurance and closing, escrow and settlement services and Altisource will take such Title Insurance Pricing Surveys into account in determining rates for such services as required under Section 4.10. The out-of-pocket costs for conducting such a survey will be paid
[***]
percent (
[***]
%) by Altisource and
[***]
percent (
[***]
%) by Residential. Residential shall not take any steps to reduce, modify or otherwise amend the structure or terms in effect as of the Omnibus Amendment Effective Date concerning the purchase of title insurance for buyers and credits issued at closing to help cover the costs related to use of Altisource as the provider of closing, escrow and settlement services. Notwithstanding the foregoing, in no event shall Altisource’s fees charged pursuant to Schedule B-6 of the Fee Letter for such title insurance and closing, escrow and settlement service exceed
[***]
% of the prices determined to be market for materially the same services under
|
g.
|
The Property Management SOW (Schedule A-7 to the Services Letter) is hereby amended as follows:
|
i.
|
Section 4.3.6 (Manage Unit Turnover) is hereby and replaced with the following: “
4.3.6. UNIT TURNOVERS FOR RENTAL PROPERTIES; HOA PAYMENTS
. All unit turnovers shall be addressed in the Renovation SOW as amended by the Omnibus Amendment. Altisource shall mange the payment of periodic dues to any home owners association (“HOA”) affecting a Rental Property on Residential’s behalf at Residential’s expense during the Property Management Services Amended Service Period. Residential shall forward all notices, bills and other HOA documentation to Altisource to the extent Residential desires that Altisource manage HOA payments.”
|
ii.
|
Section 7.1 (Controlling Provisions) is amended to replace the word “None” with the following: “As of the Omnibus Amendment Effective Date, (a) the provisions of Section 8.1 (inclusive) shall be deemed to not apply to Residential in connection with Altisouce’s provision of, and Residential’s receipt of, Renovation Services, and (b) the provisions of Section 8.2 of the Agreement shall not apply in connection with Altisouce’s provision of, and Residential’s receipt of, Renovation Services.
|
h.
|
The Services Letter is hereby amended to include and incorporate the Services set forth in a new Statement of Work (Retail Property Asset Management and Disposition Services) attached hereto as Attachment A and which is added and incorporated into the Services Letter as Schedule A-8.
|
3.
|
Amendments to the Fee Letter
.
|
a.
|
The Renovation Fee Schedule (Schedule B-2 to the Fee Letter) is hereby amended as follows:
|
i.
|
Section 4.1 of the Renovation Fee Schedule is hereby deleted in its entirety and replaced with the following:
|
4.1.1
|
Renovation Estimate Assessment for Delayed Rehab Properties and Vacant Acquired Properties
. $
[***]
each.
|
4.1.2
|
Renovation Estimate Assessment for Turnovers of Rental Properties
.
|
a.
|
Georgia
. $
[***]
each for any Rental Property located in Georgia.
|
b.
|
Outside of Georgia.
At cost for each Rental Property not located in Georgia.
|
4.1.3
|
Property Renovation Services for Delayed Rehab Properties and Vacant Acquired Property
. The amounts set forth in each Final Scope of Work.
|
4.1.4
|
Property Renovation Services for Turnovers of Rental Property
.
|
a.
|
Georgia
. The amounts set forth in each Final Scope of Work for each Rental Property located in Georgia.
|
b.
|
Outside of Georgia
.
[***]
”
|
ii.
|
Section 4.3 of the Renovation Fee Schedule is hereby deleted in its entirely and replaced with the following:
|
b.
|
The Property Management Fee Schedule (Schedule B-7 to the Fee Letter) is hereby amended as follows:
|
i.
|
Section 4.1.4 of the Leasing and Management Fee Schedule is hereby deleted in its entirety to and replaced with the following:
|
ii.
|
Section 4.1.5 (Unit Turnovers) of the Property Management Fee Schedule is hereby deleted in its entirety and replaced with the following language. “For purposes of clarity Fees for unit turnovers shall be paid as set forth in the Renovation Fee Schedule.”
|
iii.
|
A new Section 4.1.6 shall be added to the Property Management Fee Schedule that reads as follows: “4.1.6
HOA Bill Payments
. $
[***]
per HOA payment.”
|
c.
|
The Fee Letter is hereby amended to include and incorporate the Fees for the corresponding Services as set forth in a new Fee Schedule (Retail Property Asset Management and Disposition Services) attached hereto as Attachment B and which is incorporated into the Fee Letter as Schedule B-8.
|
|
|
RESIDENTIAL:
|
||
|
|
|
|
|
|
|
FRONT YEARD RESIDENTIAL CORPORATION
|
||
|
|
|
|
|
|
|
By:
|
/s/ Stephen H. Gray
|
|
|
|
Name:
|
Stephen H. Gray
|
|
|
|
Title:
|
Chief Administrative Officer
|
|
|
|
ALTISOURCE:
|
||
|
|
|
|
|
|
|
ALTISOURCE S.À R.L
.
|
||
|
|
|
|
|
|
|
By:
|
/s/ Indroneel Chatterjee
|
|
|
|
Name:
|
Indroneel Chatterjee
|
|
|
|
Title:
|
Manager
|
|
1.
|
INTEGRATION WITH SERVICES LETTER
.
|
2.
|
GOVERNED BY MASTER SERVICES AGREEMENT
.
|
3.
|
DEFINED TERMS
.
|
4.
|
SERVICES
.
|
4.1
|
Provision of Retail Property Asset Management and Disposition Services
. Subject to the terms and conditions of the MSA, Altisource shall provide, or cause to be provided to Residential and any of Residential’s Affiliates, the following services in connection with Retail Properties each as further described below:
|
(a)
|
Agency Services;
|
(b)
|
Property Management Services;
|
(c)
|
Valuation Services;
|
(d)
|
Sales Support Services; and
|
(e)
|
Insurance Services.
|
4.2
|
Agency Services
.
|
4.2.1
|
Appointment
. Residential hereby appoints Altisource, and Altisource hereby accepts this appointment, as Residential’s duly authorized representative, agent, attorney-in-fact and asset manager, as the context may require, for the purpose of delegating authority to Altisource in order to enable Altisource to perform the Retail Management and Disposition Services in connection with Retail Properties on Residential’s behalf as further described herein.
|
4.2.2
|
Powers of Attorney
. Upon the written request of Altisource, Residential agrees to execute, or cause to be executed, and furnish to Altisource appropriate powers of attorney and other documents necessary or appropriate to enable Altisource to carry out its duties hereunder.
|
4.3
|
Property Management Services
. Altisource will manage property conditions and defects for all Retail Properties as follows:
|
4.3.1
|
Preservation and Repair Services
. Altisource will, at Residential’s cost and on Residential’s behalf, manage the preservation of each Retail Property and the remediation of property conditions and defects to maintain each Retail Property in a clean and marketable condition at the direction of Residential and pursuant to the Delegated Authority Matrix as defined in the Leasing and Property Management SOW as of the
Omnibus Amendment Effective Date.
|
4.3.2
|
Code Violation Management and Mitigation
. Where code violations exist and Altisource has been provided notice of violations, Altisource will manage the mitigation of such code violations and negotiate code violation fines on behalf of Residential. Residential authorizes to Altisource to expend up to $
[***]
on any item on Residential’s behalf to mitigate any code violation without any further approval from Residential, including paying such amount as a fine, expending such amount in repair work or offering up to such amount as a seller concession to a buyer at closing. Any fine, remediation work item or a seller concession anticipated to exceed $
[***]
shall require Residential’s approval. Notwithstanding the foregoing, if any fine is the result of Altisource’s failure to timely mitigate a violation for which Altisource was aware and could have reasonably cured such violation prior to accruing the fine, then Altisource shall be responsible for payment of such fine.
|
4.3.3
|
Management of Utilities and HOA
. Altisource will provide utility activation and management for water, gas and electric utilities, and meet service providers where required to activate utilities for vacant property held by Residential. Residential authorizes Altisource to timely pay, on Residential’s behalf, any periodic fees or dues to Home Owners Association (“HOA”) until the sale of the Retail Property is completed. Residential authorizes Altisource to expend on Residential’s behalf up to $
[***]
on any item in connection with any HOA violation or unpaid dues and fees without any further approval from Residential, including paying such amount as a fine, expending such amount on a repair work item or offering up to such amount as a seller concession to a buyer at closing. Any fine, remediation work item or a seller concession anticipated to exceed $
[***]
to resolve an HOA matter shall require Residential’s approval. Notwithstanding the foregoing, if any fine is the result of Altisource’s failure to timely mitigate a violation for which Altisource was aware and could have reasonably cured such violation prior to accruing the fine, then Altisource shall be responsible for payment of such fine.
|
4.3.4
|
Property Tax Mitigation
. Residential authorizes Altisource to, on Residential’s behalf, pay or otherwise offer a credit to buyer at closing to cover all unpaid taxes and assessments preventing a closing in an amount equal to the lessor of (i) the actual amount of the unpaid taxes and assessments, or (ii)
[***]
percent (
[***]
%) of the
[***]
of such Retail Property without any further approval from Residential. Payments or a seller concession relating to unpaid taxes and assessments in an amount exceeding the actual amounts of the unpaid taxes and assessments or
[***]
percent (
[***]
%) of the
[***]
shall require the approval of Residential.
|
4.4
|
Valuation Services
.
Altisource will provide Valuation Services in connection with Retail Properties pursuant to the Valuation Services SOW only as requested by Residential. Altisource will request that each Referral Listing Agent (as defined below) provide a comparative market analysis or broker price opinion as a basis for Residential’s determination of a list price for such Retail Property.
|
4.5
|
Sales Support Services
.
|
4.5.1
|
Assignment of Broker
. For each Retail Property, Altisource or its Affiliate will recommend to Residential a duly licensed real estate agent experienced in the market in which such Retail Property is situated (the “
Referral Listing Agent
”) to list and market the Retail Property. Altisource’s recommendation shall be accompanied by such Referral Listing Agent’s list of homes sold in the subject market in the last 12 months and any other relevant information requested by Residential for evaluating the Referral Listing Agent’s ability. Residential shall have 5 business days to approve or disapprove such Referral Listing Agent. Any failure by Residential to disapprove such Referral Listing Agent within this 5 business day period shall be deemed an approval of such Referral listing Agent. If the Referral Listing Agent is disapproved Altisource shall use commercially reasonable efforts to provide a new recommendation within 5 business days. If Residential approves or is deemed to have approved the Referral Listing Agent, then Residential authorizes Altisource to execute and enter into a listing agreement on Residential’s behalf with each Referral Listing Agent. Notwithstanding the foregoing or anything to the contrary contained herein, Altisource shall not be responsible or held liable for the errors and omissions of any Referral Listing Agent. Residential agrees that the Referral Listing Agent shall be authorized to act as a dual agent or other similar capacity such that the Referral Listing Agent would have obligations to both Residential as the seller and to the buyer of any Retail Property. Residential authorizes Altisource to execute on Residential’s behalf any consents, disclosures or other documents relating to the Referral Listing Agent’s dual agent capacity in accordance with local customs and practice.
|
4.5.2
|
Listing; Registration
. Altisource will require that the Referral Listing Agent list the property in the local MLS in accordance with MLS guidelines and at a set list price as specified by Residential. Retail Properties shall not be marketed in a time-limited bidding format or otherwise be sold via an auction process or website without Residential’s approval. Additionally, Altisource shall request, and Residential hereby authorizes, that each Referral Listing Agent obtain any property registrations and inspections as required by local and state laws for any Retail Property.
[***]
|
4.5.3
|
Marketing
. All marketing activities will be handled by the Referral Listing Agent, including, but not limited to:
|
(a)
|
Arranging advertising and cooperating fully with other brokers;
|
(b)
|
Placing or using existing access devices on each Retail Property; and
|
(c)
|
Placing “for sale” signs on each Retail Property.
|
4.5.4
|
Offers; Market Evaluation
. Altisource shall instruct the Referral Listing Agent to communicate all offers to Altisource from prospective buyers. Altisource shall have the authority to accept on Residential’s behalf any offer which is (i) of at least
[***]
percent (
[***]
%) of the list price, and (ii) complies with local payment customs. During the period that is between the
[***]
and
[***]
day of being listed on the market without an acceptable purchase offer, Altisource may review the offer history and submit a revised marketing strategy to Residential for approval. All list price reductions shall require the approval of Residential.
|
4.5.5
|
Contracts
. Altisource shall ensure that each Referral Agent is instructed to cause all contracts for the sale of Retail Property to: (a) be prepared using Residential’s preferred form of purchase and sale agreement (PSA) for single-family, residential real property, and (b) identify as Seller the Residential subsidiary holding title to the Property as provided by Residential.
|
4.5.6
|
Property Condition; Disclosures
. Altisource will communicate to each Referral Listing Agent that each Residential Property has never been owner-occupied by Residential and that Residential is an institutional seller. Altisource will communicate to each Referral Agent that Residential prefers to sell each Retail Property on an “as-is, where-is” basis without any representations or warranties as to the condition of the property, improvements or appurtenances to the extent permissible under applicable laws. Residential shall provide Altisource with all information and documentation required to be disclosed by a seller of any Retail Property in the jurisdiction where each Retail Property is situated. If the Referral Listing Agent requires supplemental information or documentation or seller disclosures to comply with applicable laws, Residential agrees to provide all such information to Altisource and authorizes Altisource to cooperate with Referral Listing Agent to provide the requested information and execute such documentation as appropriate.
|
4.5.7
|
Earnest Money
. Earnest money will be held by the entity designated in the PSA as providing escrow services in an amount as recommended by the Referral Listing Agent and agreed to in the PSA. Except as may otherwise be required by applicable law, each sales contract will provide that in the event of default by purchaser, earnest money will be forfeited in full and the entire amount paid to Residential immediately upon demand.
|
4.5.8
|
Document Management and Closing
. Altisource will coordinate with the title company, settlement agent and Referral Agent assigned to each closing to facilitate Residential’s receipt and review of all closing documents at Residential’s direction. Residential acknowledges and agrees that it shall solely be responsible for the review, accuracy, execution and delivery of all closing documents, including the deed, settlement statement, FIRPTA, owner’s affidavit, release, assignment, bill of sale and any other documents required by the settlement agent and title company to close on the sale of a Retail Property pursuant to the terms of the applicable PSA.
|
4.6
|
Insurance Services and Settlement Services
. If any PSA permits Residential to choose a title insurance or settlement services provider, then Residential shall designate Altisource’s licensed Affiliate for such services. Altisource shall provide such services, to the extent applicable to a Retail Property, in accordance with the Insurance SOW.
|
5.
|
FEES
.
|
6.
|
SPECIAL PROVISIONS
.
|
7.
|
INTERPRETATION
.
|
7.1.
|
CONTROLLING PROVISIONS
. Notwithstanding anything set forth in the MSA to the contrary, the Parties agree that the following provisions shall, in connection with the Services provided pursuant to this SOW, either are (i) in addition to the terms of the MSA; or (ii) to the extent that this SOW is inconsistent with the terms of the MSA, then the terms of the MSA shall control to the extent of any conflict, unless noted below:
|
8.
|
COUNTERPARTS, ELECTRONIC SIGNATURES
.
|
RESIDENTIAL:
|
|
ALTISOURCE:
|
||
|
|
|
|
|
FRONT YARD RESIDENTIAL CORPORATION
|
|
ALTISOURCE S.À R.L.
|
||
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Stephen H. Gray
|
|
By:
|
/s/ Indroneel Chatterjee
|
Name:
|
Stephen H. Gray
|
|
Name:
|
Indroneel Chatterjee
|
Title:
|
Chief Administrative Officer
|
|
Title:
|
Manager
|
Date:
|
August 8, 2018
|
|
Date:
|
August 8, 2018
|
1.
|
INTEGRATION WITH SOW
.
|
2.
|
DEFINITIONS
.
|
2.1.
|
AGENCY SERVICES
. The term “Agency Services” means those Services described in Section 4.2 of the SOW.
|
2.2.
|
INSURANCE SERVICES
. The term “Insurance Services” means those Services described in Section 4.6 of the SOW.
|
2.3.
|
INSURANCE SOW
. The term “Insurance SOW” means that certain Statement of Work (Insurance Services), dated as of December 21, 2012, by and between Altisource and Residential, which is attached to the Services Letter as Schedule A-6, as such Insurance SOW has been amended under the Omnibus Amendment Agreement, the terms of which will be deemed to survive and continue in full force and effect if the such Statement of Work (Insurance Services) has otherwise been previously terminated, but in such case solely as to this SOW and only for so long as necessary to effect the purposes of and provision of services pursuant to this SOW.
|
2.4.
|
LEASING AND PROPERTY MANAGEMENT SOW
. The term “Leasing and Property Management SOW” means that certain Statement of Work (Leasing and Property Management Services) dated as of December 21, 2012, by and between Altisource and Residential, which is attached to the Services Letter as Schedule A-7, as such Leasing and Property Management SOW has been amended under the Omnibus Amendment Agreement, the terms of which will be deemed to survive and continue in full force and effect if the such Statement of Work (Leasing and Property Management Services) has otherwise been previously terminated, but in such case solely as to this SOW and only for so long as necessary to effect the purposes of and provision of services pursuant to this SOW.
|
2.5.
|
MLS
. The term “MLS” means Multiple Listing Service.
|
2.6.
|
MSA
. The term “MSA” has the meaning set forth in Section 2 of the SOW.
|
2.7.
|
PROPERTY MANAGEMENT SERVICES
. The term “Property Management Services” means those Services described in Section 4.3 of the SOW.
|
2.8.
|
RENTAL PROPERTY
. The term “Rental Property” means the real property owned by Residential that is active in Residential’s rental property program and indicated by an active status in the Propertyware system.
|
2.9.
|
RETAIL PROPERTY
. The term “Retail Property” means the real property owned by Residential which (a) is removed from Residential’s rental property program and designated by Residential for sale in a non-auction format to the general public, and (b) is currently vacant and Altisource has completed its unit turnover work pursuant to Section 4.3.6 of the Leasing and Property Management SOW as set forth on Schedule 1 hereto.
|
2.10.
|
RETAIL PROPERTY ASSET MANAGEMENT AND DISPOSITION SERVICES
. The term “Retail Property Asset Management and Disposition Services” means those services provided by Altisource to
|
2.11.
|
SALES SUPPORT SERVICES
. The term “Sales Support Services” means those Services described in Section 4.6 of the SOW.
|
2.12.
|
SERVICES LETTER
. The term “Services Letter” has the meaning set forth in Section 1 of the SOW.
|
2.13.
|
VALUATION SERVICES
. The term “Valuation Services” means those Services described in the Valuation SOW.
|
2.14.
|
VALUATION SOW
. The term “Valuation SOW” means that certain Statement of Work (Valuation Services), dated as of December 21, 2012, by and between Altisource and Residential, which is attached to the Services Letter as Schedule A-4, as such Valuation SOW has been amended under the Omnibus Amendment Agreement, the terms of which will be deemed to survive and continue in full force and effect if the such Statement of Work (Valuation Services) has otherwise been previously terminated, but in such case solely as to this SOW and only for so long as necessary to effect the purposes of and provision of services pursuant to this SOW.
|
RESIDENTIAL:
|
|
ALTISOURCE:
|
||
|
|
|
|
|
FRONT YARD RESIDENTIAL CORPORATION
|
|
ALTISOURCE S.À R.L.
|
||
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Stephen H. Gray
|
|
By:
|
/s/ Indroneel Chatterjee
|
Name:
|
Stephen H. Gray
|
|
Name:
|
Indroneel Chatterjee
|
Title:
|
Chief Administrative Officer
|
|
Title:
|
Manager
|
Date:
|
August 8, 2018
|
|
Date:
|
August 8, 2018
|
(a)
|
“
Lockup Period
” means the period of time between the Agreement Effective Date and December 31, 2018.
|
(b)
|
“
Quarterly Shares
” means, at a given time, the lesser of (a) one million thirty-six thousand one hundred one (1,036,101) shares from the Current Shares and (b) the number of Current Shares that Altisource holds at such time.
|
(i)
|
For the Lockup Period, Altisource shall not be initially permitted to sell any of the Current Shares (the “
Initial Restrictions
”);
|
(ii)
|
Upon expiration of the Lockup Period, the Initial Restrictions shall be removed as to a number of shares from the Current Shares equal to the Quarterly Shares (the “
First Quarter Shares
”);
|
(iii)
|
Ninety (90) days following the expiration of the Lockup Period (the “
Second Quarter Start
”), the Initial Restrictions shall be removed as to an additional number of Quarterly Shares from the Current Shares, less fifty percent (50%) of the number of First Quarter Shares that Altisource has not sold as of the Second Quarter Start (the “
Second Quarter Shares
”);
|
(iv)
|
Ninety (90) days following the Second Quarter Start (the “
Third Quarter Start
”), the Initial Restrictions shall be removed as to an additional number of Quarterly Shares from the Current Shares, less fifty percent (50%) of the sum of the number of First Quarter Shares that Altisource has not sold and 50% of the number of Second Quarter Shares that Altisource has not sold, as of the Third Quarter Start (the “
Third Quarter Shares
”);
|
(v)
|
Ninety (90) days following the Third Quarter Start (the “
Fourth Quarter Start
”), the Initial Restrictions shall be removed as to an additional number of Quarterly Shares from
|
(vi)
|
Ninety (90) days following the Fourth Quarter Start (the “
Unrestricted Period Start
”), the Initial Restrictions shall be removed as to all remaining Current Shares; for the avoidance of doubt, commencing on the Unrestricted Period Start, this Exhibit 3 shall not Restrict Altisource in any way from selling any of the Current Shares.
|
(i)
|
Altisource believes in good faith that Altisource’s (or its affiliates’) liquidity should be increased and that such sale of shares is reasonably necessary to achieve such increase;
|
(ii)
|
Altisource uses the proceeds of such sale to finance an acquisition of the assets, equity or other similar right in a third party or a similar strategic acquisition transaction;
|
(iii)
|
Altisource conducts such sale as a privately negotiated block transaction with an unrelated third party or similar transaction; or
|
(iv)
|
Residential is the subject of a tender offer that would be reasonably likely to result in a Change of Control if effectuated or undergoes a Change of Control.
|
Loan Agreement – SFR (Revised 6-1-2018)
|
|
Freddie Mac Loan Number:
|
505039591,505039605,505039613
|
Freddie Mac Deal Number:
|
180801
|
Borrower:
|
FYR SFR BORROWER, LLC, a Delaware limited liability company
|
Lender:
|
BERKADIA COMMERCIAL MORTGAGE LLC, a Delaware limited liability company
|
Effective Date:
|
August 8, 2018
|
Loan Amount:
|
$508,700,000.00
|
Table of Contents
|
|
Article I Key Terms
|
Article VII Transfers
|
Article II Security Agreement
|
Article VIII Events of Default and Remedies
|
Article III Personal Liability
|
Article IX Release; Indemnity
|
Article IV Reserve Funds and Requirements
|
Article X Miscellaneous Provisions
|
Article V Representations and Warranties
|
Article XI Defined Terms
|
Article VI Covenants
|
|
Modifications and Riders
|
|
x
|
Loan Agreement modifications are included in
Exhibit B
|
x
|
The following rider(s) are attached to this Loan Agreement:
•
Loan Agreement Rider – SFR - Substitutions (Revised 3-20-2018)
•
Loan Agreement Rider – SFR – Condominium (Revised 12-01-2017)
|
Base Recourse
|
A portion of the Indebtedness equal
to 0%
of the Loan Amount
(see Article III)
|
Tax, Insurance, and HOA Fee Reserves
|
|
Taxes -
x
Collected or
o
Deferred
|
Insurance premiums -
x
Collected or
o
Deferred
|
HOA Fees -
o
Collected or
x
Deferred
|
|
(See Article IV)
|
Capital Replacement and Repair Reserve
|
|
Capital Replacement and Repair Reserve
Monthly
Deposit of
$240,547.50 is
Collected or Deferred
|
|
o
|
One Time
Capital Replacement Deposit of
$__________ is
required for Additional Capital Replacements.
|
x
|
One Time
Repair Deposit of $
207,125
is required for Priority Repairs
|
Capital Replacement and Repair Reserve Fund Disbursement Minimum is $50,000.00
|
|
(See Article IV)
Recourse and other requirements related to Repairs are detailed in Sections 3.03, 3.04, and Section 6.14.
|
Required Additional Capital Replacements and Repairs
|
|
o
|
Additional Capital Replacements are required and are listed in
Exhibit B
.
The Additional Capital Replacements Completion Date is
___
days after the Effective Date.
|
x
|
Priority Repairs are required and are listed in
Exhibit B
.
|
Special Purpose Reserve
|
|
o
|
One Time
Special Purpose Reserve Fund Deposit in the amount of
$________ is
required
|
The Termination Date i
s ___
days after the Effective Date. The Release Conditions are listed in
Exhibit B
.
|
|
(See Article IV)
|
Property Management
|
As of the Effective Date, the Mortgaged Properties are managed by the following Property Manager(s):
|
HAVENBROOK PARTNERS, LLC, a Delaware limited liability company
|
ALTISOURCE S.À R.L., as successor in interest to ALTISOURCE SOLUTIONS S.À R.L., a Luxembourg private limited liability company
|
|
|
(See Section 6.09 for requirements for management of the Mortgaged Properties.)
|
Required Rent to Debt Service Ratio
|
Property Release Cap
|
1.25: 1:00
|
954 Mortgaged Properties
|
(See Section 7.05 for Mortgaged Property release provisions.)
|
Guarantor(s)
|
FRONT YARD RESIDENTIAL, L.P., a Delaware limited partnership
|
|
|
Pledgor
|
FYR SFR EQUITY OWNER, LLC, a Delaware limited liability company
|
Notices
|
|
Addresses for Notices as of the Effective Date are as follows
(See Section 10.03)
|
|
If to Lender:
|
323 Norristown Road, Suite 300
Ambler, Pennsylvania 19002
Attention: Servicing Senior Vice President
|
If to Borrower:
|
c/o Front Yard Residential Corporation
5100 Tamarind Reef Christiansted
United States Virgin Islands 00820
|
2.01
|
Uniform Commercial Code Security Agreement.
This Loan Agreement is also a security agreement for any portion of the Mortgaged Properties which, under applicable law, may be subjected to a security interest under the UCC, for the purpose of securing Borrower’s obligations under this Loan Agreement and to further secure Borrower’s obligations under the Note, Security Instrument and other Loan Documents, whether the Mortgaged Properties are owned now or acquired in the future, and all products and cash and non-cash proceeds of the Mortgaged Properties and all Reserve Funds (collectively, “
UCC Collateral
”), and by this Loan Agreement, Borrower grants to Lender a security interest under the UCC in the UCC Collateral.
|
3.01
|
Limited Recourse Generally.
Except as otherwise provided in this Article III, neither Borrower, Pledgor, nor any member or manager of Pledgor will have any personal liability under the Note, this Loan Agreement or any other Loan Document for the repayment of the Indebtedness or for the performance of or compliance with any other obligations of Borrower under the Loan Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations will be Lender’s exercise of its rights and remedies with respect to the Mortgaged Properties, the equity interests in Borrower pursuant to the terms of the Pledge Agreement, and to any other collateral held by Lender as security for the Indebtedness. This limitation on Borrower’s liability will not limit or impair Lender’s enforcement of its rights against any Guarantor.
|
3.02
|
Base Recourse
. Borrower will be personally liable to Lender for the Base Recourse specified in Article I (“
Base Recourse
”), plus any other amounts for which Borrower has personal liability under this Article III.
|
3.03
|
Loss or Damage Recourse.
Borrower will be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of the occurrence of any of the following events:
|
(a)
|
Borrower fails to complete any of the Priority Repairs.
|
(b)
|
Borrower fails to pay to Lender upon demand after an Event of Default all Rents to which Lender is entitled under Section 3 of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence. This Section 3.03(b) will not apply if Borrower’s failure is a result of a valid order issued in, or an automatic stay applicable because of, bankruptcy, receivership, or a similar judicial proceeding.
|
(c)
|
Borrower fails to apply all Insurance proceeds and Condemnation proceeds as required by this Loan Agreement. This Section 3.03(c) will not apply if Borrower’s failure is a result of a valid order issued in, or an automatic stay applicable because of, bankruptcy, receivership, or a similar judicial proceeding.
|
(d)
|
If an Event of Default has occurred and is continuing, Borrower fails to deliver all Books and Records, contracts, Leases and other instruments relating to the Mortgaged Properties or their operation in accordance with the provisions of Section 6.07.
|
(i)
|
Taxes, if Lender does not collect a Tax Reserve Fund.
|
(ii)
|
Insurance premiums, if Lender does not collect an Insurance Reserve Fund.
|
(iii)
|
Water and sewer charges that could become a lien on any Mortgaged Property.
|
(iv)
|
Assessments or any Other Charges that could become a lien on any Mortgaged Property.
|
(v)
|
Transfer or recording Taxes required to be paid by Borrower.
|
(i)
|
Any Person that is not an Affiliate of Borrower or a Borrower Principal creates a mechanic’s lien or other involuntary lien or encumbrance against any Mortgaged Property and Borrower has not complied with the provisions of Article VII.
|
(ii)
|
A Transfer by devise, descent or operation of law occurs upon the death of a natural person and such Transfer does not meet Lender’s requirements in Article VII.
|
(iii)
|
Borrower grants an easement that does not meet Lender’s requirements.
|
(h)
|
If any Mortgaged Property is located in Ohio and such Mortgaged Property is subject to any oil or gas lease, pipeline agreement, or other instrument related to the production or sale of oil or natural gas that under applicable state law has been given priority over the Security Instrument.
|
(ii)
|
Borrower fails to commence and diligently pursue completion of any Restoration within the time frame required by both the Zoning Code and any permits issued pursuant to the Zoning Code which are necessary to allow the Restoration of such Mortgaged Property to its pre-casualty condition.
|
(j)
|
If primary ingress to and egress from a Mortgaged Property is through an easement or private road, any party takes, or threatens to take, any action to deny ingress to or egress from such Mortgaged Property from or to a publicly dedicated and maintained right-of-way.
|
(k)
|
If Borrower fails to pay in full the amount of principal and interest due under the Note on each of the first three Payment Dates under the Note.
|
(l)
|
Any Loan Party commences any legal or other proceeding related to the Loan that delays, opposes, impedes, obstructs, hinders, enjoins or otherwise interferes with or frustrates the efforts of Lender to exercise any rights and remedies available to Lender under the Loan Documents, except for any proceedings instituted in good faith or are otherwise expressly permitted under the Loan Documents.
|
(m)
|
Borrower or Pledgor fails to comply with any provision of Section 6.13(a)(i) through (iv) and Section 6.13(a)(vii) through (xiii) (subject to possible full recourse liability as set forth in Section 3.05(b)).
|
(n)
|
Borrower or any Affiliate or employee of Borrower makes an unintentional written material misrepresentation in connection with the application for or creation of the Indebtedness or there is
|
3.04
|
Performance and Cost Recourse.
Borrower will be personally liable to Lender for all of the following:
|
(a)
|
The performance of, and the cost to Lender of any nonperformance of, all of Borrower’s obligations under each of the following:
|
(i)
|
Any audit required under Section 6.07.
|
(ii)
|
Any expenses incurred in connection with the collection of any amount for which Borrower is personally liable under this Article III, including Attorneys’ Fees and Costs and the costs of conducting any independent audit of Borrower’s Books and Records to determine the amount for which Borrower has personal liability.
|
3.05
|
Full Recourse.
Borrower will become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following:
|
(b)
|
Borrower or Pledgor fails to comply with any provision of any of Sections 6.13(a)(i) through (iv) or Sections 6.13(a)(vii) through (xiii) and a court of competent jurisdiction holds or determines that such failure or combination of failures is the basis, in whole or in part, for the substantive consolidation of the assets and liabilities of Borrower and/or Pledgor with the assets and liabilities of a debtor pursuant to Title 11 of the Bankruptcy Code.
|
(c)
|
A Transfer that is an Event of Default under Section 7.02 occurs, other than a Transfer set forth in Section 3.03(g) (for which Borrower will have personal liability for Lender’s loss or damage); provided, however, that Borrower will not have any personal liability for a Transfer consisting solely of the involuntary removal or involuntary withdrawal of a general partner in a limited partnership or a manager in a limited liability company.
|
(d)
|
There was fraud or intentional written material misrepresentation by Borrower or any Affiliate or employee of Borrower in connection with the application for or creation of the Indebtedness or there is fraud in connection with any request by Borrower or Guarantor for any action or consent by Lender.
|
(e)
|
A Bankruptcy Event occurs with respect to Borrower.
|
3.06
|
Exercise of Lender’s Rights and Application of Payment.
If Borrower has personal liability under this Article III, then Lender may, to the fullest extent permitted by applicable law, exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against a Mortgaged Property or any other security, or pursued any rights against any Guarantor, or pursued any other rights available to Lender under the Note, this Loan Agreement, any other Loan Document or applicable law. To the fullest extent permitted by applicable law, in any action to enforce Borrower’s personal liability under this Article III, Borrower waives any right to set off the value of a Mortgaged Property against such personal liability. All payments made by Borrower with respect to the Indebtedness and all amounts received by Lender from the enforcement of its rights under the Loan Documents will be applied first to the portion of the Indebtedness for which Borrower has no personal liability.
|
4.01
|
Reserves Generally.
|
(a)
|
Establishment of Reserve Funds
. Each Reserve Fund marked in Article I as required or collected will be established on the Closing Date and funded in accordance with this Article IV. Upon Notice to Borrower following (i) an Event of Default or (ii) a Transfer requiring Lender’s approval under Article VII, Lender may require Borrower to establish and make deposits into any Reserve Fund marked in Article I as deferred.
|
(b)
|
Investment of Reserve Funds
. All Reserve Funds will be deposited in an Eligible Account at an Eligible Institution or invested in “permitted investments” as then defined and required by the Rating Agencies. Lender will not be obligated to open additional accounts or deposit Reserve Funds in additional institutions when the amount of any Reserve Fund exceeds the maximum amount of the federal deposit insurance or guaranty. Borrower acknowledges and agrees that it will not have the right to direct Lender as to any specific investment of monies in any Reserve Fund. Lender will not be responsible for any losses resulting from investment of monies in any Reserve Fund or for obtaining any specific level or percentage of earnings on such investment. Unless applicable law requires, Lender will not be required to pay Borrower any interest, earnings or profits on any Reserve Funds. Any amounts deposited with Lender under this Article IV will not be trust funds, nor will they operate to reduce the Indebtedness, unless applied by Lender for that purpose pursuant to the terms of this Loan Agreement.
|
(c)
|
Use of Reserve Funds; No Disbursements during Event of Default
. Each Reserve Fund will, except as otherwise provided in this Loan Agreement, be used for the sole purpose of paying, or reimbursing Borrower for payment of, the item(s) for which the applicable Reserve Fund is established. Except as specified in this Loan Agreement, monies in one Reserve Fund will not be used to pay, or reimburse Borrower for, matters for which another Reserve Fund has been established. Lender will not be obligated to make disbursements from any Reserve Fund if any Event of Default has occurred and is continuing. If an Event of Default has occurred and is continuing, then Lender may use any Reserve Fund for the payment or performance of any obligation of Borrower to Lender or otherwise with respect to any Mortgaged Property.
|
(d)
|
Termination of Reserve Funds
. Upon payment in full of the Indebtedness, Lender will pay to Borrower all funds remaining in any Reserve Funds.
|
(e)
|
Release of Mortgaged Properties
. Upon the release of any Mortgaged Property from the applicable Security Instrument pursuant to this Agreement, if Lender determines that all Reserve Funds are fully funded, Lender will pay to Borrower all funds in any Reserve Funds that relate solely to such Release Property.
|
4.02
|
Tax, Insurance, and HOA Fee Reserves.
|
(a)
|
Deposits
. When required by Lender, Borrower will deposit with Lender on the Closing Date and on each Payment Date under the Note an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due, Taxes (“
Tax Reserve Fund
”) and HOA Fees (“
HOA Reserve Fund
”) and 110% of the entire sum required to pay, when due, Insurance premiums (“
Insurance Reserve Fund
”).
|
(b)
|
Disbursements
.
|
(i)
|
Lender will pay Taxes from the Tax Reserve Fund held by Lender upon Lender’s receipt of a bill or invoice for Taxes and, once received, prior to the addition of any interest, penalty, or cost for nonpayment. Lender will have no obligation to pay Taxes to the extent the amount payable exceeds the Tax Reserve Fund then held by Lender. Lender may pay Taxes according to any bill, statement or estimate from either the appropriate public office or the Borrower without inquiring into the accuracy of the bill, statement or estimate.
|
(ii)
|
Lender will pay Insurance premiums from the Insurance Reserve Fund held by Lender upon Lender’s receipt of a bill or invoice for Insurance premiums and, once received, prior to the addition of any interest, penalty, or cost for nonpayment. Lender will have no obligation to pay Insurance premiums to the extent the amount payable exceeds the Insurance Reserve Fund then held by Lender. Lender may pay Insurance premiums according to any bill, statement or estimate from either an insurance company or the Borrower without inquiring into the accuracy of the bill, statement or estimate.
|
(ii)
|
Lender will pay HOA Fees from the HOA Reserve Fund held by Lender upon Lender’s receipt of a bill or invoice for HOA Fees and, once received, prior to the addition of any interest, penalty, or cost for nonpayment. Lender will have no obligation to pay HOA Fees to the extent the amount payable exceeds the HOA Reserve Fund then held by Lender. Lender may pay HOA Fees according to any bill, statement or estimate from an HOA or the Borrower without inquiring into the accuracy of the bill, statement or estimate.
|
(c)
|
Adjustments to Reserve Fund Deposits
. If at any time the amount of the Tax Reserve Fund, the Insurance Reserve Fund or the HOA Reserve Fund held by Lender for payment of Taxes, Insurance premiums or HOA Fees exceeds the amount reasonably deemed necessary by Lender, then the excess will be credited against future payments into the applicable Reserve Fund. If at any time the amount of the Tax Reserve Fund, the Insurance Reserve Fund or the HOA Reserve Fund is less than the amount reasonably estimated by Lender to be necessary, then Borrower will pay to Lender the amount of the deficiency within 20 days after Notice from Lender.
|
(d)
|
Delivery of Invoices; Proof of Payment by Borrower
. Borrower will promptly deliver to Lender a copy of all notices of, and invoices for, Taxes, Insurance premiums and HOA Fees. If Lender has not established a Reserve Fund for Taxes, Insurance premiums or HOA Fees, then on or before the date the Taxes, Insurance premiums or HOA Fees are due, Borrower will provide Lender with proof of payment of the Taxes, Insurance premiums or HOA Fees.
|
4.03
|
Special Purpose Reserve Fund.
|
(a)
|
Deposit
. If a Special Purpose Reserve is required in Article I, then Borrower will pay to Lender on the Closing Date the amount set forth in Article I (“
Special Purpose Reserve Fund
”).
|
(b)
|
Disbursements
. Lender will disburse the funds in the Special Purpose Reserve Fund to Borrower when the Release Conditions specified in
Exhibit B
have been satisfied in Lender’s discretion.
|
(c)
|
Application of Reserve Funds after the Termination Date
. If Borrower has not satisfied the Release Conditions on or before the Termination Date specified in Article I, then Lender may apply some or all of the Special Purpose Reserve Fund to the Indebtedness, and Borrower will pay a prepayment premium computed using the formula set forth in the Note with respect to any such prepayment of principal under the Note. Borrower may not pay the prepayment premium from funds drawn from the Special Purpose Reserve Fund.
|
4.04
|
Capital Replacement and Repair Reserve Fund.
|
(a)
|
Monthly Deposits.
If the Capital Replacement and Repair Reserve Monthly Deposit is shown as collected in Article I, then on each Payment Date under the Note, Borrower will pay to Lender the Capital Replacement and Repair Reserve Monthly Deposit amount shown in Article I (“
Capital
Replacement and Repair Reserve Fund
”).
|
(b)
|
Disbursements from Capital Replacement and Repair Reserve Fund
. Lender will disburse funds from the Capital Replacement and Repair Reserve Fund to Borrower for
payment or reimbursement of, or to defray the cost of, each of the following, provided the conditions set forth in Sections 4.04(f) and (g) are satisfied:
|
(i)
|
Replacing any of the items listed in
Schedule II
and other items that Lender may approve after the Effective Date, subject to any conditions that Lender may require (“
Basic Capital Replacements
,” and together with any Additional Capital Replacements listed in
Exhibit B
, “
Capital Replacements
”).
|
(ii)
|
Completing the Priority Repairs, provided a Repair Deposit is required in Article I.
|
(c)
|
Additional Capital Replacements Deposit
. If an Additional Capital Replacements Deposit is required in Article I, then on the Closing Date, Borrower will pay the Additional Capital Replacements Deposit to Lender for deposit into the Capital Replacement and Repair Reserve Fund. The Additional Capital Replacements Deposit will be available to reimburse Borrower only for reimbursement of, or to defray, the cost of the Additional Capital Replacements listed in
Exhibit B
.
|
(d)
|
Repair Deposit
. If a Repair Deposit is required in Article I, then on the Closing Date, Borrower will pay the Repair Deposit to Lender for deposit into the Capital Replacement and Repair Reserve Fund. The Repair Deposit will be available to reimburse Borrower only for payment or reimbursement of, or to defray the cost of, completing Priority Repairs. Any funds from the Repair Deposit remaining in the Capital Replacement and Repair Reserve Fund after all of the Priority Repairs are completed in a manner satisfactory to Lender will be returned to Borrower.
|
(e)
|
Insufficient Amount in Capital Replacement and Repair Reserve Fund
. If Borrower requests disbursement from the Capital Replacement and Repair Reserve Fund for a Capital Replacement or a Priority Repair in an amount that exceeds the amount on deposit in the Capital Replacement and Repair Reserve Fund, then Lender will disburse to Borrower only the amount on deposit in the Capital Replacement and Repair Reserve Fund. Borrower will pay all additional amounts required in connection with any such Capital Replacement or Priority Repair from Borrower’s own funds.
|
(f)
|
Limits on Disbursements
. Lender will disburse funds from the Capital Replacement and Repair Reserve Fund no more frequently than once per calendar month, and no disbursement will be made in an amount less than the Capital Replacement and Repair Reserve Fund Disbursement Minimum specified in Article I.
|
(g)
|
Performance of Capital Replacements and Priority Repairs; Requests for Disbursement
.
|
(i)
|
If Borrower determines that a Capital Replacement is necessary or desirable, then Borrower will perform such Capital Replacement and request from Lender, in writing, payment or
|
(ii)
|
Borrower must complete all Priority Repairs pursuant to Section 6.14. After Borrower performs one or more Priority Repairs, Borrower may request from Lender reimbursement for the cost of such Priority Repair(s) from the Capital Replacement and Repair Reserve Fund using the Disbursement Request attached to this Loan Agreement as Exhibit A. The Disbursement Request must be accompanied by paid invoices or bills that show Borrower has paid for the applicable Priority Repair.
|
(iii)
|
If requested by Lender, Borrower must provide any other information, documents, lien waivers, certifications, or professional engineering reports regarding the work and the cost of such Capital Replacements or Priority Repairs. Lender, at its option, may retain a professional inspection engineer or other qualified third party to inspect any Capital Replacement or Priority Repair. If Lender retains such a third party, then it will charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector. Lender may, at its election, either deduct such cost from the Capital Replacement and Repair Reserve Fund or send Borrower a Notice of the amount of such charge, which Borrower must pay within 20 days following its receipt of such Notice.
|
(iv)
|
If Lender reasonably determines at any time that a Capital Replacement or a Repair is necessary for the proper maintenance of a Mortgaged Property, then Lender will give Notice to Borrower requesting that Borrower obtain and submit to Lender bids for all labor and materials required in connection with such Capital Replacement or Repair. In response, Borrower will submit such bids and a time schedule for completing each Capital Replacement or Repair to Lender within 30 days after Borrower’s receipt of Lender’s Notice. Borrower will perform such Capital Replacement or Repair in conformity with the requirements of this Section 4.04 and then may request reimbursement for such Capital Replacement or Repair in accordance with this Section 4.04.
|
(h)
|
Adjustments to Reserve Fund Deposits
. If the initial term of the Loan is greater than 120 months, then following each of the 120
th
and 180
th
Payment Dates under the Note, Lender may adjust the amount of the Capital Replacement and Repair Reserve Monthly Deposit based on Lender’s most recent assessment of the physical condition of the Mortgaged Properties and will provide Borrower Notice of this revised Capital Replacement and Repair Reserve Monthly Deposit amount. Borrower will begin paying this revised Capital Replacement and Repair Reserve Monthly Deposit on the next Payment Date following its receipt of the Notice from Lender.
|
5.01
|
Review of Documents.
Borrower has reviewed: (a) the Commitment Letter, (b) the Note, (c) this Loan Agreement, (d) the Security Instrument(s), (e) the Pledge Agreement and (f) all other Loan Documents.
|
5.02
|
Condition of Mortgaged Properties.
Except as Borrower may have disclosed to Lender in writing in connection with the issuance of the Commitment Letter (which written disclosure may be in certain written reports accepted by Lender in connection with the funding of the Indebtedness and dated prior to the Effective Date), no Mortgaged Property has been damaged by fire, water, wind or other cause of loss, or, if so damaged, any previous damage to a Mortgaged Property has been fully restored.
|
5.03
|
No Condemnation.
No part of any Mortgaged Property has been taken in Condemnation or other similar proceeding, and, to the best of Borrower’s knowledge after due inquiry and investigation, no such proceeding is pending or threatened for the partial or total Condemnation or other taking of a Mortgaged Property.
|
5.04
|
Actions; Suits; Proceedings.
There are no judicial, administrative, mediation or arbitration actions, suits or proceedings pending or, to the best of Borrower’s knowledge, threatened in writing against or affecting Borrower, any Borrower Principal, or any Mortgaged Property which, if adversely determined, would have a Material Adverse Effect.
|
5.05
|
Environmental.
Except as previously disclosed by Borrower to Lender in writing (which written disclosure may be in certain environmental assessments and other written reports accepted by Lender in connection with the funding of the Indebtedness and dated prior to the Effective Date), each of the following is true:
|
(a)
|
Borrower has not at any time engaged in, caused, or permitted any Prohibited Activities or Conditions on any Mortgaged Property.
|
(b)
|
To Borrower’s knowledge, no Prohibited Activities or Conditions exist or have existed on any Mortgaged Property.
|
(c)
|
No Mortgaged Property contains any underground storage tanks, and, to Borrower’s knowledge, no Mortgaged Property has contained any underground storage tanks in the past. If there is an underground storage tank located on the Mortgaged Property that has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws.
|
(d)
|
To the best of Borrower’s knowledge after due inquiry and investigation, Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.
|
(e)
|
There are no actions, suits, claims, or proceedings pending or, to the best of Borrower’s knowledge after due inquiry and investigation, threatened in writing, that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition.
|
(f)
|
Borrower has received no actual or constructive notice of any written complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting any Mortgaged Property or any property that is adjacent to any Mortgaged Property.
|
5.06
|
No Labor or Materialmen’s Claims.
Except as described on
Exhibit B
, Borrower represents and warrants that all parties furnishing labor and materials for which a Lien or claim of Lien may be filed against any Mortgaged Property have been paid in full and there are no mechanics’, laborers’ or materialmen’s Liens or claims outstanding for work, labor or materials affecting any Mortgaged Property, whether prior to, equal with or subordinate to the Lien of the Security Instrument, except such Liens or claims that Borrower has disclosed to both Lender and the title company and which are insured against by the policy of title insurance to be issued in connection with the Loan.
|
5.07
|
Compliance with Applicable Laws and Regulations.
Each of the following is true:
|
(a)
|
All Improvements and the use of each Mortgaged Property comply with all applicable statutes, rules, and regulations, including all applicable statutes, rules, and regulations pertaining to requirements for equal opportunity, anti-discrimination, fair housing, environmental protection, zoning, and land use (“legal non-conforming” status with respect to uses or structures will be considered to comply with zoning and land use requirements for the purposes of this representation).
|
(b)
|
The Improvements comply with applicable health, fire, and building codes.
|
(c)
|
Neither Borrower nor any Property Manager has knowledge of any illegal activities relating to controlled substances on any Mortgaged Property.
|
(d)
|
No Mortgaged Property is (a) zoned for, or being used for, any purpose other than a one to four unit single-family residential or residential condominium occupancy, (b) an assisted living facility, or (c) subject to any rent control, rent stabilization or similar law limiting, or placing conditions upon, the amount of rent that can be charged under a Lease or the ability of a landlord to decline the renewal or extension of a Lease.
|
5.08
|
Access; Utilities; Tax Parcels.
Each Mortgaged Property: (a) has ingress and egress via a publicly dedicated right of way or via an irrevocable easement permitting ingress and egress, (b) is served by public utilities and services generally available in the surrounding community or otherwise appropriate for the current use of such Mortgaged Property, and (c) constitutes one or more separate tax parcels.
|
5.09
|
Licenses and Permits; Property Documents.
Borrower is in possession of all material licenses, permits and authorizations required for use of each Mortgaged Property, which are valid and in full force and effect as of the Effective Date. The uses being made of each Mortgaged Property are in conformity in all material respects with all such licenses and permits and all Property Documents for such Property. The certificate of occupancy for each Mortgaged Property does not permit the use of such Property for any purpose other than as a one to four unit single-family residential home or residential condominium.
|
5.10
|
No Other Interests.
No Person has (a) any possessory interest in any Mortgaged Property or right to occupy any Mortgaged Property except under the provisions of existing Leases by and between tenants and Borrower, or (b) an option to purchase any Mortgaged Property or an interest in any Mortgaged Property, except as has been disclosed to and approved in writing by Lender. No Person has any direct ownership interest in Borrower other than the Pledgor who has executed the Pledge Agreement in favor of Lender.
|
5.11
|
Leasing.
|
(a)
|
Each Property is either (i) leased by Borrower to and occupied by an Eligible Tenant pursuant to an Eligible Lease that is in full force and effect and is not in default in any material respect or (ii) in lease ready condition, meaning that the Mortgaged Property has been cleaned, no renovations or repairs to the Mortgaged Property are needed and the Mortgaged Property is immediately available to be leased to an Eligible Tenant.
|
(b)
|
No Loan Party, Affiliate of any Loan Party or any Immediate Family Member of any of the foregoing is in occupancy of a Mortgaged Property.
|
(c)
|
Borrower has delivered to Lender true and complete copies of all Leases, and there are no material oral agreements with respect thereto.
|
(d)
|
To Borrower’s and each Property Manager’s knowledge, each Mortgaged Property is being used exclusively as a residential rental property and no illegal activity is taking place at any Mortgaged Property.
|
(e)
|
No Person has any option, right of first refusal, or any similar preferential right to purchase all or any portion of any Mortgaged Property, whether pursuant to Lease or any other recorded or unrecorded document.
|
(f)
|
Borrower has maintained records of all documentation collected and all diligence performed in connection with any current or prospective tenant.
|
5.12
|
No Prior Assignment; Prepayment of Rents.
Borrower has (a) not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender or that is being paid off and discharged with the proceeds of the Loan), and (b) not performed any acts and has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under any Loan Document. At the time of execution of this Loan Agreement there has been no prepayment of any Rents for more than 30 days prior to the due dates of such Rents other than the last month’s Rent,
|
5.13
|
Illegal Activity.
No portion of any Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.
|
5.14
|
Taxes and Other Charges Paid.
Borrower has filed all federal, state, county, and municipal tax returns required to have been filed by Borrower, and has paid all Taxes and Other Charges which have become due pursuant to such returns or to any notice of assessment received by Borrower, and Borrower has no knowledge of any basis for additional assessments with respect to such Taxes or Other Charges. To the best of Borrower’s knowledge after due inquiry and investigation, there are not presently pending any special assessments against any Mortgaged Property or any part of any Mortgaged Property.
|
5.15
|
Title Exceptions.
To the best of Borrower’s knowledge after due inquiry and investigation, none of the items shown in the schedule of exceptions to coverage in the title insurance policy issued to and accepted by Lender contemporaneously with the execution of this Loan Agreement and insuring Lender’s interest in each Mortgaged Property (“
Permitted Encumbrances
”) will have a Material Adverse Effect on the: (a) ability of Borrower to pay the Loan in full, (b) ability of Borrower to use all or any part of a Mortgaged Property in the manner in which the Mortgaged Property is being used on the Effective Date, (c) operation of any Mortgaged Property as a residential rental property, or (d) value of any Mortgaged Property.
|
5.16
|
No Change in Facts or Circumstances.
|
(a)
|
All information in the application for the Loan submitted to Lender, including all financial statements for the Mortgaged Properties, Borrower, and any Borrower Principal, and all Rent Schedules, reports, certificates, and any other documents submitted in connection with the application (collectively, “
Loan Application
”) is complete and accurate in all material respects as of the date such information was submitted to Lender.
|
(b)
|
There has been no change in any fact or circumstance since the Loan Application was submitted to Lender that would make any information submitted as part of the Loan Application materially incomplete or inaccurate.
|
5.17
|
ERISA – Borrower Status.
|
(a)
|
Borrower is not an “investment company,” or a company under the Control of an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.
|
(b)
|
Borrower is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or a “plan” to which Section 4975 of the Tax Code applies, and the assets of Borrower do not constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA.
|
(c)
|
Borrower is not a "governmental plan" within the meaning of Section 3(32) of ERISA, and is not subject to state statutes regulating investments or fiduciary obligations with respect to governmental plans.
|
5.18
|
No Fraudulent Transfer or Preference.
No Borrower or Borrower Principal has taken or will take any of the following actions:
|
(a)
|
Transfer of an interest in the property of Borrower or Borrower Principal to or for the benefit of Lender or otherwise as security for any of the obligations under the Loan Documents which is or could constitute a voidable preference under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws.
|
(b)
|
Transfer of (including any Transfer to or for the benefit of an insider under an employment contract) an interest of Borrower or any Borrower Principal in property which is or could constitute a voidable preference under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws.
|
(c)
|
Incur any obligation (including any obligation to or for the benefit of an insider under an employment contract) which is or could constitute a fraudulent transfer under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws.
|
5.19
|
No Insolvency or Judgment.
|
(a)
|
No Borrower or Borrower Principal is (i) the subject of or a party to (other than as a creditor) any completed or pending bankruptcy, reorganization or insolvency proceeding, or (ii) the subject of any unsatisfied judgment that is of record or docketed in any court located in the United States.
|
(b)
|
Borrower is not presently insolvent, and the Loan will not render Borrower insolvent. As used in this Section 5.19, the term “
insolvent
” means that the total of all of a Person’s liabilities (whether secured or unsecured, contingent or fixed, or liquidated or unliquidated) is in excess of the value of all of the assets of the Person that are available to satisfy claims of creditors.
|
5.20
|
Working Capital.
After the Loan is made, Borrower intends to have sufficient working capital, including cash flow from the Mortgaged Properties or other sources, to (a) adequately maintain the Mortgaged Properties, and (b) to pay all of Borrower’s outstanding debts as they come due (other than any balloon payment due upon the maturity of the Loan). Lender acknowledges that no members or partners of Borrower or any Borrower Principal will be obligated to contribute equity to Borrower for purposes of providing working capital to maintain the Mortgaged Properties or to pay Borrower’s outstanding debts except as may otherwise be required under their organizational documents.
|
5.21
|
Regulatory Agreement.
No Mortgaged Property is subject to a Regulatory Agreement.
|
5.22
|
Commercial Purpose; No Right to Residency.
Borrower represents that Borrower is incurring the Indebtedness solely for the purpose of carrying on a business or commercial enterprise, and not for consumer, personal, family, household or agricultural purposes.
|
5.23
|
Prohibited Parties Lists and AML Laws.
|
(a)
|
Neither Borrower, and to the best of Borrower’s knowledge after due inquiry and investigation, no Borrower Principal or Non-U.S. Equity Holder:
|
(ii)
|
has been convicted of a violation of the AML Laws or been the subject of a final enforcement action relating to the AML Laws.
|
(iii)
|
Is the subject of any pending proceedings for any violation of the AML Laws.
|
(b)
|
Borrower is not listed, and to the best of Borrower’s knowledge after due inquiry and investigation, no Borrower Principal is listed, on the FHFA SCP List.
|
5.24
|
Internal Controls.
Borrower has in place, and to the best of Borrower’s knowledge after due inquiry and investigation, Borrower has determined that each Borrower Principal has in place, practices and procedures for the admission of investors which prevent the admission of:
|
(a)
|
Any investor that is in violation of any criminal or civil law or regulation intended to prevent money laundering or the funding of terrorist or illegal drug trafficking activities.
|
(b)
|
Any Person that will have a 25% or more ownership interest in Borrower (whether directly or indirectly) that is on the Prohibited Parties Lists.
|
(c)
|
Any Non-U.S. Equity Holder that is on the OFAC Lists.
|
5.25
|
Crowdfunding.
Except as has been disclosed in writing to and approved in writing by Lender, no direct or indirect ownership (or other economic) interest of 25% or more in the aggregate in Borrower or any Borrower Principal has been marketed or sold to investors through any form of Crowdfunding.
|
5.26
|
Organizational Structure.
The organizational chart attached as
Exhibit D
accurately represents the ownership and control of Borrower, Pledgor and Guarantor (if an entity).
|
5.27
|
Survival.
The representations and warranties set forth in this Loan Agreement will survive until the Indebtedness is paid in full; however, the representations and warranties set forth in Section 5.05 will survive beyond repayment of the entire Indebtedness, as provided in Sections 9.02(b) and 9.02(h).
|
6.01
|
Compliance with Laws.
Borrower will at all times comply with all laws, ordinances, rules, regulations, and requirements of any Governmental Authority having jurisdiction over any Mortgaged Property and with the terms of all licenses and permits and all recorded covenants and agreements relating to or affecting any Mortgaged Property, including all laws, ordinances, regulations, requirements, and covenants pertaining to health and safety, construction of improvements on a Mortgaged Property, Repairs, Capital Replacements, fair housing, disability accommodation, zoning and land use, applicable building codes, special use permits, environmental regulations, Leases, and the maintenance and disposition of tenant security deposits. Borrower will at all times take appropriate measures to prevent, and will not engage in or knowingly permit, any illegal activities at or on any Mortgaged Property, including those that could endanger tenants or visitors, result in damage to any Mortgaged Property, result in forfeiture of any Mortgaged Property, or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in any Mortgaged Property. Borrower will at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 6.01.
|
6.02
|
Compliance with Organizational Documents.
Borrower will at all times comply with all laws, regulations and requirements of any Governmental Authority relating to Borrower’s formation, continued existence and good standing in its state of formation and, if different, in the Mortgaged Property Jurisdiction. Borrower will at all times comply with its organizational documents.
|
6.03
|
Use of Mortgaged Property.
Unless required by applicable law, without the prior written consent of Lender, Borrower will not take any of the following actions:
|
(a)
|
Allow any Mortgaged Property to be used for any purpose other than a residential rental property.
|
(b)
|
Initiate or acquiesce to a change in the zoning classification of any Mortgaged Property.
|
(c)
|
Establish any condominium or cooperative regime with respect to any Mortgaged Property beyond any that may be in existence on the Effective Date.
|
(d)
|
Combine all or any part of any Mortgaged Property with all or any part of a tax parcel which is not part of such Mortgaged Property.
|
(e)
|
Subdivide or otherwise split any tax parcel constituting all or any part of any Mortgaged Property.
|
(f)
|
Add to or change any location at which any of any collateral for the Loan is stored, held or located unless Borrower (A) gives Notice to Lender within 30 days after the occurrence of such addition or change, (B) executes and delivers to Lender any modifications of or supplements to this Loan
|
(g)
|
Permit any Mortgaged Property to be subject to a Regulatory Agreement.
|
6.04
|
Leasing.
|
(a)
|
Borrower will not permit the occupancy of any Property other than pursuant to an Eligible Lease with an Eligible Tenant.
|
(b)
|
Borrower or Property Manager will maintain records of all documentation collected and all diligence performed in connection with any Tenant and Borrower will provide any such items to Lender upon Lender’s request, including at least one of the following:
|
(i)
|
A credit report from a national credit reporting agency on each Eligible Tenant (except that no such credit report will be required for any tenant of a Mortgaged Property where the Lease payment is subsidized with Section 8 vouchers in accordance with HUD guidelines).
|
(ii)
|
Other evidence that Borrower or Property Manager has verified, based on bona fide written documentation, that the tenant has sufficient financial resources to satisfy its obligations under the Lease for the Mortgaged Property.
|
(c)
|
Borrower will not permit a Related Party or any Immediate Family Member of a Related Party to occupy any Mortgaged Property.
|
(d)
|
Borrower will perform the obligations of the lessor under all Leases, and will enforce, in a commercially reasonable manner, the obligations of the Tenants under such Leases.
|
(e)
|
Borrower will not grant or permit Property Manager to grant any tenant or other Person an option, right of first refusal, or any similar preferential right to purchase all or any portion of any Mortgaged Property, whether pursuant to a Lease or any other recorded or unrecorded document.
|
6.05
|
Prepayment of Rents.
Borrower will not collect any Rent more than 30 days in advance of its due date
; provided, that the foregoing restriction will not prevent Borrower from collecting both the first and last month’s rent contemporaneously with the execution of a Lease in accordance with customary residential leasing practices.
|
6.06
|
Inspection.
Borrower authorizes Lender and its agents, representatives, and designees to enter, at any reasonable time (subject to applicable law and the rights of tenants), any portion of any Mortgaged Property to inspect, attend to Lender’s interests, and perform any of the acts that Lender is authorized to perform pursuant to the Loan Documents, including with respect to Restoration, Repairs, and Capital Replacements.
|
(a)
|
Maintenance of Books and Records
.
|
(i)
|
Borrower will keep and maintain at all times at Borrower’s main business office or a Mortgaged Property Manager’s office, and upon Lender’s request will make available at such office, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Properties, and copies of all written contracts, Leases, and other instruments that affect any Mortgaged Property (“
Books and Records
”).
|
(ii)
|
The Books and Records will be kept in accordance with one of the following accounting methods, consistently applied, and Borrower will promptly provide Lender Notice of any change in Borrower’s accounting methods:
|
(A)
|
Generally accepted accounting principles (GAAP).
|
(B)
|
Tax method of accounting, provided that under the tax method of accounting, the accrual basis may be used for interest expense, real estate taxes and insurance expense, and the cash basis will be used for all other items, including income, prepaid rent, utilities and payroll expense. Financial statements may exclude depreciation and amortization.
|
(C)
|
Such other method that is acceptable to Lender.
|
(iii)
|
The Books and Records will be subject to examination and inspection by Lender at any reasonable time with or without prior Notice to Borrower.
|
(b)
|
Delivery of Borrower Financial Information – Annual Requirements
. Within 90 days after the end of each calendar year (or the end of Borrower’s fiscal year, if Borrower has adopted fiscal year financial reporting), Borrower will deliver to Lender an annual statement of income and expenses for Borrower’s operation of the Mortgaged Properties.
|
(c)
|
Delivery of Borrower Financial Information – Quarterly Requirement
. Within 25 days after the end of each calendar quarter each year (or the end of the second quarter of Borrower’s fiscal year, if Borrower has adopted fiscal year financial reporting), Borrower will deliver the following to Lender:
|
(i)
|
a Rent Schedule dated no earlier than the date that is 5 days prior to the end of such quarter.
|
(ii)
|
a quarterly statement of income and expenses for Borrower’s operation of the Mortgaged Properties.
|
(d)
|
Delivery of Borrower Financial Information – When Requested by Lender
. Within 25 days following a Notice from Lender including a request for such information, Borrower will deliver the following to Lender:
|
(i)
|
The Rent Schedule for any period specified by Lender.
|
(ii)
|
A statement of income and expenses for Borrower as of the end of (A) the quarter that ended at least 30 days prior to the due date of the requested item, and/or (B) the fiscal year that ended at least 90 days prior to the due date of the requested item.
|
(iii)
|
A balance sheet showing all assets and liabilities of Borrower as of the end of (A) the quarter that ended at least 30 days prior to the due date of the requested item, and/or (B) the fiscal year that ended at least 90 days prior to the due date of the requested item.
|
(iv)
|
An accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts.
|
(v)
|
A property management report for the Mortgaged Properties, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants for any period specified by Lender.
|
(vi)
|
Copies of Borrower’s state and federal tax returns, including current tax return extensions.
|
(vii)
|
Written updates on the status of all litigation proceedings that were disclosed or should have been disclosed by Borrower to Lender either (A) as of the Effective Date or (B) during the term of the Loan pursuant to Section 6.16.
|
(viii)
|
A statement that identifies all owners of any direct interest in Borrower and any Person(s) that Control(s) Borrower (except that the statement need not identify the owners of a publicly-traded entity). The statement must identify the percentage and type of ownership or Control interest held by each Person and must also identify any Non-U.S. Equity Holders.
|
(ix)
|
Such other financial information or property management information as Lender may require (including information on tenants under Leases if such information is available to Borrower and copies of bank account statements from financial institutions where funds owned or controlled by Borrower are maintained).
|
(e)
|
Delivery of Guarantor or Pledgor’s Financial Information – When Requested by Lender
. Within 25 days following a Notice from Lender including a request for such information, Borrower will cause Guarantor or Pledgor, as applicable, to deliver the following to Lender:
|
(i)
|
Its balance sheet and profit and loss statement (or if such party is a natural person, such party’s personal financial statements) as of the end of (A) the quarter that ended at least 30 days prior to the due date of the requested items, and/or (B) the fiscal year that ended at least 90 days prior to the due date of the requested items.
|
(iii)
|
Written updates on the status of all litigation proceedings that Guarantor or Pledgor, as applicable, disclosed or should have disclosed to Lender as of the Effective Date.
|
(iv)
|
If an Event of Default has occurred and is continuing, copies of Guarantor’s or Pledgor’s, as applicable, state and federal tax returns, including current tax return extensions.
|
(f)
|
Form of Financial Statements.
All financial statements required under this Agreement should be prepared using the template available from Lender, which may be revised from time to time, or in a format otherwise acceptable to Lender.
|
(g)
|
Certification of Statements; Audited Financials
. A natural person having authority to bind Borrower, Guarantor, or Pledgor, as applicable, will certify each of the statements, schedules and reports required by Sections 6.07(b)-(f) to be complete and accurate. Each of the statements, schedules and reports required by Sections 6.07(b)-(f) will be in such form and contain such detail as Lender may reasonably require. At any time when an Event of Default has occurred and is continuing, or at any time that Lender determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or the Mortgaged Properties, Lender also may require that any of the statements, schedules or reports listed in Sections 6.07(b)-(f) be audited at Borrower’s expense by an independent certified public accountant acceptable to Lender.
|
(h)
|
Failure to Timely Provide Financial Statements
. If Borrower fails to provide in a timely manner the statements, schedules and reports required by Sections 6.07(b)-(f), then Lender will give Notice to Borrower specifying the statements, schedules and reports required by Sections 6.07(b)-(f) that Borrower has failed to provide. If Borrower has not provided the required statements, schedules and reports within 10 Business Days following such Notice, then (i) Borrower will pay a late fee of $500 for each late statement, schedule or report, plus an additional $500 per month that any such statement, schedule or report continues to be late, and (ii) Lender will have the right to have Borrower’s Books and Records audited, at Borrower’s expense, by an independent certified public accountant acceptable to Lender.
|
(i)
|
Reporting Upon Event of Default
. If an Event of Default has occurred and is continuing, then Borrower will deliver to Lender upon written demand all Books and Records and other instruments that affect the Mortgaged Properties.
|
(j)
|
Credit Reports
. Borrower authorizes Lender to obtain a credit report on Borrower at any tim
e.
|
6.08
|
Taxes; Operating Expenses.
|
(a)
|
Payment of Taxes and Other Charges
. Subject to the provisions of Section 6.08(c), Borrower will pay or cause to be paid all Taxes and Other Charges when due and before the addition of any interest, fine, penalty or cost for nonpayment.
|
(b)
|
Payment of Operating Expenses and Insurance Premiums
. Subject to the provisions of Section 6.08(d), Borrower will (i) pay the expenses of operating, managing, maintaining and repairing the Mortgaged Properties (including utilities, Repairs and Capital Replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added, and (ii) pay Insurance premiums prior to the expiration date of each policy of Insurance.
|
(c)
|
Payment of Taxes and Reserve Funds
. If Lender is collecting Tax Reserves pursuant to Article IV, then so long as no Event of Default exists, Borrower will not be obligated to pay Taxes, but only if Lender holds sufficient Tax Reserves and Borrower has timely delivered to Lender any bills or notices that it has received with respect to Taxes. Lender will have no liability to Borrower for failing to pay any Taxes if any of the following conditions exist: (i) any Event of Default has occurred and is continuing, (ii) Lender holds insufficient Tax Reserves at the time a Tax becomes due and payable, or (iii) Borrower has failed to provide Lender with bills and notices as provided in this Section 6.08.
|
(d)
|
Payment of Insurance and Reserve Funds
. If Lender is collecting Insurance Reserves pursuant to Article IV, then so long as no Event of Default exists, Borrower will not be obligated to pay Insurance premiums but only if Lender holds sufficient Insurance Reserve Deposits and Borrower has timely delivered to Lender any bills or premium notices that it has received with respect to Insurance premiums. Lender will have no liability to Borrower for failing to pay any Insurance premiums if any of the following conditions exist: (i) any Event of Default has occurred and is continuing, (ii) Lender holds insufficient Insurance Reserve Deposits at the time an Insurance premium becomes due and payable, or (iii) Borrower has failed to provide Lender with bills and premium notices as provided in this Section 6.08.
|
(e)
|
Payment of HOA Fees and Reserve Funds
. If Lender is collecting HOA Reserves pursuant to Article IV, then so long as no Event of Default exists, Borrower will not be obligated to pay HOA Fees for the applicable Mortgaged Properties but only if Lender holds sufficient HOA Reserve Deposits and Borrower has timely delivered to Lender any bills or invoices that it has received with respect to HOA Fees. Lender will have no liability to Borrower for failing to pay any HOA Fees if any of the following conditions exist: (i) any Event of Default has occurred and is continuing, (ii) Lender holds insufficient HOA Reserve Deposits at the time an HOA Fee becomes due and payable, or (iii) Borrower has failed to provide Lender with bills and invoices as provided in this Section 6.08.
|
(f)
|
Right to Contest
. Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of Taxes or Other Charges, if: (i) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (ii) no Mortgaged Property is not in danger of being sold or forfeited, (iii) if Borrower has not already paid the Taxes or Other Charges, Borrower deposits with Lender reserves sufficient to pay the contested Taxes or Other Charges, if requested by Lender, and (iv) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of reserves established by Borrower to pay the contested Taxes or Other Charges.
|
6.09
|
Preservation, Management, and Maintenance of Mortgaged Property.
|
(a)
|
Maintenance of Mortgaged Property; No Waste
. Borrower will keep each Mortgaged Property in good repair, including replacing Personalty and Fixtures with items of equal or better function and quality. Borrower will not commit waste or permit impairment or deterioration of any Mortgaged Property.
|
(b)
|
Abandonment of Mortgaged Property
. Borrower will not abandon any Mortgaged Property.
|
(c)
|
Preservation of Mortgaged Property
.
|
(i)
|
Borrower will promptly restore or repair, in a good and workmanlike manner, any damaged part of any Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not Insurance proceeds or Condemnation awards are available to cover any costs of such Restoration or Repair; provided, however, that Borrower will not be obligated to perform such Restoration or Repair if (A) no Event of Default has occurred and is continuing, and (B) Lender has elected to apply any available Insurance proceeds and/or Condemnation awards to the payment of Indebtedness pursuant to Section 6.10(j) or Section 6.11(b).
|
(ii)
|
Borrower will give Notice to Lender of and, unless otherwise directed in writing by Lender, will appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Loan Agreement.
|
(d)
|
Alteration of Mortgaged Property – Consent Required
. Before taking any of the following actions (or permitting any tenant or other Person to take any of the following actions, Borrower must have the prior written consent of Lender:
|
(ii)
|
Converting, in whole or in part, any income producing unit to a non-income producing unit.
|
(iii)
|
Displacing or relocating tenants to undertake or complete any Repair, Capital Replacement, or other Property Improvements, unless such displacement or relocation is required by law.
|
(iv)
|
Removing, demolishing or altering any Mortgaged Property or any part of any Mortgaged Property, including any removal, demolition, or alteration occurring in connection with a rehabilitation of all or part of any Mortgaged Property.
|
(e)
|
Alteration of Mortgaged Property – Consent Not Required
. Notwithstanding Section 6.09(d)(iv), Borrower may undertake, or permit a Tenant to undertake, any of the following without the prior written consent of Lender.
|
(iv)
|
Preservation and maintenance of a Mortgaged Property in accordance with Sections 6.09(a) and (d).
|
(v)
|
Alterations intended to renovate or upgrade the Mortgaged Property (“
Property Improvement
”), provided the Property Improvement complies with Section 6.14 and it does not:
|
(A)
|
Include any of the actions listed in Sections 6.09(d)(i)-(iii) or (v).
|
(B)
|
Require demolition of any existing Improvements.
|
(C)
|
Cause a permanent obstruction of tenants’ access to units or a temporary obstruction of tenants’ access to units without a reasonable alternative access provided during the period the Property Improvement is underway.
|
(D)
|
Have an adverse effect on any major building systems, including the following:
|
(1)
|
Electrical (electrical lines or power upgrades, excluding fixture replacement).
|
(2)
|
HVAC (central and unit systems, excluding replacement of in kind unit systems).
|
(f)
|
Property Documents
. Borrower will observe and perform in all material respects each term to be observed or performed by Borrower pursuant to the terms of each Property Document. Borrower will enforce in a commercially reasonable manner the performance and observance of each Property Document, will do all things reasonably necessary to preserve and to keep unimpaired its material rights thereunder and cause each Mortgaged Property to be operated in accordance therewith. Borrower will not, without the prior written consent of Lender, consent to the increase of the amount of any charges under any Property Document or the reduction of any material right thereunder. During the continuance of an Event of Default Borrower will not exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Property Documents without Lender’s prior written consent.
|
(g)
|
Inspection of Mold
. If Lender determines that Mold has or may have developed as a result of a water intrusion event or leak, then Lender may require that a professional inspector inspect the applicable Mortgaged Property to confirm whether Mold has developed and, if so, thereafter as frequently as Lender determines is necessary until any issue with Mold and its cause(s) are resolved to Lender’s satisfaction. Such inspection will be limited to a visual and olfactory inspection of the area that has experienced the Mold, water intrusion event or leak. Borrower will be responsible for the cost of each such professional inspection and any remediation deemed to be necessary as a result of the professional inspection.
|
(h)
|
Property Management
. Borrower will provide for professional management of the Mortgaged Properties by one or more Property Managers at all times under property management agreements approved by Lender in writing. Without Lender’s prior consent, Borrower will not cancel or modify any property management agreement, except that Borrower and a Property Manager may renew a property management agreement on identical terms. Borrower will cause each Property Manager to execute an Assignment of Management Agreement with Borrower and Lender, in a form acceptable to Lender. If at any time Lender consents to the appointment of one or more new Property Managers, each such new Property Manager(s) and Borrower will, as a condition of Lender’s consent, execute an Assignment of Management Agreement in a form acceptable to Lender. As of the Effective Date, Borrower has confirmed that each Property Manager is not on any Prohibited Parties List. Borrower
|
(a)
|
Insurance Covenant
.
Borrower will
at all times during the term of this Loan Agreement maintain, at its sole expense, for the mutual benefit of Borrower and Lender, Insurance as required by Lender and applicable law, with such endorsements as Lender may reasonably require from time to time and which are customarily required by institutional lenders for properties comparable to the Mortgaged Properties.
|
(b)
|
Property Insurance
. Borrower will maintain Insurance against relevant physical hazards that may cause damage to the Mortgaged Properties, which Insurance will include coverage against loss or damage from fire, wind, hail, and other perils within the scope of a “Special Causes of Loss” policy form, an “All Risk” policy form, or a standard fire insurance policy with a customary extended coverage endorsement that includes replacement cost valuation, business income/rental value for all relevant perils, and flood (if any of the Improvements are located in an area identified by the Federal Emergency Management Agency, or any successor to that agency, as a “Special Flood Hazard Area”) (collectively, “
Property Insurance
”). Property Insurance may also include coverage for other risks that Lender may reasonably require such as earthquake, Named Storm, sinkhole, mine subsidence, and ordinance or law (if any Mortgaged Property does not conform with applicable building, zoning or land use laws, rules or regulations).
|
(c)
|
Liability Insurance
. Borrower will maintain commercial general liability Insurance, which may include workers’ compensation Insurance, and such other liability, errors and omissions, and fidelity Insurance coverage.
|
(d)
|
Builder’s Risk
. During any period of construction or Restoration, Borrower will maintain builder’s risk Insurance, including fire and other perils within the scope of a policy known as “Causes of Loss – Special Form” or “All Risk” policy.
|
(e)
|
Payment of Premiums
. All premiums for Insurance required under this Section 6.10 will be paid in the manner provided in Article IV and Section 6.08, unless Lender has designated in writing another method of payment.
|
(f)
|
Policy Requirements
. The following requirements apply with respect to all Insurance required by this Section 6.10:
|
(i)
|
All Insurance policies will be with one or more insurance companies that are satisfactory to Lender, in a form and with the terms required by Lender, and in amounts and with maximum deductibles as required by Lender.
|
(ii)
|
All Property Insurance policies will contain a standard mortgagee or mortgage holder’s clause with loss payable to, and in favor of, and in a form approved by, Lender.
|
(iii)
|
All commercial general liability and excess umbrella liability policies will name Lender and its successors and assigns as an additional insured party.
|
(iv)
|
All Property Insurance policies will provide that the insurer will notify Lender in writing of cancellation of policies at least 10 days before the cancellation of the policy by the insurer for nonpayment of the premium or nonrenewal and at least 30 days before cancellation by the insurer for any other reason.
|
(g)
|
Evidence of Insurance; Insurance Policy Renewals
. Borrower will deliver to Lender a legible copy of each Insurance policy, and Borrower will promptly deliver to Lender a copy of all renewal,
|
(h)
|
Compliance With Insurance Requirements
. Borrower will comply with all Insurance requirements and will not permit any condition to exist on any Mortgaged Property that would invalidate any part of any Insurance coverage required under this Loan Agreement.
|
(i)
|
Obligations Upon Casualty; Proof of Loss
.
|
(i)
|
If an insured loss occurs, then Borrower will give immediate written Notice to the Insurance carrier and to Lender.
|
(ii)
|
Borrower will promptly restore or repair the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (“
Restoration
”), subject to the limitations of Section 6.09(c)(i).
|
(iii)
|
Borrower authorizes and appoints Lender as attorney in fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of Property Insurance, to appear in and prosecute any action arising from such Property Insurance policies, to collect and receive the proceeds of Property Insurance, to hold the proceeds of Property Insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 6.10 will require Lender to incur any expense or take any action.
|
(j)
|
Lender’s Options Following a Casualty
. Following a casualty, Lender may, at Lender’s option, do any of the following:
|
(i)
|
Require a “repair or replacement” settlement, in which case the proceeds will be used to reimburse Borrower for the cost of Restoration. If Lender determines to require a repair or replacement settlement and to apply Insurance proceeds to Restoration, Lender will apply the proceeds in accordance with Lender’s then-current policies relating to the Restoration of casualty damage on similar residential properties. If Lender retains a professional inspection engineer or other qualified third party to inspect any Restoration items, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third-party inspector.
|
(ii)
|
Require an “actual cash value” settlement, in which case the proceeds may be applied to the payment of the Indebtedness, whether or not then due.
|
(iii)
|
If, in Lender’s discretion, the cost of Restoration following a casualty will equal or exceed 50% of the Release Amount, then Lender may require Borrower to Transfer the Mortgaged Property to a third-party and pay down the Indebtedness by an amount equal to the Release Amount plus all interest amounts required under the Note in accordance with Section 7.05(b) of this Agreement. If Lender elects to exercise its option under this Section 6.10(j)(iii), then Lender will provide Borrower with Notice that the Mortgaged Property must be Transferred in accordance with Section 7.05(b) no later than 30 days following the date of the Notice.
|
(k)
|
Borrower’s Rights Following a Casualty
. Subject to Section 6.10(j), and provided no Event of Default has occurred and is continuing, following a casualty, Borrower may take the following actions:
|
(i)
|
If a casualty results in damage to any Mortgaged Property for which the cost of Repairs required to complete the Restoration will be equal to or less than $20,000, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the Insurance proceeds are used solely for the Restoration of the applicable Mortgaged Property.
|
(ii)
|
If a casualty results in damage to any Mortgaged Property for which the cost of Repairs required to complete the Restoration will be more than $20,000, but less than 50% of the Release Amount for the Mortgaged Property, Borrower is authorized to make proof of loss and adjust and compromise the claim without the prior consent of Lender, and Lender will, at its option, hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property.
|
(iii)
|
If a casualty results in damage to the Mortgaged Property for which the cost of Repairs required to complete the Restoration will be equal to or greater than 50% of the Release Amount for the Mortgaged Property, Borrower must obtain the consent of Lender prior to making any proof of loss or adjusting or compromising the claim, and Lender will, at its option, hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property.
|
(l)
|
Lender’s Succession to Insurance Policies
. If any Mortgaged Property is sold at a foreclosure sale or Lender acquires title to a Mortgaged Property, then Lender will automatically succeed to all rights of Borrower in and to any Insurance policies and unearned Insurance premiums and in and to the proceeds resulting from any damage to such Mortgaged Property prior to such sale or acquisition.
|
(m)
|
Payments After Application of Insurance Proceeds
. Unless Lender otherwise agrees in writing, any application of any Insurance proceeds to the Indebtedness will not extend or postpone the due date, or change the amount, of any monthly payments referred to in the Note or Article IV of this Loan Agreement.
|
(n)
|
Assignment of Insurance Proceeds
. Borrower agrees to execute such further evidence of assignment of any Insurance proceeds as Lender may require.
|
(o)
|
Borrower Acknowledgment of Lender’s Right to Change Insurance Requirements
. Borrower acknowledges and agrees that Lender’s Insurance requirements may change from time to time throughout the term of the Indebtedness to include coverage for the kind of risks customarily insured against and in such minimum coverage amounts and maximum deductibles as are generally required by institutional lenders for properties comparable to the Mortgaged Properties.
|
(p)
|
Blanket Policy
. The Insurance coverage required by this Section 6.10 may be effected under a blanket policy or policies covering all the Mortgaged Properties if such blanket policy has been approved in advance by Lender.
|
6.11
|
Condemnation.
|
(a)
|
Borrower’s Obligations Generally
. Borrower will promptly notify Lender in writing of any action or proceeding or notice relating to any proposed or actual condemnation or other taking, or conveyance in lieu thereof, of all or any part of any Mortgaged Property, whether direct or indirect (“
Condemnation
”). Borrower will appear in, and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing. Borrower authorizes and appoints Lender as attorney in fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation, after consultation with Borrower
|
(b)
|
Lender’s Options Following a Condemnation
.
|
(i)
|
Following a Condemnation, Lender may, at Lender’s option, (i) hold the Condemnation award or proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property, or (ii) apply the Condemnation award or proceeds to the payment of the Indebtedness, whether or not then due. Unless Lender otherwise agrees in writing, any application of any Condemnation award to the Indebtedness will not extend or postpone the due date, or change the amount, of any monthly payments referred to in the Note or Article IV of this Loan Agreement.
|
(ii)
|
If, in Lender’s discretion, the cost of Restoration following a Condemnation will exceed 50% of the Release Amount, then Lender may require Borrower to Transfer the Mortgaged Property to a third-party and pay down the Indebtedness by an amount equal to the Release Amount plus all interest amounts required under the Note in accordance with Section 7.05(b) of this Agreement.
|
(iii)
|
If Lender elects to exercise its option under Section 6.11(b)(ii), then Lender will provide Borrower with Notice that the Mortgaged Property must be Transferred in accordance with Section 7.05(b) no later than 30 days following the date of the Notice.
|
(c)
|
Borrower’s Rights Following a Casualty
. Subject to Section 6.11, and provided no Event of Default has occurred and is continuing, then following a Condemnation, Borrower may take the following actions:
|
(i)
|
If a Condemnation results in proceeds or awards of $20,000 or less, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the Insurance proceeds are used solely for the Restoration of the applicable Mortgaged Property.
|
(ii)
|
If a Condemnation results in proceeds or awards of more than $20,000, but less than 50% of the Release Amount for the Mortgaged Property, Borrower is authorized to make proof of loss and adjust and compromise the claim without the prior consent of Lender, and Lender will, at its option, hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the applicable Mortgaged Property.
|
(iii)
|
If a Condemnation results in damage to the Mortgaged Property for which the cost of Repairs required to complete the Restoration will be equal to or greater than 50% of the Release Amount for the Mortgaged Property, Borrower must obtain the consent of Lender prior to making any proof of loss or adjusting or compromising the claim, and Lender will, at its option, hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the applicable Mortgaged Property
|
(d)
|
Succession to Condemnation Proceeds
. If any Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, then Lender will automatically succeed to all rights of Borrower in and to any Condemnation proceeds and awards prior to such sale or acquisition.
|
6.12
|
Environmental Hazards.
|
(a)
|
Prohibited Activities and Conditions
. Borrower will comply with all Hazardous Materials Laws applicable to any Mortgaged Property and will not cause or permit Prohibited Activities or Conditions.
|
(b)
|
Notice to Lender
. Borrower will promptly give Notice to Lender upon the occurrence of any of the following events:
|
(i)
|
Borrower’s discovery of any Prohibited Activity or Condition.
|
(ii)
|
Borrower’s receipt of or knowledge of any written complaint, order, notice of violation or other communication from any tenant, Property Manager, Governmental Authority or other Person with regard to present or future alleged Prohibited Activities or Conditions, or any other environmental, health or safety matters affecting the Mortgaged Properties.
|
(iii)
|
Borrower’s breach of any of its obligations under this Section 6.12.
|
(c)
|
Lender’s Option following a Hazardous Materials Event
.
|
(i)
|
If notwithstanding Borrower’s obligations under this Section 6.12, Borrower fails to comply with Hazardous Materials Laws applicable to a Mortgaged Property or Prohibited Activities or Conditions exist at a Mortgaged Property (“
Hazardous Materials Event
”), then Lender may require Borrower to Transfer the Mortgaged Property to a third party and pay down the Indebtedness by an amount equal to the Release Amount plus all interest amounts required under the Note in accordance with Section 7.05(b) of this Agreement.
|
(ii)
|
If Lender elects to exercise its option under Section 6.12(c)(i), then Lender will provide Borrower with Notice that the Mortgaged Property must be Transferred in accordance with Section 7.05(b) no later than 30 days following the date of the Notice.
|
(d)
|
Environmental Inspections, Tests and Audits
. Borrower will pay promptly the costs of any environmental inspections, tests or audits, a purpose of which is to identify the extent or cause of or potential for a Prohibited Activity or Condition (“
Environmental Inspections
”), required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Article VII, or required by Lender following a determination by Lender that Prohibited Activities or Conditions may exist. Any such costs incurred by Lender (including Attorneys’ Fees and Costs and the costs of technical consultants whether incurred in connection with any judicial or administrative process or otherwise) that Borrower fails to pay promptly will become an additional part of the Indebtedness as provided in Section 8.02. As long as: (i) no Event of Default has occurred and is continuing, (ii) Borrower has actually paid for or reimbursed Lender for all costs of any such Environmental Inspections performed or required by Lender, and (iii) Lender is not prohibited by law, contract or otherwise from doing so, Lender will make available to Borrower, without representation of any kind, copies of Environmental Inspections prepared by third parties and delivered to Lender. Lender reserves the right, and Borrower expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by or for Lender with respect to the Mortgaged Property. Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any Environmental Inspections made by or for Lender. Borrower acknowledges that Lender cannot control or otherwise ensure the truthfulness or accuracy of the
|
(e)
|
Remedial Work
. If any investigation, site monitoring, containment, clean-up, Restoration or other remedial work (“
Remedial Work
”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, then Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and must in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, then Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower will reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 8.02.
|
(g)
|
Borrower Contest of Order
. Notwithstanding Section 6.12(e), Borrower may contest the order of any Governmental Authority in good faith through appropriate proceedings, provided that (i) Borrower has demonstrated to Lender’s satisfaction that any delay in completing Remedial Work pending the outcome of such proceedings would not (A) result in damage to the Mortgaged Property or to persons who use or occupy the Improvements or (B) otherwise impair Lender’s interest under this Loan Agreement, and (ii) if any delay in completing the Remedial Work results in a Lien against the Mortgaged Property, Borrower must promptly furnish to Lender a bond or other security satisfactory to Lender in an amount not less than 150% of the claim that underlies the Lien.
|
(a)
|
Until the Indebtedness is paid in full, Borrower and each Pledgor will satisfy each of the following requirements:
|
(i)
|
It will preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its formation or organization and will do all things necessary to observe organizational formalities.
|
(iii)
|
It will not take any action to dissolve, wind-up, terminate or liquidate in whole or in part; to sell, transfer or otherwise dispose of all or substantially all of its assets; to change its legal structure; to transfer or permit the direct or indirect transfer of any partnership, membership or other equity interests, as applicable, other than Transfers permitted under this Loan Agreement; to issue additional partnership, membership or other equity interests, as applicable, or to seek to accomplish any of the foregoing.
|
(iv)
|
It will not maintain its assets in a way difficult to segregate and identify.
|
(v)
|
Borrower will not acquire, own, hold, lease, operate, manage, maintain, develop or improve any assets other than the Mortgaged Properties and such Personalty as may be necessary for the operation of the Mortgaged Properties and will conduct and operate its business as presently conducted and operated. Pledgor will not acquire, own, hold, lease, operate,
|
(vi)
|
Borrower will not engage in any business or activity other than the ownership, operation and maintenance of the Mortgaged Property and activities incidental to such ownership, operation, and maintenance. Pledgor will not engage in any business or activity other than the ownership of its interest in Borrower.
|
(vii)
|
Borrower will not incur or assume any debt other than the Indebtedness, except that Borrower is permitted to incur unsecured trade payables that are necessary for owning and operating the Mortgaged Property (“
Trade Payables
”). The Trade Payables:
|
(3)
|
In the aggregate, at any one time, must not exceed 3% of the Loan Amount.
|
(viii)
|
It will hold all its assets in its own name and will not commingle its assets with the assets of any other Person.
|
(ix)
|
It will identify its assets on its financial statements separate from those of any other Person.
|
(x)
|
Except for the terms of the Pledge Agreement, it will not guaranty the debts or obligations of, hold itself out to be responsible for the debts of, pledge its assets for the benefit of or to secure the obligations of, or hold out its credit as being available to satisfy the obligations of, any other Person.
|
(xi)
|
Borrower will pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s funds) its own liabilities (including salaries of its own employees) from its own funds; provided, however, that this requirement will not be deemed to require additional capital contributions by Borrower’s or Pledgor’s members, limited partners, or any Guarantor.
|
(viii)
|
It will not enter into any agreement with any affiliate of any Loan Party except upon commercially reasonable terms and conditions that are comparable to those of an arms-length basis with unaffiliated third parties.
|
(ix)
|
It will not dissolve, merge, liquidate, consolidate with any other Person or sell, transfer, dispose, or encumber (except with respect to the Loan Documents) all or substantially all of its assets.
|
(x)
|
It will not make any loans or advances to any third party (including any affiliate of any Loan Party).
|
(xi)
|
It will do, all things necessary to observe organizational formalities and preserve its existence, and it will not, nor will it permit any Person to, (i) terminate or fail to comply with the provisions of its organizational documents, or (ii) unless Lender has consented, amend, modify or otherwise change its organizational documents in any material respect.
|
(xii)
|
It will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any of its affiliates), will correct any known misunderstanding regarding its status as a separate entity, will conduct business in its own name, will not identify itself or any of its affiliates as a division or department or part of the other and will maintain and utilize separate stationery, invoices and checks bearing its own name.
|
(xiii)
|
It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; provided, however, that this requirement will not be deemed to require additional capital contributions by Borrower’s or Pledgor’s members, limited partners, or any Guarantor.
|
(b)
|
Borrower represents that it has never owned any real property other than the Mortgaged Property and personal property necessary or incidental to its ownership or operation of the Mortgaged Property and has never engaged in any business other than the ownership and operation of the Mortgaged Property.
|
(c)
|
Neither Borrower nor Pledgor will change its jurisdiction of formation or name without receiving Lender’s prior written consent and promptly providing Lender such information and replacement Uniform Commercial Code financing statements as Lender may reasonably request in connection with such a change.
|
(d)
|
Borrower and Pledgor will at all times elect to be treated as a “partnership” or “disregarded entity” that is not taxable as a corporation for state and U.S. federal tax purposes.
|
(e)
|
Borrower is and will continue to be a single member limited liability company wholly owned and controlled by Pledgor.
|
(f)
|
Pledgor is and will continue to be a limited liability company formed in Delaware.
|
6.14
|
Restoration, Priority Repairs, Capital Replacements, Property Improvements, and Other Repairs.
|
(a)
|
Borrower Obligated to Complete Priority Repairs
. Borrower will commence all Priority Repairs as soon as practicable after the Effective Date and will diligently proceed with and complete such Repairs.
|
(b)
|
Completion of Work in Good and Workmanlike Manner
. All (i) Restoration, (ii) Priority Repairs, (iii) Capital Replacements and (iv) Property Improvements and other Repairs Borrower elects to begin (collectively, “
Work
”) will be completed in a good and workmanlike manner, with suitable materials, and in accordance with good building practices and all applicable laws, ordinances, rules, regulations, building setback lines and restrictions applicable to the Mortgaged Properties. Borrower agrees to cause the replacement of any material or work that is defective, unworkmanlike or that does not comply with the requirements of this Loan Agreement, as determined by Lender.
|
(c)
|
No Conditional Sales Contracts or Lease Agreements
. Without the prior written consent of Lender, no materials, machinery, equipment, fixtures or any other part of any Work will be purchased or installed under conditional sale contracts or lease agreements, or any other arrangement wherein title to such Work or any portion of such Work is retained or subjected to a purchase money security interest, or the right is reserved or accrues to anyone to remove or repossess any such Work, or to consider them as personal property.
|
(d)
|
Lien Protection
. Borrower will promptly pay or cause to be paid, when due, all costs, charges and expenses incurred in connection with the construction and completion of the Work, and will keep the Mortgaged Properties free and clear of any and all Liens other than the Lien of the Security Instrument and any other junior Lien to which Lender has consented.
|
(e)
|
Adverse Claims
. Borrower will promptly advise Lender in writing of any litigation, Liens or claims affecting any Mortgaged Property and of all complaints and charges made by any Governmental Authority that may delay or adversely affect the Work.
|
(f)
|
Right to Complete Work
. If Borrower abandons or fails to proceed diligently with any Restoration, Priority Repair, or Capital Replacement or abandons any other Repair or Property Improvement once undertaken by Borrower, and such abandonment or failure continues for 30 days after Notice from Lender, then Lender will have the right (but not the obligation) to enter upon any Mortgaged Property and take over and cause the completion of such Work. However, no such Notice or cure period will apply in the case of such failure which could, in Lender’s discretion, result in harm to Lender, tenants or third parties or impairment of the security given under this Loan Agreement, the Security Instrument or any other Loan Document. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact for Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Work and the payment, settlement or compromise of all bills and claims for materials and work performed in connection with the Work) and do any and all things necessary or proper to complete any Work, including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete any Work, but Lender may advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Note, this Loan Agreement, the Security Instrument and any other Loan Document pertaining to the protection of Lender’s security and advances made by Lender. Borrower waives all claims it may have against Lender for materials used, work performed or resultant damage to a Mortgaged Property.
|
(g)
|
Completion of Work Not a Certification by Lender
. Lender’s disbursement of monies from any Reserve Fund or other acknowledgment of completion of any Work in a manner satisfactory to Lender will not be deemed a certification by Lender that the Work has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will, at all times, have the sole responsibility for ensuring that all Work is completed in accordance with all such requirements of any Governmental Authority.
|
6.15
|
Residential Leases.
|
(a)
|
All Leases for residential units executed on or after the Effective Date (including renewals of any existing Leases) will satisfy the following conditions:
|
(i)
|
They will be on forms acceptable to Lender.
|
(ii)
|
They will not include options to purchase or have purchase options associated with them.
|
(iii)
|
They will be for initial terms of at least 6 months.
|
(b)
|
Borrower will promptly upon Lender’s request, deliver to Lender an executed copy of each residential Lease then in effect.
|
6.16
|
Litigation; Government Proceedings.
Borrower will give prompt Notice to Lender of any litigation or governmental proceedings pending or, to the best of Borrower’s knowledge after due inquiry and investigation, threatened in writing against Borrower or any Borrower Principal which might have a Material Adverse Effect.
|
6.17
|
Estoppel Certificates; Further Assurances; Lender’s Expenses.
Within 10 days after a request from Lender, Borrower will take each of the following actions:
|
(a)
|
Deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any Person designated by Lender, as of the date of such statement:
|
(i)
|
that the Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications),
|
(ii)
|
the unpaid principal balance of the Note,
|
(iii)
|
the date to which interest under the Note has been paid,
|
(iv)
|
that Borrower is not in default under any of the Loan Documents (or, if Borrower is in default, describing such default in reasonable detail),
|
(v)
|
whether there are any then-existing setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents, and
|
(vi)
|
any additional facts requested by Lender.
|
(b)
|
Execute, acknowledge and deliver and, if applicable, cause Guarantor, Pledgor, or Property Manager to execute, acknowledge and deliver, at Borrower’s expense (i) all amendments, modifications, corrections, deletions or additions to this Loan Agreement, the Note, the Security Instrument and/or any other Loan Document, and (ii) any further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances, as may be required by Lender from time to time in order to correct clerical errors and legal deficiencies and to better assure, grant and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Loan Agreement and the other Loan Documents, or in connection with Lender’s consent rights under Article VII; provided, however, that this Section 6.17 is not intended to require Borrower to execute any corrective amendment or modification of the Loan Documents that has the effect of (x) changing the essential economic terms of the Loan set forth in the Commitment Letter, or (y) imposing greater liability under the Loan Documents than that set forth in the terms of the Commitment Letter.
|
(c)
|
Borrower agrees that, in connection with each request by Borrower under this Loan Agreement or any Loan Document, Borrower will pay or reimburse Lender for all reasonable Attorneys’ Fees and Costs and expenses incurred by Lender and Loan Servicer, including any fees charged by the Rating Agencies, if applicable, regardless of whether the matter is approved, denied or withdrawn. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 8.02.
|
6.18
|
ERISA Requirements.
|
(a)
|
Borrower will not engage in any transaction which would cause an action by either Borrower or Lender permitted or required under this Loan Agreement or any other Loan Document to be a non-exempt prohibited transaction under either ERISA or Section 4975 of the Tax Code.
|
(b)
|
When requested by Lender, Borrower will deliver to Lender a certification from Borrower with supporting evidence satisfactory to Lender that each of the following is true:
|
(i)
|
Borrower is not any of the following:
|
(A)
|
An “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA.
|
(C)
|
An entity whose underlying assets constitute “plan assets” of one or more of the plans described in Sections 6.18(c)(i)(A) and (B).
|
(D)
|
A “governmental plan” within the meaning of Section 3(32) of ERISA.
|
(ii)
|
Borrower is not subject to state statutes regulating investments or fiduciary obligations with respect to governmental plans.
|
(iii)
|
At least one of the following circumstances is true:
|
(A)
|
None of the equity interests in Borrower are held by “benefit plan investors” within the meaning of Section 3(42) of ERISA.
|
(B)
|
Less than 25% of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of Section 3(42) of ERISA.
|
(C)
|
Equity interests in Borrower are publicly offered securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2), as amended or any successor provision.
|
(D)
|
Borrower qualifies as either an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e), as either may be amended or any successor provisions.
|
(E)
|
Borrower is an investment company registered under the Investment Company Act of 1940.
|
6.19
|
Economic Sanctions Laws: AML Laws.
Borrower will comply with, and will take reasonable measures to ensure that each Borrower Principal will comply with, all Economic Sanctions Laws and AML Laws. Borrower and each Borrower Principal will have in place practices and procedures for the admission of investors which prevent the admission of:
|
(a)
|
Any Non-U.S. Equity Holder, or any investor that would have a 25% or more ownership interest in Borrower (whether directly or indirectly), and that has been convicted of a violation of the AML Laws or been the subject of a final enforcement action relating to the AML Laws.
|
(b)
|
Any Person with a 25% or more ownership interest in Borrower (whether directly or indirectly) that is on the Prohibited Parties Lists.
|
6.20
|
Crowdfunding.
Borrower and each Borrower Principal will not permit direct or indirect ownership (or other economic) interests of 25% or more in Borrower or any Borrower Principal that have been marketed or sold to investors through any fund of Crowdfunding.
|
ARTICLE VII
|
TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
|
7.01
|
Permitted Transfers.
The occurrence of any of the following Transfers will not constitute an Event of Default under this Loan Agreement, notwithstanding any provision of Section 7.02 to the contrary:
|
(a)
|
A Transfer to which Lender has consented.
|
(b)
|
A Transfer that is not a prohibited Transfer pursuant to Section 7.02.
|
(c)
|
A Transfer that is conditionally permitted pursuant to Section 7.03 upon the satisfaction of all applicable conditions.
|
(d)
|
A Preapproved Intrafamily Transfer that satisfies the requirements of Section 7.04.
|
(e)
|
A Release Property Transfer or Mandatory Release Property Transfer that satisfies the requirements of Section 7.05(a) or 7.05(b), as applicable.
|
(g)
|
The grant of a leasehold interest in an individual residential unit for a term of 2 years or less (or longer if approved by Lender in writing) not containing an option to purchase.
|
(h)
|
A Transfer of a Mortgaged Property that has been released from the applicable Security Instrument pursuant to Section 6.10(j) or Section 6.12(c).
|
(i)
|
A Condemnation with respect to which Borrower satisfies the requirements of Section 6.11.
|
(j)
|
A Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of Liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender.
|
(k)
|
The creation of a mechanic’s, materialmen’s or judgment Lien against any Mortgaged Property which is released of record, bonded or otherwise remedied to Lender’s satisfaction within 60 days after the date of creation or is being contested as otherwise provided in this Loan Agreement; provided, however, if Borrower is diligently prosecuting such release or other remedy and advises Lender that such release or remedy cannot be consummated within such 60-day period, Borrower will have an additional period of time (not exceeding 120 days from the date of creation or such earlier time as may be required by applicable law in which the lienholder must act to enforce the Lien) within which to obtain such release of record or consummate such other remedy.
|
7.02
|
Prohibited Transfers.
The occurrence of any of the following Transfers will constitute an Event of Default under this Loan Agreement:
|
(a)
|
A Transfer of all or any part of any Mortgaged Property or any interest in any Mortgaged Property, including the grant, creation or existence of any Lien on a Mortgaged Property, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the Lien of the Security Instrument, other than the Lien of the Security Instrument, or any other Lien to which Lender has consented.
|
(b)
|
A Transfer or series of Transfers of any legal or equitable interest of any Guarantor which owns a direct or indirect interest in Borrower that result(s) in such Guarantor no longer owning any direct or indirect interest in Borrower.
|
(c)
|
A Transfer of any direct ownership interest in Borrower.
|
(d)
|
A Transfer or series of Transfers of any legal or equitable interest since the Effective Date that result(s) in (a) a change of more than 49% of the indirect ownership interests (or beneficial interests, if the applicable entity is a trust) in Borrower or (b) a change of more than 49% of the direct or indirect interests in any Person that Controls Borrower.
|
(e)
|
A Transfer of any general partnership interest in a partnership, or any manager interest (whether a member manager or nonmember manager) in a limited liability company if such partnership or limited liability company, as applicable, is a Person that Controls Borrower.
|
(f)
|
If Any Person that Controls Borrower is a corporation whose outstanding voting stock is held by 100 or more shareholders, one or more Transfers by a single transferor within a 12-month period affecting an aggregate of 10% or more of that stock.
|
(g)
|
The grant, creation or existence of any Lien, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the Lien of the Security Instrument, on any direct or
|
7.03
|
Conditionally Permitted Transfers.
The occurrence of any of the following Transfers will not constitute a prohibited Transfer under Section 7.02, provided that Borrower has complied with all applicable specified conditions in this Section 7.03.
|
(a)
|
Transfer by Devise, Descent or Operation of Law.
Upon the death of a natural person, a Transfer which occurs by devise, descent, or by operation of law (but excluding a Transfer as a result of the death of a Borrower that is a natural person) to one or more Immediate Family Members of such natural person or to a trust or family conservatorship established for the benefit of such Immediate Family Members (each a “
Beneficiary
”), provided that each of the following conditions is satisfied:
|
(i)
|
The Property Manager (if applicable) continues to be responsible for the management of the Mortgaged Properties, and such Transfer will not result in a change in the day-to-day operations of the Mortgaged Properties.
|
(ii)
|
Lender receives confirmation acceptable to Lender that Borrower continues to satisfy the requirements of Section 6.13.
|
(iii)
|
Following the Transfer, no Non-U.S. Equity Holder or Person with a direct or indirect interest in Borrower equal to or greater than 25% is on any Prohibited Parties List.
|
(iv)
|
Each Guarantor executes such documents and agreements as Lender requires to ratify each Guaranty, or in the event of the death of any Guarantor, Borrower causes one of the following to occur:
|
(A)
|
Within 60 days following the Guarantor’s death, one or more Persons acceptable to Lender execute(s) and deliver(s) to Lender a replacement guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Effective Date, without any cost or expense to Lender.
|
(B)
|
The estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within 6 months after the date of the death of the deceased Guarantor, one or more Persons acceptable to Lender execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Effective Date, without any cost or expense to Lender.
|
(v)
|
Borrower gives Lender Notice of such Transfer together with copies of all documents effecting such Transfer not more than 30 days after the date of such Transfer, and contemporaneously with the Notice, takes each of the following additional actions:
|
(A)
|
Borrower reaffirms the representations and warranties under Article V.
|
(B)
|
Borrower satisfies Lender that the Beneficiary’s organization, credit and experience in the management of similar properties are appropriate to the overall structure and documentation of the existing financing.
|
(vi)
|
Borrower (A) pays the Transfer Processing Fee to Lender, and (B) pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with such Transfer; provided, however, that Lender will not be entitled to collect a Transfer Fee.
|
(b)
|
Affiliate Transfer
. A Transfer of any direct or indirect interests in Pledgor held by an entity owned and directly or indirectly Controlled by Guarantor to one or more of Guarantor’s Affiliates (“
Affiliate Transfer
”) provided that each of the following conditions is satisfied:
|
(i)
|
Borrower provides Lender with at least 30 days prior Notice of the proposed Affiliate Transfer, including organizational charts and documents reflecting the structure of Borrower prior to and after the proposed Affiliate Transfer.
|
(i)
|
At the time of the proposed Affiliate Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.
|
(ii)
|
Borrower delivers to Lender a certification that following the proposed Affiliate Transfer, each of the following conditions will be satisfied:
|
(A)
|
Control and management of the day-to-day operations of Borrower will continue to be held by the Person exercising such Control and management immediately prior to the Affiliate Transfer.
|
(B)
|
No Non-U.S. Equity Holder, and no other person with a direct or indirect interest in Borrower equal to or greater than 25%, is on any Prohibited Parties List.
|
(iv)
|
Borrower and Guarantor execute such additional documents as Lender may require to evidence the Affiliate Transfer.
|
(v)
|
Borrower (A) pays the Transfer Processing Fee to Lender, and (B) pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with such Transfer; provided, however, that Lender will not be entitled to collect a Transfer Fee.
|
(c)
|
Publicly-Held Fund or Publicly-Held Real Estate Investment Trust
. If Guarantor is a publicly-held fund or a publicly-held real estate investment trust, either of the following:
|
(i)
|
The public issuance of common stock, convertible debt, equity or other similar securities (“
Public Fund/REIT Securities
”) and the subsequent Transfer of such Public Fund/REIT Securities.
|
(ii)
|
The acquisition by a single Public Fund/REIT Securities holder of an ownership percentage of 10% or more in the Pledgor or Guarantor, if within 30 days following the acquisition, Borrower does each of the following:
|
(A)
|
Provides notice to Lender of that acquisition.
|
(1)
|
Borrower certifies in writing to Lender that as of the date of the Transfer either (i) there will be not be any Person with a collective equity interest (whether direct or indirect) of 25% or more in Borrower or (ii) no Borrower Principal (A) is on any Prohibited Parties Lists, (B) has been convicted of any violation of the AML Laws, or (C) has been the subject of a final enforcement action relating to the AML Laws.
|
(2)
|
Borrower certifies in writing to Lender that as of the date of the Transfer either (i) there will not be any Non-U.S. Equity Holders, or (ii) no Non-U.S. Equity Holder (A) is on the OFAC Lists, (B) has been convicted of any violation of the AML Laws, or (C) has been the subject of a final enforcement action relating to the AML Laws.
|
(d)
|
Easement, Restrictive Covenant or other Encumbrance.
The grant of an easement, restrictive covenant or other encumbrance, provided that each of the following conditions is satisfied:
|
(i)
|
Borrower provides Lender with at least 30 days prior Notice of the proposed grant.
|
(ii)
|
Prior to the grant, Lender determines that the easement, restrictive covenant or other encumbrance will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property.
|
(iii)
|
Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with reviewing Borrower’s request for Lender’s review of such grant of easement, restrictive covenant or other encumbrance; provided, however, that Lender will not be entitled to collect a Transfer Processing Fee or a Transfer Fee.
|
(iv)
|
If the Note is held by a REMIC trust, Lender may require an opinion of counsel which meets each of the following requirements:
|
(A)
|
The counsel providing the opinion is acceptable to Lender.
|
(B)
|
The opinion is addressed to Lender.
|
(C)
|
The opinion is paid for by Borrower.
|
(D)
|
The opinion is in form and substance satisfactory to Lender.
|
(E)
|
The opinion confirms each of the following:
|
(1)
|
The grant of such easement has been effected in accordance with the requirements of Treasury Regulation Section 1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from time to time).
|
(2)
|
The qualification and status of the REMIC trust as a REMIC will not be adversely affected or impaired as a result of such grant.
|
(3)
|
That there will be no imposition of a tax under applicable REMIC provisions as a result of such grant.
|
7.04
|
Preapproved Intrafamily Transfers.
The occurrence
of a Transfer or a series of Transfers of limited partnership interests or non-managing membership interests that result in a change of more than a 49% indirect interest in Borrower or a 49% direct or indirect interest in a Person that Controls Borrower as set forth in this Section 7.04 will be considered a “
Preapproved
Intrafamily Transfer
”
if each of the conditions set forth in Sections 7.04(a) and (b) is satisfied:
|
(a)
|
Type of Transfer
. The Transfer is one of the following:
|
(i)
|
A sale or transfer to one or more of the transferor’s Immediate Family Members.
|
(ii)
|
A sale or transfer to any trust having as its sole beneficiaries the transferor and/or one or more of the transferor’s Immediate Family Members.
|
(iii)
|
A sale or transfer from a trust to any one or more of its beneficiaries who are the settlor and/or Immediate Family Members of the settlor of the trust.
|
(iv)
|
The substitution or replacement of the trustee of any trust with a trustee who is an Immediate Family Member of the settlor of the trust.
|
(v)
|
A sale or transfer from a natural person to an entity owned and under the Control of the transferor or the transferor’s Immediate Family Members.
|
(b)
|
Conditions
. The Preapproved Intrafamily Transfer satisfies each of the following conditions:
|
(i)
|
Borrower provides Lender with 30 days prior Notice of the proposed Preapproved Intrafamily Transfer and pays the Transfer Processing Fee.
|
(ii)
|
Following the Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Transfer and there is no change in Guarantor, if applicable.
|
(iii)
|
Following the Transfer, no Non-U.S. Equity Holder or Person with a direct or indirect interest in Borrower equal to or greater than 25% is on any Prohibited Parties List.
|
(iv)
|
At the time of the Preapproved Intrafamily Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.
|
(v)
|
Borrower pays Lender all of Lender’s costs, including the cost of all title searches, title insurance and recording costs, and all Attorneys’ Fees and Costs; provided, however, that Lender will not be entitled to collect a Transfer Fee.
|
(vi)
|
Lender receives confirmation acceptable to Lender that Section 6.13 continues to be satisfied.
|
7.05
|
Mortgaged Property Releases.
|
(a)
|
The Transfer of one or more of the Mortgaged Properties (each a “
Release Property
”) will be considered a “
Release Property Transfer
” if each of the conditions set forth in this Section 7.05(a) is satisfied.
|
(i)
|
No Release Property Transfers can occur in the six months immediately prior to the Maturity Date.
|
(ii)
|
No Event of Default has occurred and is continuing, except that if the Release Property Transfer will cure the Event of Default, then the Release Property may be released and the release of such Release Property will be deemed to cure the applicable Event of Default.
|
(iii)
|
No more than two Release Property Transfers can occur in a calendar year.
|
(iv)
|
Borrower has submitted to Lender, not less than 30 days prior to the proposed Release Property Transfer Date, all the following:
|
(A)
|
A Release Property Transfer request substantially in the form attached to this Loan Agreement as
Exhibit C.
|
(B)
|
Evidence satisfactory to Lender that the conditions of this Section 7.05 are or will be satisfied in connection with the Release Property Transfer
|
(v)
|
The Rent to Debt Service Ratio calculated as of each of the following dates is equal to or greater than the Required Rent to Debt Service Ratio specified in Article I:
|
(A)
|
The last day of the calendar quarter ended immediately prior to the request for a Release Property Transfer.
|
(B)
|
The last day of the month ended immediately prior to the request for a Release Property Transfer.
|
(vi)
|
The sum of the Mortgaged Properties released in connection with this and all prior Release Property Transfers does not exceed the Property Release Cap specified in Article I.
|
(vii)
|
Borrower, Pledgor, and Guarantor execute such additional documents as Lender may require to evidence the Release Property Transfer.
|
(viii)
|
The Release Property will be Transferred in exchange for United States dollars on arms-length terms and conditions to a Person that is not an Affiliate of the Borrower.
|
(ix)
|
Borrower pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Release Property Transfer.
|
(x)
|
At the time of the Transfer, Borrower pays the Release Amount to Lender, plus all interest and prepayment premium amounts required under the Note; provided, however, that Lender will not be entitled to collect a Transfer Processing Fee or a Transfer Fee.
|
(b)
|
The required Transfer of one or more of the Mortgaged Properties following a casualty, condemnation, or Hazardous Materials Event pursuant to Section 6.10(j), 6.11(b), or 6.12(c) (each a “
Mandatory Release Property
”) will be considered a “
Mandatory Release Property Transfer
” if each of the conditions set forth in this Section 7.05(b) is satisfied.
|
(i)
|
Borrower has received notice from Lender that a Mandatory Release Property Transfer is required.
|
(ii)
|
Borrower, Pledgor, and Guarantor execute such additional documents as Lender may require to evidence the Mandatory Release Property Transfer.
|
(iii)
|
Borrower pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Mandatory Release Property Transfer
|
(iv)
|
At the time of the Transfer, Borrower pays the Release Amount to Lender; plus all interest amounts required under the Note; provided, however, that Lender will not be entitled to collect a Release Property Processing Fee, Transfer Processing Fee, a Transfer Fee, or a prepayment premium.
|
7.06
|
Lender’s Consent to Prohibited Transfers.
A Transfer that results in a change in the direct or indirect Control of the Borrower or the Pledgor will not constitute a prohibited Transfer under Section 7.02 if each of the conditions set forth in this Section 7.06 is satisfied.
|
(a)
|
Borrower provides Lender with at least 30 days prior Notice of the proposed Transfer, including organizational charts and documents reflecting the direct and indirect ownership and Control of Borrower and Pledgor prior to and after the proposed Transfer, and pays the Transfer Processing Fee.
|
(b)
|
At the time of the proposed Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.
|
(c)
|
No Non-U.S. Equity Holder and no other person with a direct or indirect interest in Borrower equal to or greater than 25%, is on any Prohibited Parties List.
|
(d)
|
Lender determines that each of the following conditions is satisfied:
|
(i)
|
The transferee meets Lender’s eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee).
|
(ii)
|
The transferee’s organization, credit and experience in the management of similar properties is appropriate to the overall structure and documentation of the Loan.
|
(iii)
|
At the time of the proposed Transfer, all the Mortgaged Properties meet Lender’s standards as to their physical condition, occupancy, net operating income and the accumulation of reserves.
|
(iv)
|
Following the Transfer, the Mortgaged Properties will be managed by one or more Property Managers meeting the requirements of Section 6.09(d).
|
(vii)
|
Following the Transfer, Borrower and Pledgor will continue to meet the requirements of Section 6.13.
|
(e)
|
Borrower, Pledgor, Guarantor, and transferee(s) execute such additional documents as Lender may require to evidence the Transfer, provided there will not be any adjustment to the rate at which the Indebtedness bears interest or to any other economic terms of the Indebtedness set forth in the Note.
|
(f)
|
Lender has received such legal opinions as Lender deems necessary, including an opinion that the assignment and assumption of the Loan Documents has been duly authorized, executed, and delivered and that the assignment documents are enforceable as the obligations of Borrower, Pledgor, Guarantor, and transferee(s), as applicable.
|
(g)
|
Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Transfer, and pays Lender the Transfer Fee.
|
8.01
|
Events of Default.
The occurrence of any one or more of the following will constitute an “
Event of Default
” under this Loan Agreement:
|
(a)
|
Borrower fails to pay or deposit when due any amount required by the Note, this Loan Agreement or any other Loan Document.
|
(b)
|
Borrower or any of its officers, directors, trustees, general partners, or managers, or any Guarantor, commits fraud or makes a material misrepresentation or material omission in connection with any of the following:
|
(i)
|
The application for or creation of the Indebtedness.
|
(ii)
|
Any financial statement, Rent Schedule or other report or information provided to Lender during the term of the Indebtedness.
|
(iii)
|
Any request for Lender’s consent to any proposed action, including a request for disbursement of funds under this Loan Agreement or a release of a Mortgaged Property.
|
(c)
|
Borrower has made any representation or warranty in this Loan Agreement that is false or misleading in any material respect.
|
(d)
|
Borrower fails to maintain the Insurance coverage required by Section 6.10.
|
(e)
|
Borrower fails to comply with the Condemnation provisions of Section 6.11.
|
(f)
|
Borrower fails to comply with the provisions of Section 6.13.
|
(g)
|
A Transfer occurs that violates the provisions of Article VII, whether or not any actual impairment of Lender’s security results from such Transfer.
|
(h)
|
A forfeiture action or proceeding, whether civil or criminal, is commenced which could result in a forfeiture of any Mortgaged Property or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in any Mortgaged Property.
|
(i)
|
Reserved.
|
(j)
|
Borrower fails to perform any of its obligations under any Property Documents, and such failure continues beyond any applicable cure period, if any.
|
(k)
|
Reserved.
|
(l)
|
Any of the following occurs:
|
(i)
|
Borrower commences any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors (A) seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debt, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets.
|
(ii)
|
Any party other than Lender commences any case, proceeding or other action of a nature referred to in Section 8.01(l)(i) against Borrower which (A) results in the entry of an order for relief or any such adjudication or appointment, or (B) has not been dismissed, discharged or bonded within a period of 90 days following commencement.
|
(iii)
|
Any case, proceeding or other action is commenced against Borrower seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order by a court of competent jurisdiction
|
(iv)
|
Borrower takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Section 8.01(l)(i), (ii) or (iii).
|
(m)
|
Reserved.
|
(n)
|
A Guarantor files for bankruptcy protection under the Bankruptcy Code or a Guarantor voluntarily becomes subject to any reorganization, receivership, insolvency proceeding or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights, or any creditor (other than Lender) of a Guarantor commences any involuntary case against a Guarantor pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights, unless each of the following conditions is satisfied:
|
(i)
|
Borrower or Guarantor provides Notice of such action to Lender within 30 days after the filing of such action.
|
(ii)
|
Either (A) the case is dismissed or discharged within 90 days after filing, or (B) within 90 days following the date of such filing or commencement, the affected Guarantor is replaced with one or more other Persons acceptable to Lender, each of whom executes and delivers to Lender a replacement Guaranty in form and content acceptable to Lender; provided, however, that if Lender determines that any proposed replacement Guarantor is not acceptable, then the action will constitute a prohibited Transfer governed by Section 7.02.
|
(iii)
|
If Borrower must provide a replacement Guarantor pursuant to Section 8.01(n)(ii), Borrower pays the Transfer Processing Fee to Lender.
|
(p)
|
The death of any Guarantor who is a natural person, unless Borrower satisfies one of the conditions set forth in Section 7.03(a)(iii).
|
(q)
|
If the Guaranty includes the “Expiring Term of Existence” rider, the Expiring Guarantor (as defined in the rider) does not comply with any of the requirements in the rider, including extending its term of existence, providing one or more replacement guarantors, or providing cash or letter of credit collateral for its obligations under the Guaranty.
|
(r)
|
Borrower fails to perform any of its obligations under this Loan Agreement (other than those Events of Default specified in Sections 8.01(a) through (q) or included on any exhibit, schedule, or rider attached to this Loan Agreement) as and when required, and that failure continues for a period of 30 days after Notice of the failure by Lender to Borrower.
|
(s)
|
Any Loan Party fails to perform any of its obligations as and when required under any Loan Document other than this Loan Agreement and that failure continues beyond the applicable cure period, if any, specified in that Loan Document.
|
8.02
|
Protection of Lender’s Security; Security Instrument Secures Future Advances.
|
(a)
|
If Borrower fails to perform any of its obligations under this Loan Agreement or any other Loan Document, or if any action or proceeding is commenced which purports to affect any Mortgaged Property, Lender’s security or Lender’s rights under this Loan Agreement, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender may make such appearances, file such documents, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender’s interest, including: (i) payment of Attorneys’ Fees and Costs, (ii) payment of fees and out-of-pocket expenses of accountants, inspectors and consultants, (iii) entry upon a Mortgaged Property to make Repairs or secure the Mortgaged Property, (iv) procurement of the Insurance required by Section 6.10, (v) payment of amounts which Borrower has failed to pay under Section 6.08, (vi) performance of Borrower’s obligations under Section 6.09, and (vii) advances made by Lender to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a Prior Lien.
|
(b)
|
Any amounts disbursed by Lender under this Section 8.02, or under any other provision of this Loan Agreement that treats such disbursement as being made under this Section 8.02, will be secured by the Security Instrument, will be added to, and become part of, the principal component of the Indebtedness, will be immediately due and payable and will bear interest from the date of disbursement until paid at the Default Rate.
|
(c)
|
Nothing in this Section 8.02 will require Lender to incur any expense or take any action.
|
8.03
|
Remedies.
|
(a)
|
Upon an Event of Default, Lender may exercise any or all of its rights and remedies provided under the Loan Documents and Borrower will pay all associated costs, including Attorneys’ Fees and Costs.
|
(b)
|
Each right and remedy provided in this Loan Agreement is distinct from all other rights or remedies under this Loan Agreement or any other Loan Document or afforded by applicable law or equity, and each will be cumulative and may be exercised concurrently, independently or successively, in any order. Lender’s exercise of any particular right or remedy will not in any way prevent Lender from exercising any other right or remedy available to Lender. Lender may exercise any such remedies from time to time and as often as Lender chooses.
|
(c)
|
Lender will have all remedies available to Lender under Revised Article 9 of the UCC, the Loan Documents and under applicable law.
|
(d)
|
Lender may also retain all money in the Reserve Funds, including interest, and in Lender’s discretion, may apply such amounts, without restriction and without any specific order of priority, to the payment of any and all Indebtedness.
|
(e)
|
If a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender has an obligation to act reasonably or promptly, then Lender will not be liable for any monetary damages, and Borrower’s sole remedy will be limited to commencing an action seeking injunctive
|
8.04
|
Forbearance.
|
(a)
|
Lender may (but will not be obligated to) agree with Borrower, from time to time, and without giving Notice to, or obtaining the consent of, or having any effect upon the obligations of, any Guarantor or other third party obligor, to take any of the following actions:
|
(i)
|
Extend the time for payment of all or any part of the Indebtedness.
|
(ii)
|
Reduce the payments due under any of the Loan Documents.
|
(iii)
|
Release anyone liable for the payment of any amounts due under any of the Loan Documents.
|
(iv)
|
Accept a renewal of the Note.
|
(v)
|
Modify the terms and time of payment of the Indebtedness.
|
(vi)
|
Join in any extension or subordination agreement.
|
(vii)
|
Release any portion of any Mortgaged Property.
|
(viii)
|
Take or release other or additional security.
|
(ix)
|
Modify the rate of interest or period of amortization of the Note or change the amount of the monthly payments payable under the Note.
|
(x)
|
Otherwise modify this Loan Agreement, the Note or any other Loan Document.
|
(b)
|
Any forbearance by Lender in exercising any right or remedy under any of the Loan Documents, or otherwise afforded by applicable law will not be a waiver of or preclude the exercise of any other right or remedy, or the subsequent exercise of any right or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, will not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness will not constitute an election of remedies by Lender so as to preclude the exercise of any other right available to Lender. Lender’s receipt of any awards or proceeds under Sections 6.10 and 6.11 will not operate to cure or waive any Event of Default.
|
8.05
|
Waiver of Marshalling.
Notwithstanding the existence of any other security interests in the Mortgaged Properties held by Lender or by any other party, Lender will have the right to determine the order in which any or all of the Mortgaged Properties will be subjected to the remedies provided in this Loan Agreement or any other Loan Document or applicable law. Lender will have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies. Borrower and any party who now or in the future owns or acquires a security interest in any Mortgaged Property and who has actual or constructive notice of the Security Instrument waives any and all right to require the marshalling of assets or to require that any Mortgaged Property be sold in the inverse order of alienation or that any Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Loan Agreement.
|
8.06
|
Severance
.
|
(a)
|
During the continuance of an Event of Default, Lender will have the right from time to time to partially foreclose any Security Instrument or the Lien of any of the other Loan Documents in any manner and for any amounts secured by the Loan Documents then due and payable as determined by Lender, including the following circumstances: (A) if Borrower defaults beyond any applicable grace period in the payment of one or more required payments of principal and interest, Lender may foreclose one or more of the Security Instruments or other Loan Documents to recover such delinquent payments, or (B) if Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose one or more of the Security Instruments or other Loan Documents to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgages and the other Loan Documents as Lender may elect. Notwithstanding one or more partial foreclosures, the collateral for the Loan will remain subject to the Security Instruments and the other Loan Documents to secure payment of the sums secured by the Loan Documents and not previously recovered.
|
(b)
|
During the continuance of an Event of Default, Lender will have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, Loan Documents and other security documents in such denominations as Lender will determine for purposes of evidencing and enforcing its rights and remedies provided under the Loan Documents. Borrower will execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender will request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney will do by virtue thereof;
provided
,
however
, Lender will not make or execute any such documents under such power until three days after notice has been given to Borrower by Lender of Lender’s intent to exercise its rights under such power.
|
9.01
|
Release.
Borrower covenants and agrees that, in performing any of its duties under this Loan Agreement, none of Lender, Loan Servicer or any of their respective agents or employees will be liable for any losses, claims, damages, liabilities, or expenses that may be incurred by any of them as a result of such performance, except that no party will be released from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such party.
|
9.02
|
Indemnity.
|
(a)
|
General Indemnity
. Borrower agrees to indemnify, hold harmless and defend Lender, including any custodian, trustee and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties,
any prior owner or holder of the Note, the Loan Servicer, any prior Loan Servicer, the officers, directors, shareholders, partners, employees and trustees of each of the foregoing, and the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, “
Indemnitees
”) against any and all losses, claims, damages, liabilities, and expenses, including Attorneys’ Fees and Costs, which may be imposed or incurred by any of them directly or indirectly arising out of, or in any way relating to, or as a result of: (i) any failure of any Mortgaged Property to comply with the laws, regulations, ordinances, codes or decrees of any Governmental Authority, including those pertaining to the Americans with Disabilities Act, zoning, occupancy and subdivision of real property, (ii) failure of Borrower or any Borrower Principal to comply with the Economic Sanction Laws or AML Laws, or (iii) any obligation of Borrower under any Lease, and (iv) any accident, injury or death to any natural person on any Mortgaged Property or any damage to personal property located on any Mortgaged Property, except that no such party will be indemnified from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such party.
|
(b)
|
Environmental Indemnity
. Borrower agrees to indemnify, hold harmless and defend Indemnitees from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including Attorneys’ Fees and Costs and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:
|
(i)
|
Any breach of any representation or warranty of Borrower in Section 5.05.
|
(ii)
|
Any failure by Borrower to perform any of its obligations under Section 6.12.
|
(iii)
|
The existence or alleged existence of any Prohibited Activity or Condition.
|
(iv)
|
The presence or alleged presence of Hazardous Materials on or under any Mortgaged Property or in any of the Improvements.
|
(v)
|
The actual or alleged violation of any Hazardous Materials Law.
|
(c)
|
Indemnification Regarding ERISA Covenants
.
BORROWER WILL INDEMNIFY LENDER AND DEFEND AND HOLD LENDER HARMLESS FROM AND AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST, DAMAGE AND EXPENSE (INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE INVESTIGATION, DEFENSE AND SETTLEMENT OF CLAIMS AND LOSSES INCURRED IN CORRECTING ANY PROHIBITED TRANSACTION OR IN THE SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY INDIVIDUAL PROHIBITED TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN LENDER’S DISCRETION) THAT LENDER MAY INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF DEFAULT UNDER SECTION 6.18. THIS INDEMNITY WILL SURVIVE ANY TERMINATION, SATISFACTION OR FORECLOSURE OF THE SECURITY INSTRUMENT.
|
(d)
|
Selection and Direction of Counsel
. Counsel selected by Borrower to defend Indemnitees will be subject to the approval of those Indemnitees. In any circumstances in which the indemnity under this Article IX applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which will not be unreasonably withheld, delayed or conditioned) may settle or compromise any action or legal or administrative proceeding. However, unless an Event of Default has occurred and is continuing, or the interests of Borrower and Lender are in conflict, as determined by Lender, Lender will permit Borrower to undertake the actions referenced in this Article IX so long as Lender approves such action, which approval will not be unreasonably withheld or delayed. Borrower will reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, consultants’ fees and Attorneys’ Fees and Costs.
|
(e)
|
Settlement or Compromise of Claims
. Borrower will not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (“
Claim
”), settle or compromise the Claim if the settlement (i) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender, or (ii) may materially and adversely affect Lender, as determined by Lender.
|
(f)
|
Effect of Changes to Loan on Indemnification Obligations
. Borrower’s obligation to indemnify the Indemnitees will not be limited or impaired by any of the following, or by any failure of Borrower or any Guarantor to receive notice of or consideration for any of the following:
|
(i)
|
Any amendment or modification of any Loan Document.
|
(ii)
|
Any extensions of time for performance required by any Loan Document.
|
(iii)
|
Any provision in any of the Loan Documents limiting Lender’s recourse to property securing the Indebtedness, or limiting the personal liability of Borrower or any other party for payment of all or any part of the Indebtedness.
|
(iv)
|
The accuracy or inaccuracy of any representations and warranties made by Borrower under any of the Loan Documents.
|
(v)
|
The release of Borrower or any other Person, by Lender or by operation of law, from performance of any obligation under any Loan Document.
|
(vi)
|
The release or substitution in whole or in part of any security for the Indebtedness.
|
(vii)
|
Lender’s failure to properly perfect any Lien or security interest given as security for the Indebtedness.
|
(g)
|
Payments by Borrower
. Borrower will, at its own cost and expense, do all of the following:
|
(i)
|
Pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding arising out of any matters against which Indemnitees are entitled to be indemnified under this Article IX.
|
(ii)
|
Reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Article IX.
|
(iii)
|
Reimburse Indemnitees for any and all expenses, including Attorneys’ Fees and Costs, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Article IX, or in monitoring and participating in any legal or administrative proceeding.
|
(h)
|
Other Obligations
. The provisions of this Article IX will be in addition to any and all other obligations and liabilities that Borrower may have under applicable law or under other Loan Documents, and each Indemnitee will be entitled to indemnification under this Article IX without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Properties or any of them or any other security, pursued any rights against any Guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one Person, then the obligation of those Persons to indemnify the Indemnitees under this Article IX will be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Article IX will survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Lien of the Security Instrument. However, if Lender has never been a mortgagee-in-possession of, or held title to, the Mortgaged Properties or any of them, Borrower will have no obligation to indemnify the Indemnitees under this Article IX after the date of the release of record of the Lien of the Security Instrument by payment in full at the Maturity Date or by voluntary prepayment in full.
|
10.01
|
Waiver of Statute of Limitations, Offsets and Counterclaims.
Borrower waives the right to assert any statute of limitations as a bar to the enforcement of this Loan Agreement or the Lien of the Security Instrument or to any action brought to enforce any Loan Document. Borrower waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or otherwise to offset any obligations to make the payments required by the Loan Documents. No failure by Lender to perform any of its obligations under the Loan Documents will be a valid defense to, or result in any offset against, any payments that Borrower is obligated to make under any of the Loan Documents.
|
10.03
|
Notice.
|
(a)
|
All Notices under or concerning this Loan Agreement will be in writing. Each Notice will be deemed given on the earliest to occur of: (i) the date when the Notice is received by the addressee, (ii) the first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery, or (iii) the third Business Day after the Notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. Addresses for Notice are as shown in Article I.
|
(b)
|
Any party to this Loan Agreement may change the address to which Notices intended for it are to be directed by means of Notice given to the other party in accordance with this Section 10.03. Each party agrees that it will not refuse or reject delivery of any Notice given in accordance with this Section 10.03, that it will acknowledge, in writing, the receipt of any Notice upon request by the other party and that any Notice that it rejects or refuses will be deemed for purposes of this Section 10.03 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.
|
(c)
|
Any Notice under any other Loan Document that does not specify how Notices are to be given will be given in accordance with this Section 10.03.
|
10.04
|
Successors and Assigns Bound.
This Loan Agreement will bind the respective successors and assigns of Borrower and Lender, and the rights granted by this Loan Agreement will inure to Lender’s successors and assigns.
|
10.05
|
Joint and Several (and Solidary) Liability.
If more than one Person signs this Loan Agreement as Borrower, then the obligations of such Persons will be joint and several. For a Mortgaged Property located in Louisiana, if more than one Person signs this Loan Agreement as Borrower, then the obligations of such Persons will be joint and several and solidary, and wherever the phrase “joint and several” appears in this Loan Agreement, the phrase is amended to read “joint, several, and solidary.”
|
10.06
|
Relationship of Parties; No Third Party Beneficiary.
|
(a)
|
The relationship between Lender and Borrower will be solely that of creditor and debtor, respectively, and nothing contained in this Loan Agreement will create any other relationship between Lender and Borrower. Nothing contained in this Loan Agreement will constitute Lender as a joint venturer, partner or agent of Borrower, or render Lender liable for any debts, obligations, acts, omissions, representations or contracts of Borrower.
|
(b)
|
No creditor of any party to this Loan Agreement and no other Person will be a third party beneficiary of this Loan Agreement or any other Loan Document. Any arrangement between Lender and any Loan Servicer for loss sharing or interim advancement of funds (“
Servicing Arrangement
”) will constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness. Borrower will not be a third party beneficiary of any
|
10.07
|
Subrogation.
If the proceeds of the Loan, or subsequent advances under Section 8.02, are used to pay, satisfy or discharge a Prior Lien, then such Loan proceeds or advances will be deemed to have been advanced by Lender at Borrower’s request, and Lender will automatically, and without further action on its part, be subrogated to the rights, including Lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.
|
10.08
|
Severability.
The invalidity or unenforceability of any provision of this Loan Agreement will not affect the validity or enforceability of any other provision, and all other provisions will remain in full force and effect. This Loan Agreement contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Loan Agreement.
|
10.09
|
Amendments.
This Loan Agreement may not be amended or modified except by a writing signed by the party against whom enforcement is sought.
|
10.10
|
Disclosure of Information; Authorization to Publicly Use Loan Information.
|
(a)
|
Borrower acknowledges that Lender may provide to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, ownership, purchase, participation or Securitization (if applicable) of the Loan, including any of the Rating Agencies, any entity maintaining databases on the underwriting and performance of commercial mortgage loans, as well as governmental regulatory agencies having regulatory authority over Lender, any and all information which Lender now has or may hereafter acquire relating to the Loan, a Mortgaged Property, Borrower or any Guarantor, as Lender determines necessary or desirable and that such information may be included in disclosure documents in connection with a Securitization (if applicable) or syndication of participation interests, including a prospectus, prospectus supplement, offering memorandum, private placement memorandum or similar document (each, a “
Disclosure Document
”) and also may be included in any filing with the Securities and Exchange Commission pursuant to the Securities Act or the Securities Exchange Act. To the fullest extent permitted under applicable law, Borrower irrevocably waives all rights, if any, to prohibit such disclosure, including any right of privacy.
|
(b)
|
Borrower agrees that Lender may publicly use, at Lender’s discretion, photographs of the Mortgaged Property, and basic transaction information (for example, the number of units in a Mortgaged Property and the Loan Amount) relating to the Loan.
|
10.11
|
Determinations by Lender.
In any instance where the consent or approval of Lender may be given or is required, or where Lender is authorized to render any determination, judgment, or decision under this Loan Agreement, the granting, withholding or denial of such consent or approval and the rendering of such determination, judgment or decision will be made or exercised by Lender (or its designated representative) at its option and in its discretion.
|
10.12
|
Sale of Note; Change in Loan Servicer; Loan Servicing.
The Note or a partial interest in the Note (together with this Loan Agreement and the other Loan Documents) may be sold one or more times without prior Notice to Borrower. A sale may result in a change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, then Borrower will be given Notice of the change. The Loan Servicer may take all actions regarding the servicing of the Loan unless Borrower receives Notice to the contrary, including the collection of payments, the disbursement and application of Reserve Funds, the giving and receipt of Notice, inspections of the Mortgaged Properties, inspections of Books and Records, and the granting of consents and approvals. If Borrower receives conflicting Notices regarding the identity of the Loan Servicer or any other subject, then any such Notice from Lender will govern.
|
10.13
|
Reserved.
|
10.14
|
Lender’s Rights to Sell or Securitize.
Borrower acknowledges that Lender, and each successor to Lender’s interest, may (without prior Notice to Borrower or Borrower’s prior consent), sell or grant participations in the Loan (or any part of the Loan), sell or subcontract the servicing rights related to the Loan, securitize the Loan or place the Loan in a trust. Borrower, at its expense, agrees to cooperate with all requests of Lender in connection with any of the foregoing including taking the following actions:
|
(a)
|
Executing any financing statements or other documents deemed necessary by Lender or its transferee to create, perfect or preserve the rights and interest to be acquired by such transferee.
|
(b)
|
Delivering revised organizational documents, counsel opinions and executed amendments to the Loan Documents satisfactory to the Rating Agencies.
|
(c)
|
Providing updated financial information with appropriate verification through auditors’ letters, if required by Lender.
(If Lender requires that Borrower’s updated financial information be accompanied by appropriate verification through auditors’ letters, then Lender will reimburse Borrower for the costs which Borrower reasonably incurs in connection with obtaining such auditors’ letters.)
|
(d)
|
Providing updated information on all litigation proceedings affecting Borrower or any Borrower Principal as required in Section 6.16.
|
(e)
|
Reviewing information contained in any Disclosure Document and providing a mortgagor estoppel certificate, written confirmation of Borrower’s indemnification obligations under this Loan
Agreement, and such other information about Borrower, any
Guarantor, any Pledgor, any Property Manager, or the Mortgaged Properties as Lender may require for Lender’s offering materials.
|
10.15
|
Cooperation with Rating Agencies and Investors.
If Lender decides to include the Loan as an asset of a Secondary Market Transaction, then Borrower will do all of the following:
|
(a)
|
At Lender’s request, meet with representatives of the Rating Agencies and/or investors to discuss the business and operations of the Mortgaged Properties.
|
(b)
|
Permit Lender or its representatives to provide related information to the Rating Agencies and/or investors.
|
(c)
|
Cooperate with the reasonable requests of the Rating Agencies and/or investors in connection with all of the foregoing.
|
10.16
|
Exhibits, Schedules, and Riders.
This Loan Agreement incorporates all the attached exhibits, schedules, and riders that are listed in Article I or elsewhere in this Loan Agreement.
|
10.17
|
Reserved.
|
10.18
|
Time is of the Essence.
Time is of the essence with respect to each covenant of this Loan Agreement.
|
10.19
|
Construction; Interpretation.
|
(a)
|
The captions and headings of the Articles and Sections of this Loan Agreement are for convenience only and will be disregarded in construing this Loan Agreement. Any reference in this Loan Agreement to an “Exhibit,” an “Article” or a “Section” will, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Loan Agreement or to an Article or Section of this Loan Agreement.
|
(b)
|
Any reference in this Loan Agreement to a statute or regulation will be construed as referring to that statute or regulation as amended from time to time.
|
(c)
|
Use of the singular in this Loan Agreement includes the plural and use of the plural includes the singular. The use of one gender includes the other gender, as the context may require.
|
(d)
|
As used in this Loan Agreement, the term “including” means “including, but not limited to” and the term “includes” means “includes without limitation.”
|
(e)
|
Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document in this Loan Agreement will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in this Loan Agreement), and (ii) any reference in this Loan Agreement to any Person will be construed to include such Person’s successors and assigns.
|
(f)
|
Any reference in this Loan Agreement to “Lender’s requirements,” “as required by Lender,” or similar references will be construed, after Securitization, to mean Lender’s requirements or standards as determined in accordance with Lender’s and Loan Servicer’s obligations under the terms of the Securitization documents.
|
10.20
|
Right to Apply Proceeds in Connection with Releases
. For so long as the Loan or any portion of the Loan is included in a Securitization, then each of the following will apply:
|
(a)
|
Notwithstanding anything to the contrary contained herein or in any other Loan Document, if any Mortgaged Property is released from the Lien of the Loan in connection with a casualty, Condemnation or Transfer and if the ratio of (A) the unpaid principal balance of the Loan to (B) the value of the Mortgaged Properties (taking into account only the related land and buildings and not any personal property or going-concern value), as determined by Lender in its discretion based on a commercially reasonable valuation method permitted in connection with a Securitization, is greater than 125% immediately after such casualty, Condemnation or Transfer and before any Restoration or Repair of any Mortgaged Property (but taking into account any planned Restoration or repair of the Mortgaged Property as if such planned Restoration or repair were completed), then Lender will apply any net proceeds or awards from such casualty, Condemnation or Transfer, in full, to the payment of the principal of the Indebtedness whether or not then due and payable, unless Lender has received an opinion of counsel that a different application of such net proceeds or awards will not cause such Securitization to fail to meet applicable federal income tax qualification requirements or subject such Securitization to any tax and the net proceeds or awards are applied in the manner specified in such opinion.
|
(b)
|
If neither Borrower nor Lender has the right to receive any or all of the net proceeds or awards as a result of the provisions of any agreement affecting any Mortgaged Property (including any condominium document or reciprocal easement agreement) and, therefore cannot apply such net proceeds or awards to the payment of the principal of the Indebtedness as set forth above, then Borrower will prepay the Indebtedness in an amount which Lender, in its discretion, deems necessary to ensure that the Securitization will not fail to meet applicable federal income tax qualification requirements or be subject to any tax as a result of the casualty, Condemnation, or Transfer.
|
(b)
|
Such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.
|
(c)
|
Any Mortgaged Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights.
|
(d)
|
An order of relief is entered against such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. If such Person, any general partner of such person if such Person is a general partnership, any Guarantor, or any Related Party has solicited creditors to initiate or participate in such a proceeding, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party.
|
(e)
|
An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against such Person (by a party other than Lender) but only if such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person to contribute or cause the contribution of additional capital to such Person.
|
(f)
|
If such Person is a general partnership, any of the following occur:
|
(i)
|
Any general partner of such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.
|
(ii)
|
Any general partner of such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.
|
(iii)
|
An order of relief is entered against any general partner of such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party.
|
(viii)
|
An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against any general partner of such Person (by a party other than Lender) but only if such Person or such general partner of such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person or such general partner of such Person to contribute or cause the contribution of additional capital to such Person.
|
(i)
|
Via general solicitation (i.e., marketing directed to the public at large, whether via the internet or otherwise) that (A) names Freddie Mac, or (B) names or contains any information about the Mortgaged Property.
|
(ii)
|
From unaccredited investors in a public offering (e.g., under the related exemptions of Title III or Title IV of the Jumpstart Our Business Startups (JOBS) Act.
|
(ii)
|
It is executed by an Eligible Tenant and Borrower, or Property Manager on behalf of Borrower (or, in the case of a Lease existing on the Closing Date, such Lease has been assigned to Borrower).
|
(iv)
|
As of the date the Lease was executed, the Lease had an initial term of at least 6 months and not more than 2 years.
|
(v)
|
It complies with all applicable law in all material respects and includes all disclosures required by applicable law.
|
(vi)
|
It covers 100% of the square footage of the applicable Mortgaged Property or Unit.
|
(vii)
|
It does not include any purchase option, right of refusal, right of first offer or other similar interest in any Property in favor of any Tenant or other Person.
|
(i)
|
Borrower or Property Manager has verified, based on bona fide written documentation, that the tenant has sufficient financial resources to satisfy its obligations under the Lease for the Mortgaged Property.
|
(ii)
|
The tenant is not subject to an ongoing Bankruptcy Event as such date of initial screening (or if not so initially screened, as of the Closing Date).
|
(iii)
|
The tenant is not a Loan Party, Affiliate of any Loan Party, or any Immediate Family Member of any of the foregoing.
|
(i)
|
The OFAC Specially Designated Nationals and Blocked Persons List.
|
(i)
|
The presence, use, generation, release, treatment, processing, storage (including storage in above-ground and underground storage tanks), handling or disposal of any Hazardous Materials on or under a Mortgaged Property.
|
(ii)
|
The transportation of any Hazardous Materials to, from or across a Mortgaged Property.
|
(iii)
|
Any occurrence or condition on a Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws.
|
(A)
|
Prepackaged supplies, cleaning materials, and petroleum products customarily used in the operation and maintenance of comparable properties.
|
(B)
|
Cleaning materials, personal grooming items, and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential units in the Mortgaged Properties.
|
(C)
|
Petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property’s parking areas.
|
(i)
|
The OFAC Lists.
|
(i)
|
Borrower.
|
(ii)
|
Any general partner of Borrower if Borrower is a general partnership.
|
(iii)
|
Any Guarantor.
|
(iv)
|
Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Borrower, any general partner of Borrower if Borrower is a general partnership, any Guarantor, or any Person that has a right to manage Borrower, any general partner of Borrower if Borrower is a general partnership, or any Guarantor.
|
(v)
|
Any Person in which Borrower, any general partner of Borrower if Borrower is a general partnership, or any Guarantor has any ownership interest (direct or indirect) or right to manage.
|
(vi)
|
Any Person in which any partner, shareholder, or member of Borrower, any general partner of Borrower if Borrower is a general partnership, or any Guarantor has an ownership interest or right to manage.
|
(vii)
|
Any Person in which any Person holding an interest in Borrower, any general partner of Borrower if Borrower is a general partnership, or any Guarantor also has any ownership interest.
|
(viii)
|
Any creditor of Borrower that is related by blood, marriage or adoption to Borrower or any Guarantor.
|
(ix)
|
Any creditor of Borrower or any general partner of Borrower if Borrower is a general partnership that is related to any partner, shareholder or member of, or any other Person holding an interest in, Borrower, any general partner of Borrower if Borrower is a general partnership, or any Guarantor.
|
(i)
|
For a Release Property where there is no continuing Event of Default, 115% of the Allocated Loan Amount for such Mortgaged Property.
|
(ii)
|
For a Release Property where there is a continuing Event of Default, the greater of 115% of the Allocated Loan Amount for such Mortgaged Property and 100% of Transfer Proceeds for such Mortgaged Property.
|
(iii)
|
For a Mandatory Release Property, 100% of the Allocated Loan Amount for such Mortgaged Property.
|
|
|
BORROWER:
|
|||
|
|
|
|
|
|
|
|
FYR SFR BORROWER, LLC,
|
|||
|
|
a Delaware limited liability company
|
|||
|
|
|
|
|
|
|
|
By:
|
/s/ Stephen H. Gray
|
|
|
|
|
|
Name:
|
Stephen H. Gray
|
|
|
|
|
Title:
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LENDER:
|
|||
|
|
|
|
|
|
|
|
BERKADIA COMMERCIAL MORTGAGE LLC,
|
|||
|
|
a Delaware limited liability company
|
|||
|
|
|
|
|
|
|
|
By:
|
/s/ Megan Mather
|
|
|
|
|
|
Name:
|
Megan Mather
|
|
|
|
|
Title:
|
Authorized Representative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Agreement Rider - SFR
|
Substitutions (Revised 3-20-2018)
|
A.
|
Article I is modified by adding a “Property Substitution Cap” table:
|
Article 1
Property Substitution Cap
|
|
Property Substitution Cap
|
954 Mortgaged Properties
|
Aggregate Release and Substitution Cap
|
954 Mortgaged Properties
|
Additional Permitted Substitute Property MSAs
|
None
|
(See Section 7.07 for Mortgaged Property substitution provisions.)
|
B.
|
The following new Section 7.01(l) is added:
|
(l)
|
A Substitute Property Transfer that satisfies the requirements of Section 7.07.
|
C.
|
Section 7.05(a)(vi) is modified as shown below:
|
(vi)
|
The sum of the Mortgaged Properties released in connection with this and all prior Release Property Transfers and Substitute Property Transfers does not exceed either the Release Cap or the Aggregate Release and Substitution Cap specified in Article I.
|
7.07
|
Mortgaged Property Substitutions.
|
(a)
|
The Transfer of one or more of the Mortgaged Properties (each a “
Replaced Property
”) and the simultaneous acquisition by Borrower of one or more replacement properties (each a “
Substitute Property
” and collectively, the “
Substitute Properties
”) will be considered a “
Substitute Property Transfer
” if each of the conditions set forth in this Section 7.07(a) is satisfied.
|
(i)
|
The Substitute Property Transfer occurs on or before a date that is six months prior to the Maturity Date.
|
(ii)
|
Borrower may request a proposed Substitute Property Transfer no more than
twice
four (4)
times in any calendar year.
|
(iii)
|
No Event of Default has occurred and is continuing, except that if the Substitute Property Transfer will cure the Event of Default, then a Replaced Property may be released and substituted with a Substitute Property pursuant to the requirements of this Section 7.07.
|
(iv)
|
Each Substitute Property must satisfy the following conditions:
|
(A)
|
It is a residential real property of a similar property type as the Replaced Property (such as
2-4 family home,
townhome
,
or detached single-family residential dwelling), unless otherwise approved by Lender.
|
(B)
|
It is not a housing cooperative or manufactured housing.
|
(C)
|
It is occupied by an Eligible Tenant
acceptable to Lender
under an Eligible Lease
acceptable to Lender
.
|
(D)
|
It is a single-family residential dwelling.
|
(v)
|
Borrower has submitted to Lender, not less than 60 days prior to the proposed Substitute Property Transfer date, all the following:
|
(A)
|
A Substitute Property Transfer request substantially in the form attached to this Loan Agreement as
Exhibit E.
|
(B)
|
Evidence satisfactory to Lender that the conditions of this Section 7.07 are or will be satisfied in connection with the Substitute Property Transfer.
|
(vi)
|
The sum of the Mortgaged Properties released in connection with this and all prior Substitute Property Transfers and Release Property Transfers does not exceed either the Substitution Cap or the Aggregate Release and Substitution Cap specified in Article I.
|
(vii)
|
The rent for the Substitute Property (or Substitute Properties) must equal or exceed the rent for the Replaced Property (or Replaced Properties)
(when more than one Mortgaged Property is being substituted, the rental income comparison shall be on an aggregate basis)
:
|
(A)
|
If any Replaced Property is vacant, then annualized market rent for such Replaced Property (as determined by Lender) will be used rather than in-place rent.
|
(B)
|
If the Replaced Property was subject to a HUD Section 8 voucher and the Substitute Property is also subject to a HUD Section 8 voucher, Lender in its discretion may accept the maximum rent permitted in accordance with HUD guidelines under the replacement voucher as equaling or exceeding the rent for the Replaced Property under this Section 7.07(a)(vii).
|
(viii)
|
Lender has obtained, at Borrower’s expense, one or more appraisals acceptable in all respects to Lender dated no more than 180 days prior to the Substitution Date for all Substitute Properties and Replaced Properties that are part of the proposed Substitute Property Transfer (collectively, “
Substitute Property Transfer Appraisals
”).
|
(ix)
|
The Substitute Property Transfer Appraisals must show that the aggregated value of the Substitute Properties is equal to or greater than the greater of the following:
|
(A)
|
The aggregated value of the Replaced Properties on the Effective Date.
|
(B)
|
The aggregated value of the Replaced Properties at the time of the Substitute Property Transfer request.
|
(x)
|
The Substitute Property Appraisals must show that each Substitute Property has a minimum condition rating of C4 and a minimum quality rating of Q5, provided that Lender may approve a condition rating of C5 in its discretion.
|
(xi)
|
Each Substitute Property must either be in (A) a Metropolitan Statistical Area (“
MSA
”) that contains at least five Mortgaged Properties as of the Effective Date or (B) an
|
(xii)
|
Any remaining Properties after the release of such Replaced Property must be in a MSA that contains at least five Mortgaged Properties after the proposed Substitute Property Transfer, which can include the Mortgaged Properties after the proposed Substitute Property Transfer.
|
(xiii)
|
Borrower must deposit with Lender such additional amount necessary to accumulate with Lender the entire sum required to pay, when due, Taxes, Insurance premiums, and HOA Fees for the Substitute Properties.
|
(xiv)
|
Borrower must perform any repairs that Lender determines are necessary with respect to any Substitute Property prior to the Substitute Property Transfer date and fund any additional Capital Replacement and Repair Reserves required by Lender related to the Substitute Properties on or prior to the Substitute Property Transfer date.
|
(xv)
|
Borrower, Pledgor, Guarantor, and any new Property Manager approved by Lender must execute such additional documents as Lender may require to evidence and acknowledge the Substitute Property Transfer (“
Substitute Property Transfer Loan Documents
”). Such Substitute Property Transfer Loan Documents will become part of the Loan Documents defined in Article XI.
|
(xvi)
|
Borrower must deliver to Lender on or prior to the Substitute Property Transfer date an opinion of counsel that meets the following requirements:
|
(A)
|
The counsel providing the opinion is acceptable to Lender.
|
(B)
|
The opinion is addressed to Lender.
|
(C)
|
The opinion is paid for by Borrower.
|
(D)
|
The opinion is in form and substance satisfactory to Lender.
|
(E)
|
The opinion confirms each of the following:
|
(1)
|
The Substitute Property Transfer Loan Documents were duly authorized, executed, and delivered by Borrower.
|
(2)
|
The execution and delivery of the Substitute Property Transfer Loan Documents and the performance by Borrower, Guarantor, and Pledgor (as applicable) of its obligations under such documents will not cause a breach or a default under any agreement, document, or instrument to which Borrower, Guarantor, or Pledgor (as applicable) is a party or to which it or the Mortgaged Properties are bound.
|
(xvii)
|
Lender must receive one or more lender’s policies of title insurance satisfactory to Lender with respect to each Substitute Mortgage Property.
|
(xviii)
|
Lender has had an opportunity to inspect each Substitute Property, and Borrower has provided such other information with respect to the Substitute Properties as Lender may require.
|
(xix)
|
Lender has received satisfactory evidence that each Substitute Property is insured in accordance with the requirements of the Loan Documents.
|
(xx)
|
The Replaced Properties must be Transferred in exchange for value to a Person that is not the Pledgor or the Guarantor.
|
(xxi)
|
Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Substitute Property Transfer; provided, however, that Lender will not be entitled to collect a Transfer Processing Fee or a Transfer Fee.
|
(xxii)
|
Borrower satisfies any other conditions of Lender to meet Lender’s then-current underwriting requirements for single family rental.
|
(xxiii)
|
The Substitute Property Transfer shall occur after the first anniversary of the Closing Date.
|
(b)
|
Notwithstanding the foregoing, if the Loan is included in a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code (a “
REMIC Trust
”), no substitution will be permitted unless (i) either (A) immediately after such substitution the ratio of the aggregate unpaid principal balance of the Loan to the aggregate value of the remaining Mortgaged Properties (as determined by Lender in its sole discretion using any commercially reasonable method permitted to a REMIC Trust, excluding the value of any personal property (other than fixtures) or going concern value, (if any)) is equal to or less than 125% or (B) the ratio of the unpaid principal balance of the Loan to the value of the Mortgaged Properties (including the Substitute Property or Substitute Properties and excluding the Replaced Property or Replaced Properties) will not be greater than the ratio of the unpaid principal balance of the Loan to the value of the Replaced Properties immediately before the release, or (ii) Lender receives an opinion of counsel acceptable to Lender that the substitution will not cause the REMIC Trust holding the Loan to fail to maintain its status as a REMIC Trust as a result of the substitution of the Substitute Property or Substitute Properties for the Replaced Properties.
|
Loan Agreement Rider - SFR
|
Condominium (Revised 12-01-2017)
|
(a)
|
Partially-Owned Condominium
.
The Mortgaged Properties more fully described on Schedule 3 attached hereto
Mortgaged Property #______, with a street address of _______________ [, and commonly known as ____________]
(“
Borrower Condominium Unit(s)
”),
are
is
a portion of the Condominium consisting of, as of the Closing Date, the Borrower Condominium Unit(s), and 1449 units that are owned by one or more Persons which are not Affiliates of Borrower.
|
(b)
|
Rights Under Condominium Instruments and Act
. The Mortgaged Property granted, conveyed and assigned to Lender with respect to the Borrower Condominium Unit(s) includes all rights, easements, rights of way, reservations and powers of the Borrower under the Condominium Act and the Condominium Instruments in Borrower’s capacity as owner of the Borrower Condominium Unit(s) as well as any rights that Borrower may have, in any capacity, under the Condominium Act and the Condominium Instruments, specifically including all rights to approve any amendments to the Condominium Instruments.
|
(c)
|
No Sale or Encumbrance
. None of the Borrower Condominium Unit(s) and no portion of the common elements comprising the Condominium and attributable to the Borrower Condominium Unit(s) have been sold, conveyed or encumbered or are subject to any agreement to convey or encumber.
|
(a)
|
Condominium Units as Rental Apartment Project
. Borrower will own, operate and maintain the Borrower Condominium Unit(s) in accordance with the terms of this Loan Agreement and operate the Borrower Condominium Unit(s) solely as a rental apartment project.
|
(b)
|
Modification of Condominium Instruments
. Borrower will not vote to allow the Condominium Instruments to be modified or amended without the prior written consent of Lender, which consent may be given or withheld in Lender’s sole and absolute discretion.
|
(c)
|
Assessments
. Borrower will pay when due all assessments for common charges, expenses and other amounts due to the Condominium Association.
|
(d)
|
Notices from Condominium Association
. Borrower will immediately deliver to Lender a copy of any notice received by Borrower from the Condominium Association asserting that Borrower is in breach of any payment obligation or in default under the Condominium Instruments.
|
(e)
|
Replacement of Directors
. Notwithstanding any other provision contained in this Loan Agreement, if Borrower controls the Condominium Association, and if a receiver is appointed pursuant to this Loan Agreement or otherwise, which receiver has authority to replace any director or trustee of the Condominium Association pursuant to the terms of the receivership order, then:
|
(i)
|
Borrower will, if directed by Lender, cause any trustee or director of the Condominium Association to resign or otherwise be removed effective as of the date of such appointment, and
|
(ii)
|
Borrower agrees that such receiver may thereafter appoint any replacement trustee or director, to the extent permitted by the receivership order.
|
(f)
|
Distribution of Casualty or Condemnation Proceeds
. If a casualty or condemnation results in distribution of proceeds to owners of the Condominium Units, all proceeds allocable to the Borrower Condominium Unit(s) will be deposited into any account established in connection with the Replacement Reserve Fund or other Imposition Reserve Deposits held by Lender to be disbursed in accordance with the provisions of this Loan Agreement.
|
(g)
|
Additional Insurance
. Borrower will maintain insurance meeting the requirements of Section 6.10 with respect to the Borrower Condominium Unit(s), including each of the following, to the extent the Condominium Association insurance does not provide such coverage:
|
(i)
|
Common areas.
|
(ii)
|
Interior walls, the space between the interior walls and the exterior walls, and the floors and Fixtures.
|
(iii)
|
In the event of an insured loss, each Borrower Condominium Unit’s share of the deductible under the master policy held by the Condominium Association, which deductible share may be in the form of a special assessment levied on Condominium Unit owners by the Condominium Association.
|
(h)
|
Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s proxy and attorney-in-fact (which appointment will be deemed coupled with an interest) for and on its behalf to perform all the obligations of Borrower and to exercise all the rights and powers of Borrower under the Condominium Instruments without any liability to Borrower or third parties, unless such liability arises from Lender’s gross negligence or willful misconduct.
|
(i)
|
Borrower hereby instructs and grants and gives to Lender as Borrower’s attorney-in-fact, full power and authority to do and perform every act authorized, permitted, requisite or necessary to be done by Borrower under the provisions of the Condominium Instruments to all intents and purposes the same as Borrower might do. Borrower hereby ratifies and confirms all such acts that Lender lawfully does or performs by virtue of this appointment. Borrower acknowledges and agrees that the provisions set forth in this Section do not impose, burden or obligate Lender to do or perform any act whatsoever. Notwithstanding anything in this Section to the contrary, Lender may not exercise the rights and powers as Borrower’s attorney-in-fact prior to the occurrence of an Event of Default.
|
(j)
|
Nothing contained in this Loan Agreement is intended to or will be construed to constitute Lender as the Declarant under the Condominium Act and/or the Condominium Instruments or as an owner of the Condominium, a partner or joint venturer of Borrower.
|
C.
|
Section 8.01 of the Loan Agreement is modified by adding new subsections (t) and (u) as follows:
|
(t)
|
Borrower fails to perform any of its obligations under Section 6.21 (Covenants Regarding the Condominium) and such failure continues for 30 days after Borrower’s receipt of Notice, as set forth in this Loan Agreement; provided, however, the occurrence of either of the events set forth
|
(i)
|
Borrower terminates or revokes or attempts to terminate or revoke the appointment of Lender as Borrower’s attorney-in-fact either permanently or as to any election in the Condominium Act or Condominium Instruments.
|
(ii)
|
Borrower agrees to modify the terms of the Condominium Instruments without the prior written consent of Lender.
|
(u)
|
Lender, at its sole option and discretion, may declare all sums secured by the Security Instrument immediately due and payable and Lender may invoke any remedies permitted under this Loan Agreement if any of the following occurs:
|
(i)
|
Any provision of the applicable statutes pursuant to which the Condominium is established is held invalid and such invalidity would affect the lien of the Security Instrument, or impair the ability of Lender to enforce the lien of the Security Instrument or otherwise materially affect the rights of Lender under the Loan Documents.
|
(ii)
|
The Condominium becomes subject to an action for partition at the suit of any Condominium Unit owner or otherwise, and such action has been commenced and not dismissed within 30 days after commencement of such suit.
|
(iii)
|
A court of competent jurisdiction issues a final order determining that the Condominium is not considered a validly created condominium as established under the Condominium Act.
|
D.
|
Section 10.02 of the Loan Agreement is modified to add a new subsection (i) as follows:
|
(i)
|
Borrower agrees to indemnify and hold Lender harmless from and against all losses, costs, liabilities, or damages (including Attorneys’ Fees and Costs) arising out of Borrower’s failure to comply with any state or local law, ordinance, statute, or regulation promulgated by any Governmental Authority and covering the Condominium.
|
E.
|
The following definitions are added to Article XI of the Loan Agreement:
|
Special Purpose Reserve Fund Release Conditions
|
None
|
Additional Capital Replacements
|
None
|
Priority Repairs
|
See attached.
|
Labor or Materialmen’s Claims
(See Section 5.06)
|
None
|
(b)
|
Borrower fails to pay to Lender upon demand after an Event of Default all Rents to which Lender is entitled under Section 3 of the Security Instrument
,
and
the amount of all security deposits collected by Borrower from tenants then in residence
and the amount of any unearned Rents that Borrower is permitted to receive and collect more than 30 days in advance under Section 6.05 of the Loan Agreement (by way of example, in the event that Borrower has collected Rents for 12 months from a tenant under a 12-month lease and there is an Event of Default in month 7 of the 12-month lease, Borrower shall be liable to Lender for 5 months of such Rent).
This Section 3.03(b) will not apply if Borrower’s failure is a result of a valid order issued in, or an automatic stay applicable because of, bankruptcy, receivership, or a similar judicial proceeding.
|
(ii)
|
Borrower fails to commence and diligently pursue completion of any Restoration within the time frame required by both the Zoning Code and any permits issued pursuant to the Zoning Code which are necessary to allow the Restoration of such Mortgaged Property to its pre-casualty condition.
|
(f)
|
Supplemental Loan. If a Supplemental Loan is made in accordance with Section 10.21 and if the same Person is or becomes both Lender and Supplemental Lender, then:
|
(i)
|
Borrower assigns and grants to Lender a security interest in the Reserve Funds established in connection with the Supplemental Loan as additional security for all of Borrower’s obligations under the Note.
|
(ii)
|
It is the intention of Borrower that all amounts deposited by Borrower in connection with either the Loan Documents, the Supplemental Loan Documents, or both, constitute collateral for the Indebtedness, with the application of such amounts to such Indebtedness to be at the discretion of Lender.
|
(c)
|
Adjustments to Reserve Fund Deposits
. If at any time the amount of the Tax Reserve Fund, the Insurance Reserve Fund or the HOA Reserve Fund held by Lender for payment of Taxes, Insurance premiums or HOA Fees exceeds the amount reasonably deemed necessary by Lender, then the excess will be credited against future payments into the applicable Reserve Fund. If at any time the amount of the Tax Reserve Fund, the Insurance Reserve Fund or the HOA Reserve Fund is less than the amount reasonably estimated by Lender to be necessary, then Borrower will pay to Lender the amount of the deficiency within
20
30
days after Notice from Lender.
|
(iii)
|
If requested by Lender, Borrower must provide any other information, documents, lien waivers, certifications, or professional engineering reports regarding the work and the cost of such Capital Replacements or Priority Repairs. Lender, at its option, may retain a professional inspection engineer or other qualified third party to inspect any Capital Replacement or Priority Repair. If Lender retains such a third party, then it will charge Borrower an amount sufficient to pay all reasonable costs and expenses
|
5.02
|
Condition of Mortgaged Properties.
Except as Borrower may have disclosed to Lender in writing in connection with the issuance of the Commitment Letter (which written disclosure may be in certain written reports accepted by Lender in connection with the funding of the Indebtedness and dated prior to the Effective Date), no Mortgaged Property has been damaged by fire, water, wind or other cause of loss, or, if so damaged, any previous damage to a Mortgaged Property has been fully restored
, if such damage would result in an Individual Material Adverse Effect
.
|
10.
|
Section 5.03 is modified to read as follows:
|
5.03
|
No Condemnation.
No part of any Mortgaged Property has been taken in Condemnation or other similar proceeding, and, to the best of Borrower’s knowledge after due inquiry and investigation, no such proceeding is pending or threatened
in writing
for the partial or total Condemnation or other taking of a Mortgaged Property.
|
11.
|
Section 5.05(f) is modified to read as follows:
|
(f)
|
Borrower has received no actual or constructive notice of any written complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting any Mortgaged Property
or any property that is adjacent to any Mortgaged Property
.
Borrower has received no actual notice of any written complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting any property that is adjacent to any Mortgaged Property.
|
12.
|
Section 5.07(a) is modified to read as follows:
|
(a)
|
All Improvements and the use of each Mortgaged Property comply with all applicable statutes, rules, and regulations, including all applicable statutes, rules, and regulations pertaining to requirements for equal opportunity, anti-discrimination, fair housing, environmental protection, zoning, and land use (“legal non-conforming” status with respect to uses or structures will be considered to comply with zoning and land use requirements for the purposes of this representation)
, except for any building code violation or similar type of violation, which would not result in an Individual Material Adverse Effect
.
|
13.
|
Section 5.11 is modified to read as follows:
|
5.11
|
Leasing.
|
(a)
|
Each Property is either (i) leased by Borrower to and occupied by an Eligible Tenant pursuant to an Eligible Lease that is in full force and effect and is not in default in any material respect or (ii) in lease ready condition, meaning that the Mortgaged Property has been cleaned, no renovations or repairs to the Mortgaged Property are needed and the Mortgaged Property is immediately available to be leased to an Eligible Tenant.
|
(b)
|
No Loan Party, Affiliate of any Loan Party or any Immediate Family Member of any of the foregoing is in occupancy of a Mortgaged Property.
|
(c)
|
Borrower has delivered to Lender true and complete copies of all Leases, and there are no material oral agreements with respect thereto.
|
(d)
|
To Borrower’s and each Property Manager’s knowledge, each Mortgaged Property is being used exclusively as a residential rental property and no illegal activity is taking place at any Mortgaged Property.
|
(e)
|
No Person has any option, right of first refusal, or any similar preferential right to purchase all or any portion of any Mortgaged Property, whether pursuant to Lease or any other recorded or unrecorded document
, except for those disclosed and approved pursuant to Section 5.10 above
.
|
(f)
|
Borrower has maintained
, or caused to be maintained,
records of all documentation collected and all diligence performed in connection with any current or prospective tenant.
In the event that Borrower causes another entity to maintain such materials, then Borrower shall (x) provide Lender the name and address of such entity and (b) ensure that Lender will be provided access to such materials as if they were being maintained by Borrower. Lender hereby acknowledges that, as of the Effective Date, HAVENBROOK PARTNERS, LLC, a Delaware limited liability company and ALTISOURCE SOLUTIONS S.À R.L., a Luxembourg private limited liability company are the entities that maintain such materials and Lender will be provided access to such materials.
|
5.12
|
No Prior Assignment; Prepayment of Rents.
Borrower has (a) not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender or that is being paid off and discharged with the proceeds of the Loan), and (b) not performed any acts and has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under any Loan Document. At the time of execution of this Loan Agreement there has been no prepayment of any Rents for more than 30 days prior to the due dates of such Rents other than the last month’s Rent, if collected at the time a tenant enters into a Lease
and Rent received and accepted by Borrower more than 30 days in advance of its due date for up to 5% of the total number of the Leases
and no right to free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements have been given or are required to be given to any tenant.
|
6.01
|
Compliance with Laws.
Borrower will at all times comply with all laws, ordinances, rules, regulations, and requirements of any Governmental Authority having jurisdiction over any Mortgaged Property and with the terms of all licenses and permits and all recorded covenants and agreements relating to or affecting any Mortgaged Property, including all laws, ordinances, regulations, requirements, and covenants pertaining to health and safety, construction of improvements on a Mortgaged Property, Repairs, Capital Replacements, fair housing, disability accommodation, zoning and land use, applicable building codes, special use permits, environmental regulations, Leases, and the maintenance and disposition of tenant security deposits)
, except for any building code violation or similar type of violation, which would not result in an Individual Material Adverse Effect
. Borrower will at all times take appropriate measures to prevent, and will not engage in or knowingly permit, any illegal activities at or on any Mortgaged Property, including those that could endanger tenants or visitors, result in damage to any Mortgaged Property, result in forfeiture of any Mortgaged Property, or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in any Mortgaged Property. Borrower will at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 6.01.
|
6.05
|
Prepayment of Rents.
Borrower will not collect any Rent more than 30 days in advance of its due date
except that Borrower may receive and accept Rent more than 30 days in advance of its due date for up to 5% of the total number of the Leases;
provided, that the foregoing restriction will not prevent Borrower from collecting both the first and last month’s rent contemporaneously with the execution of a Lease in accordance with customary residential leasing practices.
Borrower will maintain a record of any Rents collected more than 30 days in advance, and make such record available to Lender upon request.
|
6.06
|
Inspection.
Borrower authorizes Lender and its agents, representatives, and designees to enter,
following advance written notice to Borrower,
at any reasonable time (subject to applicable law
, the terms of the related Eligible Leases provided such terms do not preclude any such inspection right
and the rights of tenants), any portion of any Mortgaged Property to inspect, attend to Lender’s interests, and perform any of the acts that Lender is authorized to perform pursuant to the Loan Documents, including with respect to Restoration, Repairs, and Capital Replacements.
Notice to Borrower will not be required in the case of an emergency or other exigent circumstances, as determined in Lender’s discretion, or when an Event of Default has occurred and is continuing.
|
(a)
|
Maintenance of Books and Records
.
|
(i)
|
Borrower will keep and maintain at all times at Borrower’s main business office or a Mortgaged Property Manager’s office, and upon Lender’s request will make available at such office, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Properties, and copies of all written contracts, Leases, and other instruments that affect any Mortgaged Property (“
Books and Records
”).
|
(ii)
|
The Books and Records will be kept in accordance with one of the following accounting methods, consistently applied, and Borrower will promptly provide Lender Notice of any change in Borrower’s accounting methods:
|
(A)
|
Generally accepted accounting principles (GAAP).
|
(B)
|
Tax method of accounting, provided that under the tax method of accounting, the accrual basis may be used for interest expense, real estate taxes and insurance expense, and the cash basis will be used for all other items, including income, prepaid rent, utilities and payroll expense. Financial statements may exclude depreciation and amortization.
|
(C)
|
Such other method that is acceptable to Lender.
|
(iii)
|
The Books and Records will be subject to examination and inspection by Lender
at any
during normal business hours
with reasonable
time with or without
prior Notice to Borrower.
Notice to Borrower will not be required in the case of an emergency or other exigent circumstances, as determined in Lender’s discretion, or when an Event of Default has occurred and is continuing.
|
(b)
|
Delivery of Borrower Financial Information – Annual Requirements
. Within
90
120
days after the end of each calendar year (or the end of Borrower’s fiscal year, if Borrower has adopted fiscal year financial reporting), Borrower will deliver to Lender an annual statement of income and expenses for Borrower’s operation of the Mortgaged Properties.
|
(c)
|
Delivery of Borrower Financial Information – Quarterly Requirement
. Within
25
60
days after the end of each calendar quarter each year (or the end of the second quarter of Borrower’s fiscal year, if Borrower has adopted fiscal year financial reporting), Borrower will deliver the following to Lender:
|
(i)
|
a Rent Schedule dated no earlier than the date that is 5 days prior to the end of such quarter.
|
(ii)
|
a quarterly statement of income and expenses for Borrower’s operation of the Mortgaged Properties.
|
(d)
|
Delivery of Borrower Financial Information – When Requested by Lender
. Within
25
30
days following a Notice from Lender including a request for such information, Borrower will deliver the following to Lender:
|
(i)
|
The Rent Schedule for any period specified by Lender.
|
(ii)
|
A statement of income and expenses for Borrower as of the end of (A) the quarter that ended at least
30
60
days prior to the due date of the requested item, and/or (B) the fiscal year that ended at least
90
120
days prior to the due date of the requested item.
|
(iii)
|
A balance sheet showing all assets and liabilities of Borrower as of the end of (A) the quarter that ended at least
30
60
days prior to the due date of the requested item, and/or (B) the fiscal year that ended at least
90
120
days prior to the due date of the requested item.
|
(iv)
|
An accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts.
|
(v)
|
A property management report for the Mortgaged Properties, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants for any period specified by Lender.
|
(vi)
|
Copies of Borrower’s state and federal tax returns, including current tax return extensions.
|
(vii)
|
Written updates on the status of all litigation proceedings that were disclosed or should have been disclosed by Borrower to Lender either (A) as of the Effective Date or (B) during the term of the Loan pursuant to Section 6.16
, which shall expressly include the following litigation proceedings: (1) the lawsuit captioned Martin v. Altisource Residential Corporation, et. al., 15-cv-00024 filed in United States District Court of the Virgin Islands; (2) the lawsuit captioned City of Cambridge Retirement System v. Altisource Asset Management Corporation et al, 15-cv-00004 filed in United States District Court of the Virgin Islands; and (3) the lawsuit captioned Powell et al v. Ocwen Financial Corporation et al, 1:18-cv-01951-VSB filed in the United States District Court for the Southern District of New York.
|
(viii)
|
A statement that identifies all owners of any direct interest in Borrower and any Person(s) that Control(s) Borrower (except that the statement need not identify the owners of a publicly-traded entity). The statement must identify the percentage and type of ownership or Control interest held by each Person and must also identify any Non-U.S. Equity Holders.
|
(ix)
|
Such other financial information or property management information as Lender may require (including information on tenants under Leases if such information is available to Borrower and copies of bank account statements from financial institutions where funds owned or controlled by Borrower are maintained).
|
(e)
|
Delivery of Guarantor or Pledgor’s Financial Information – When Requested by Lender
. Within
25
30
days following a Notice from Lender including a request for such information, Borrower will cause Guarantor or Pledgor, as applicable, to deliver the following to Lender:
|
(i)
|
Its balance sheet and profit and loss statement (or if such party is a natural person, such party’s personal financial statements) as of the end of (A) the quarter that ended at least
30
60
days prior to the due date of the requested items, and/or (B) the fiscal year that ended at least
90
120
days prior to the due date of the requested items.
|
(ii)
|
If an Event of Default has occurred and is continuing, other
Other
financial statements as Lender may reasonably require. financial statements as Lender may reasonably require.
|
(iii)
|
Written updates on the status of all litigation proceedings that Guarantor or Pledgor, as applicable, disclosed or should have disclosed to Lender as of the Effective Date.
|
(iii)
|
If an Event of Default has occurred and is continuing, copies of Guarantor’s or Pledgor’s, as applicable, state and federal tax returns, including current tax return extensions.
|
(f)
|
Form of Financial Statements.
All financial statements required under this Agreement should be prepared using the template available from Lender, which may be revised from time to time, or in a format otherwise acceptable to Lender.
|
(g)
|
Certification of Statements; Audited Financials
. A natural person having authority to bind Borrower, Guarantor, or Pledgor, as applicable, will certify each of the statements, schedules and reports required by Sections 6.07(b)-(f) to be complete and accurate. Each of the statements, schedules and reports required by Sections 6.07(b)-(f) will be in such form and contain such detail as Lender may reasonably require. At any time when an Event of Default has occurred and is continuing, or at any time that Lender
reasonably
determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or the Mortgaged Properties, Lender also may require that any of the statements, schedules or reports listed in Sections 6.07(b)-(f) be audited at Borrower’s expense by an independent certified public accountant acceptable to Lender.
|
(h)
|
Failure to Timely Provide Financial Statements
. If Borrower fails to provide in a timely manner the statements, schedules and reports required by Sections 6.07(b)-(f), then Lender will give Notice to Borrower specifying the statements, schedules and reports required by Sections 6.07(b)-(f) that Borrower has failed to provide. If Borrower has not provided the required statements, schedules and reports within 10 Business Days following such Notice, then (i) Borrower will pay a late fee of $500 for each late statement, schedule or report, plus an additional $500 per month that any such statement, schedule or report continues to be late, and (ii) Lender will have the right to have Borrower’s Books and Records audited, at Borrower’s expense, by an independent certified public accountant acceptable to Lender.
|
(i)
|
Reporting Upon Event of Default
. If an Event of Default has occurred and is continuing, then Borrower will deliver to Lender upon written demand
true and accurate copies of
all Books and Records and other instruments that affect the Mortgaged Properties.
|
(j)
|
Credit Reports
. Borrower authorizes Lender to obtain a credit report on Borrower at any tim
e.
|
(iv)
|
Displacing or relocating tenants to undertake or complete any Repair, Capital Replacement, or other Property Improvements, unless such displacement or relocation is required by law
or would not result in an Individual Material Adverse Effect
.
|
(g)
|
Inspection of Mold
. If Lender
reasonably
determines that Mold has or may have developed as a result of a water intrusion event or leak, then Lender may require that a professional inspector inspect the applicable Mortgaged Property to confirm whether Mold has developed and, if so, thereafter as frequently as Lender determines is necessary until any issue with Mold and its cause(s) are resolved to Lender’s satisfaction. Such inspection will be limited to a visual and olfactory inspection of the area that has experienced the Mold, water intrusion event or leak. Borrower will be responsible for the cost of each such professional inspection and any remediation deemed to be necessary as a result of the professional inspection.
|
(h)
|
Property Management
. Borrower will provide for professional management of the Mortgaged Properties by one or more Property Managers at all times under property management agreements approved by Lender in writing. Without Lender’s prior consent, Borrower will not cancel or modify any property management agreement
in any material respect
, except that Borrower and a Property Manager may renew a property management agreement on identical
economic
terms
and substantially similar non-economic terms
. Borrower will cause each Property Manager to execute an Assignment of Management Agreement with Borrower and Lender, in a form acceptable to Lender. If at any time Lender consents to the appointment of one or more new Property Managers, each such new Property Manager(s) and Borrower will, as a condition of Lender’s consent, execute an Assignment of Management Agreement in a form acceptable to Lender. As of the Effective Date, Borrower has confirmed that each Property Manager is not on any Prohibited Parties List. Borrower will confirm at the time of entering into or renewing any property management agreement that each Property Manager is not on any Prohibited Parties List.
|
(k)
|
Borrower’s Rights Following a Casualty
. Subject to Section 6.10(j), and provided no Event of Default has occurred and is continuing, following a casualty, Borrower may take the following actions:
|
(i)
|
If a casualty results in damage to any Mortgaged Property for which the cost of Repairs required to complete the Restoration will be equal to or less than
$40,000
$20,000
, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the Insurance proceeds are used solely for the Restoration of the applicable Mortgaged Property.
|
(ii)
|
If a casualty results in damage to any Mortgaged Property for which the cost of Repairs required to complete the Restoration will be more than
$40,000
$20,000
, but less than 50% of the Release Amount for the Mortgaged Property, Borrower is authorized to make proof of loss and adjust and compromise the claim without the prior consent of Lender, and Lender will, at its option, hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property.
|
(iii)
|
If a casualty results in damage to the Mortgaged Property for which the cost of Repairs required to complete the Restoration will be equal to or greater than 50% of the Release Amount for the Mortgaged Property, Borrower must obtain the consent of Lender prior to making any proof of loss or adjusting or compromising the claim, and Lender will, at its option, hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property.
|
(i)
|
Guarantor shall separately segregate and maintain on its balance sheet in cash or cash equivalents, the amount by which the SIR Component exceeds the SIR Component Limit Amount (the “SIR Component Differential”);
|
(ii)
|
Any such SIR Component Differential shall be separate from and shall be in addition to, Guarantor’s liquidity requirements under the Guaranty; and
|
(iii)
|
Any and all losses incurred by Lender as a result of the SIR Policy exceeding the SIR Component Limit Amount shall be recourse to the Borrower under Section 3.03 of this Loan Agreement.
|
(iv)
|
Within 30 days following a Notice from Freddie Mac including a request for such information, Borrower will cause Guarantor to deliver evidence acceptable to Freddie Mac that the terms and conditions of this Section 6.10(q) have been satisfied.
|
(e)
|
Remedial Work
. If any investigation, site monitoring, containment, clean-up, Restoration or other remedial work (“
Remedial Work
”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, then Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and must in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, then Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower will reimburse Lender
on demand
within 15 days of receipt of invoice
for the cost of doing so. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 8.02.
|
(vii)
|
Borrower will not incur or assume any debt other than the Indebtedness
and any further indebtedness as described in Section 10.21 with regard to Supplemental Instruments
, except that Borrower is permitted to incur unsecured trade payables that are necessary for owning and operating the Mortgaged Property (“
Trade Payables
”). The Trade Payables:
|
27.
|
Section 6.13(a)(ix) is modified to read as follows:
|
(ix)
|
It will identify its assets on its financial statements separate from those of any other Person
; provided, however, that Borrower’s assets may be included in a consolidated financial statement of its Affiliate provided that (A) appropriate notation will be made on such consolidated financial statements to indicate the separateness of Borrower from such Affiliate and to indicate that Borrower’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person, and (B) such assets will also be listed on Borrower’s own separate balance sheet
.
|
(l)
|
A Supplemental Instrument that complies with Section 10.21.
|
29.
|
The following is added as Section 7.01(m) of the Loan Agreement:
|
(m)
|
A Transfer of a Mortgaged Property with Lender’s consent subject to Borrower’s satisfaction of the conditions set forth in Section 7.05(a) in order to cure a breach of a representation or warranty pursuant to Article V.
|
(iii)
|
No more than
two
four
Release Property Transfers can occur in a calendar year.
|
(h)
|
If any Supplemental Instrument is outstanding, Borrower has obtained the consent of each Supplemental Lender, if different from Lender.
|
(t)
|
Guarantor fails to comply with the provisions of the Section of the Guaranty entitled “Minimum Net Worth/Liquidity Requirements.”
|
(u)
|
Any Event of Default occurs under (i) the Supplemental Note, the Supplemental Instrument or any other Sup mental Loan Document, or (ii) any loan document related to another loan in connection with the Mortgaged Properties.
|
(a)
|
General Indemnity
. Borrower agrees to indemnify, hold harmless and defend Lender, including any custodian, trustee and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties,
any prior owner or holder of the Note, the Loan Servicer, any prior Loan Servicer, the officers, directors, shareholders, partners, employees and trustees of each of the foregoing, and the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, “
Indemnitees
”) against any and all losses, claims, damages, liabilities, and expenses, including Attorneys’ Fees and Costs, which may be imposed or incurred by any of them directly or indirectly arising out of, or in any way relating to, or as a result of: (i) any failure of any Mortgaged Property to comply with the laws, regulations, ordinances, codes or decrees of any Governmental Authority, including those pertaining to the Americans with Disabilities Act, zoning, occupancy and subdivision of real property, (ii) failure of Borrower or any Borrower Principal to comply with the Economic Sanction Laws or AML Laws, or (iii) any obligation of Borrower under any Lease, and (iv) any accident, injury or death to any natural person on any Mortgaged Property or any damage to personal property located on any Mortgaged Property, except that
no such party
the Indemnitees
will
not
be indemnified from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such
party
the Indemnitees
.
|
35.
|
Section 10.10 of the Loan Agreement is modified to read as follows:
|
10.10
|
Disclosure of Information; Authorization to Publicly Use Loan Information.
|
(a)
|
Borrower acknowledges that Lender may provide to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, ownership, purchase, participation or Securitization (if applicable) of the Loan, including any of the Rating Agencies, any entity maintaining databases on the underwriting and performance of commercial mortgage loans, as well as governmental regulatory agencies having regulatory authority over Lender, any and all information which Lender now has or may hereafter acquire relating to the Loan, a Mortgaged Property, Borrower or any Guarantor, as Lender determines necessary or desirable and that such information may be included in disclosure documents in connection with a Securitization (if applicable) or syndication of participation interests, including a prospectus, prospectus supplement, offering memorandum, private placement memorandum or similar document (each, a “
Disclosure Document
”) and also may be included in any filing with the Securities and Exchange Commission pursuant to the Securities Act or the Securities Exchange Act. To the fullest extent permitted under applicable
|
(b)
|
Borrower agrees that Lender may publicly use, at Lender’s discretion,
photographs of the Mortgaged Property, and
basic transaction information (for example, the number of units in a Mortgaged Property and the Loan Amount) relating to the Loan.
Notwithstanding the foregoing, Lender shall not be permitted to publicly use the name of Borrower, Pledgor, Guarantor, any Borrower Principal or any Person that is an Affiliate of Borrower, Pledgor, Guarantor, or any Borrower Principal without Borrower’s prior written consent.
|
10.14
|
Lender’s Rights to Sell or Securitize.
Borrower acknowledges that Lender, and each successor to Lender’s interest, may (without prior Notice to Borrower or Borrower’s prior consent), sell or grant participations in the Loan (or any part of the Loan), sell or subcontract the servicing rights related to the Loan, securitize the Loan or place the Loan in a trust. Borrower, at its expense, agrees to cooperate with all requests of Lender in connection with any of the foregoing including taking the following actions:
|
(a)
|
Executing any financing statements or other documents deemed necessary by Lender or its transferee to create, perfect or preserve the rights and interest to be acquired by such transferee.
|
(b)
|
Delivering revised organizational documents, counsel opinions and executed amendments to the Loan Documents satisfactory to the Rating Agencies.
|
(c)
|
Providing updated financial information with appropriate verification through auditors’ letters, if required by Lender.
(If Lender requires that Borrower’s updated financial information be accompanied by appropriate verification through auditors’ letters, then Lender will reimburse Borrower for the costs which Borrower reasonably incurs in connection with obtaining such auditors’ letters.)
|
(d)
|
Providing updated information on all litigation proceedings affecting Borrower or any Borrower Principal as required in Section 6.16.
|
(e)
|
Reviewing information contained in any Disclosure Document and providing a mortgagor estoppel certificate, written confirmation of Borrower’s indemnification obligations under this Loan
Agreement, and such other information about Borrower, any
Guarantor, any Pledgor, any Property Manager, or the Mortgaged Properties as Lender may require for Lender’s offering materials.
|
10.21
|
Supplemental Financing.
|
(a)
|
This Section will apply only if at the time of any application referred to in Section 10.21(b), Freddie Mac has in effect a product described in its Multifamily Seller/Servicer Guide under which it purchases supplemental mortgages encumbering single family rental properties that meet specified criteria (“Supplemental Mortgage Product”). For purposes of this Section 10.21 only, the term “Freddie Mac” will include any affiliate or subsidiary of Freddie Mac.
|
(b)
|
After the first anniversary of the date of this Loan Agreement but before the eighth anniversary of the date of this Loan Agreement, Freddie Mac will consider an application from an originating lender that is generally approved by Freddie Mac to sell mortgages to Freddie Mac under the Supplemental Mortgage Product (“Approved Seller/Servicer”) for the purchase by Freddie Mac of a proposed indebtedness of Borrower to the Approved Seller/Servicer to be secured by Supplemental Instruments on the Mortgaged Properties. Freddie Mac will purchase the Supplemental Loan secured by the Mortgaged Properties if each of the following conditions is satisfied:
|
(i)
|
At the time of the proposed Supplemental Loan, no Event of Default may have occurred and be continuing and no event or condition may have occurred and be continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.
|
(ii)
|
Borrower and the Mortgaged Properties must be acceptable to Freddie Mac under its Supplemental Mortgage Product.
|
(iii)
|
New loan documents must be entered into to reflect the Supplemental Loan, such documents to be acceptable to Freddie Mac in its discretion.
|
(iv)
|
The Supplemental Loan may not cause the combined debt service coverage ratio of the Mortgaged Properties after the making of the Supplemental Loan to be less than the Minimum DSCR. As used in this Section, the term “combined debt service coverage ratio” means, with respect to the Mortgaged Properties, the ratio of:
|
(A)
|
the annual net operating income from the operations of the Mortgaged Properties at the time of the proposed Supplemental Loan,
|
(B)
|
the aggregate of the annual principal and interest payable on all of the following:
|
(I)
|
the Indebtedness under this Loan Agreement (using a 30 year amortization schedule), and
|
(III)
|
the proposed “Indebtedness” for the Supplemental Loan (using a 30 year amortization schedule).
|
(v)
|
The Supplemental Loan may not cause the combined loan to value ratio of the Mortgaged Property after the making of the Supplemental Loan to exceed the Maximum Combined LTV, as determined by Freddie Mac. As used in this Section, “combined loan to value ratio” means, with respect to the Mortgaged Properties, the ratio, expressed as a percentage, of:
|
(A)
|
the aggregate outstanding principal balances of all of the following:
|
(I)
|
the Indebtedness under this Loan Agreement, and
|
(III)
|
the proposed “Indebtedness” for the Supplemental Loan,
|
(B)
|
the value of the Mortgaged Properties.
|
(vi)
|
Borrower’s organizational documents are amended to permit Borrower to incur additional debt in the form of the Supplemental Loan (Lender will consent to such amendment(s)).
|
(vii)
|
One or more Persons acceptable to Freddie Mac executes and delivers to the Approved Seller/Servicer a Guaranty in a form acceptable to Freddie Mac with respect to the exceptions to non-recourse liability described in Freddie Mac’s form promissory note, unless Freddie Mac has elected to waive its requirement for a Guaranty.
|
(viii)
|
The loan term of the Supplemental Loan will be coterminous with the Loan or longer than the Loan, in Freddie Mac’s discretion.
|
(ix)
|
Reserved.
|
(x)
|
The interest rate of the Supplemental Loan will be determined by Freddie Mac in its discretion.
|
(xi)
|
Lender enters into an intercreditor agreement (“Intercreditor Agreement”) acceptable to Freddie Mac and to Lender for the Supplemental Loan.
|
(xii)
|
Borrower’s payment of fees and other expenses charged by Lender, Freddie Mac, the Approved Seller/Servicer, and the Rating Agencies (including reasonable Attorneys’ Fees and Costs) in connection with reviewing and originating the Supplemental Loan.
|
(xiii)
|
Commencing on the date that the Supplemental Loan is originated and continuing for so long as the Supplemental Loan is outstanding, Lender may require Borrower to establish and make deposits into any Reserve Fund marked in Article I as deferred. Such deposits will be credited to the payment of any such required deposits under the Supplemental Loan.
|
(xiv)
|
If any covenants, conditions and restrictions affecting the Mortgaged Properties provide for a lien for any assessments or other unpaid amounts, Borrower will provide satisfactory evidence that such lien will be subordinate to the lien of the Supplemental Instrument.
|
(xv)
|
All other requirements of the Supplemental Mortgage Product must be met, unless Freddie Mac has elected to waive one or more of its requirements.
|
(c)
|
No later than 5 Business Days after Lender’s receipt of a written request from Borrower, Lender will provide the following information to an Approved Seller/Servicer:
|
(i)
|
The then-current outstanding principal balance of the Indebtedness.
|
(ii)
|
Payment history of the Indebtedness.
|
(iii)
|
Whether any Reserve Funds are being collected on the Indebtedness and the amount of each such Reserve Fund deposit as of the date of the request.
|
(iv)
|
Whether any Repairs, Capital Replacements or improvements or rental achievement or burn-off guaranty requirements are existing or outstanding under the terms of the Indebtedness.
|
(v)
|
Copies of the most recent inspection reports for the Mortgaged Properties.
|
(vi)
|
Whether any modifications or amendments have been made to the Loan Documents for the Indebtedness since origination of the Indebtedness and, if applicable, a copy of such modifications and amendments.
|
(vii)
|
Whether to Lender’s knowledge any Event of Default exists under the Indebtedness.
|
(d)
|
Lender will have no obligation to consent to any mortgage or Lien on the Mortgaged Properties that secures any indebtedness other than the Indebtedness, except as set forth in this Loan Agreement.
|
(e)
|
If a Supplemental Loan is made to Borrower, Borrower agrees that the terms of the Intercreditor Agreement will govern with respect to any distributions of excess
|
39.
|
The definition of “Eligible Lease” in Article XI of the Loan Agreement is modified to read as follows:
|
(ii)
|
It is executed by an Eligible Tenant and Borrower, or Property Manager on behalf of Borrower (or, in the case of a Lease existing on the Closing Date, such Lease has been assigned to Borrower).
|
(iii)
|
It has a rental rate and terms consistent with existing local market rates and terms.
|
(iv)
|
As of the date the Lease was executed, the Lease had an initial term of at least 6 months and not more than 2 years
; provided, however, not more than 5% in the aggregate of all Eligible Leases may be for an initial term of less than 6 months but at least 1 month
.
|
(v)
|
It complies with all applicable law in all material respects and includes all disclosures required by applicable law.
|
(vi)
|
It covers 100% of the square footage of the applicable Mortgaged Property or Unit.
|
(vii)
|
It does not include any purchase option, right of refusal, right of first offer or other similar interest in any Property in favor of any Tenant or other Person.
|
(viii)
|
It provides Borrower the right to enter, at any reasonable time (subject to applicable law), any portion of the applicable Mortgaged Property or Unit to inspect the applicable Mortgaged Property or Unit.
|
(ix)
|
It will not be used for full-time or part-time Home Sharing Activities.
|
FOR IMMEDIATE RELEASE
|
FOR FURTHER INFORMATION CONTACT:
|
|
Robin N. Lowe
|
|
Chief Financial Officer
|
|
T: +1-345-815-9919
|
|
E:
Robin.Lowe@AltisourceAMC.com
|
•
|
Acquired 3,236 single-family rental (“SFR”) homes currently managed by HavenBrook in target markets, growing portfolio to approximately 15,000 homes.
|
•
|
Commenced internalization of the property management function onto the HavenBrook platform.
|
•
|
Plan to transition approximately 4,000 externally managed properties onto internal platform by year end 2018.
|
•
|
Obtained $508.7 million of long-term, fixed rate financing as part of Freddie Mac's affordable SFR pilot program.
|
•
|
Full-company Core Funds from Operations per diluted share increased to $0.06 for the second quarter of 2018.
1
|
•
|
Stabilized Rental Net Operating Income Margin was 65%.
1
|
•
|
94% of stabilized rentals were leased at June 30, 2018.
|
•
|
190 remaining legacy REOs, down 41% from 320 at March 31, 2018 and down 61% from 490 at December 31, 2017.
|
•
|
65% of funding had fixed or capped rates and 79% had maturities of over three years.
|
1
|
Core Funds from Operations and Stabilized Rental Net Operating Income Margin are non-GAAP measures. Refer to the Reconciliation of Non-GAAP Financial Measures section for further information and reconciliation to U.S. GAAP net loss.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Rental revenues
|
$
|
40,906
|
|
|
$
|
30,102
|
|
|
$
|
80,671
|
|
|
$
|
55,720
|
|
Change in unrealized gain on mortgage loans
|
—
|
|
|
(77,824
|
)
|
|
—
|
|
|
(129,689
|
)
|
||||
Net realized gain on mortgage loans
|
—
|
|
|
40,227
|
|
|
—
|
|
|
75,777
|
|
||||
Net realized gain on sales of real estate
|
—
|
|
|
20,807
|
|
|
—
|
|
|
40,763
|
|
||||
Interest income
|
—
|
|
|
98
|
|
|
—
|
|
|
177
|
|
||||
Total revenues
|
40,906
|
|
|
13,410
|
|
|
80,671
|
|
|
42,748
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Residential property operating expenses
|
17,197
|
|
|
19,337
|
|
|
33,989
|
|
|
37,596
|
|
||||
Depreciation and amortization
|
18,761
|
|
|
14,805
|
|
|
37,951
|
|
|
29,979
|
|
||||
Acquisition fees and costs
|
759
|
|
|
209
|
|
|
792
|
|
|
376
|
|
||||
Impairment
|
2,143
|
|
|
9,114
|
|
|
9,718
|
|
|
23,334
|
|
||||
Mortgage loan servicing costs
|
319
|
|
|
2,625
|
|
|
674
|
|
|
8,870
|
|
||||
Interest expense
|
16,338
|
|
|
15,153
|
|
|
32,401
|
|
|
30,725
|
|
||||
Share-based compensation
|
1,094
|
|
|
552
|
|
|
680
|
|
|
2,466
|
|
||||
General and administrative
|
2,477
|
|
|
2,882
|
|
|
5,150
|
|
|
5,204
|
|
||||
Management fees to AAMC
|
3,697
|
|
|
4,433
|
|
|
7,487
|
|
|
9,248
|
|
||||
Total expenses
|
62,785
|
|
|
69,110
|
|
|
128,842
|
|
|
147,798
|
|
||||
Operating loss
|
(21,879
|
)
|
|
(55,700
|
)
|
|
(48,171
|
)
|
|
(105,050
|
)
|
||||
Net loss on real estate and mortgage loans
|
(306
|
)
|
|
—
|
|
|
(1,940
|
)
|
|
—
|
|
||||
Casualty loss reversals, net
|
520
|
|
|
—
|
|
|
520
|
|
|
—
|
|
||||
Insurance recoveries
|
115
|
|
|
—
|
|
|
115
|
|
|
—
|
|
||||
Other income
|
214
|
|
|
—
|
|
|
790
|
|
|
—
|
|
||||
Loss before income taxes
|
(21,336
|
)
|
|
(55,700
|
)
|
|
(48,686
|
)
|
|
(105,050
|
)
|
||||
Income tax expense
|
—
|
|
|
7
|
|
|
—
|
|
|
14
|
|
||||
Net loss
|
$
|
(21,336
|
)
|
|
$
|
(55,707
|
)
|
|
$
|
(48,686
|
)
|
|
$
|
(105,064
|
)
|
|
|
|
|
|
|
|
|
||||||||
Loss per share of common stock - basic:
|
|
|
|
|
|
|
|
||||||||
Loss per basic share
|
$
|
(0.40
|
)
|
|
$
|
(1.04
|
)
|
|
$
|
(0.91
|
)
|
|
$
|
(1.96
|
)
|
Weighted average common stock outstanding - basic
|
53,520,486
|
|
|
53,474,680
|
|
|
53,487,459
|
|
|
53,560,012
|
|
||||
Loss per share of common stock - diluted:
|
|
|
|
|
|
|
|
||||||||
Loss per diluted share
|
$
|
(0.40
|
)
|
|
$
|
(1.04
|
)
|
|
$
|
(0.91
|
)
|
|
$
|
(1.96
|
)
|
Weighted average common stock outstanding - diluted
|
53,520,486
|
|
|
53,474,680
|
|
|
53,487,459
|
|
|
53,560,012
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends declared per common share
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(unaudited)
|
|
|
||||
Assets:
|
|
|
|
||||
Real estate held for use:
|
|
|
|
||||
Land
|
$
|
317,789
|
|
|
$
|
322,062
|
|
Rental residential properties
|
1,393,371
|
|
|
1,381,110
|
|
||
Real estate owned
|
57,279
|
|
|
64,036
|
|
||
Total real estate held for use
|
1,768,439
|
|
|
1,767,208
|
|
||
Less: accumulated depreciation
|
(105,716
|
)
|
|
(73,655
|
)
|
||
Total real estate held for use, net
|
1,662,723
|
|
|
1,693,553
|
|
||
Real estate assets held for sale
|
26,850
|
|
|
75,718
|
|
||
Mortgage loans at fair value
|
9,778
|
|
|
11,477
|
|
||
Cash and cash equivalents
|
111,644
|
|
|
113,666
|
|
||
Restricted cash
|
37,095
|
|
|
47,822
|
|
||
Accounts receivable, net
|
16,180
|
|
|
19,555
|
|
||
Prepaid expenses and other assets
|
20,791
|
|
|
12,758
|
|
||
Total assets
|
$
|
1,885,061
|
|
|
$
|
1,974,549
|
|
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Repurchase and loan agreements
|
$
|
1,241,336
|
|
|
$
|
1,270,157
|
|
Accounts payable and accrued liabilities
|
59,222
|
|
|
55,639
|
|
||
Payable to AAMC
|
4,252
|
|
|
4,151
|
|
||
Total liabilities
|
1,304,810
|
|
|
1,329,947
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Equity:
|
|
|
|
||||
Common stock, $0.01 par value, 200,000,000 authorized shares; 53,561,803 shares issued and outstanding as of June 30, 2018 and 53,447,950 shares issued and outstanding as of December 31, 2017
|
536
|
|
|
534
|
|
||
Additional paid-in capital
|
1,181,873
|
|
|
1,181,327
|
|
||
Accumulated deficit
|
(602,158
|
)
|
|
(537,259
|
)
|
||
Total equity
|
580,251
|
|
|
644,602
|
|
||
Total liabilities and equity
|
$
|
1,885,061
|
|
|
$
|
1,974,549
|
|
|
|
Three months ended June 30, 2018
|
||
GAAP net loss
|
|
$
|
(21,336
|
)
|
|
|
|
||
Adjustments to determine FFO:
|
|
|
||
Depreciation and amortization
|
|
18,761
|
|
|
Impairment
|
|
2,143
|
|
|
Net loss on real estate and mortgage loans
|
|
306
|
|
|
FFO
|
|
(126
|
)
|
|
|
|
|
||
Adjustments to determine Core FFO:
|
|
|
||
Acquisition fees and costs
|
|
759
|
|
|
Non-cash interest expense
|
|
1,219
|
|
|
Share-based compensation
|
|
1,094
|
|
|
Other adjustments
|
|
94
|
|
|
Core FFO
|
|
$
|
3,040
|
|
|
|
|
||
Weighted average common stock outstanding - basic and diluted
|
|
53,520,486
|
|
|
FFO per share - basic and diluted
|
|
$
|
0.00
|
|
Core FFO per share - basic and diluted
|
|
$
|
0.06
|
|
|
|
Three months ended June 30, 2018
|
||
GAAP net loss
|
|
$
|
(21,336
|
)
|
|
|
|
||
Adjustments:
|
|
|
||
Net loss on real estate and mortgage loans
|
|
306
|
|
|
Residential property operating expenses on non-stabilized rentals and REOs
|
|
2,684
|
|
|
Depreciation and amortization
|
|
18,761
|
|
|
Acquisition fees and costs
|
|
759
|
|
|
Impairment
|
|
2,143
|
|
|
Mortgage loan servicing costs
|
|
319
|
|
|
Interest expense
|
|
16,338
|
|
|
Share-based compensation
|
|
1,094
|
|
|
General and administrative
|
|
2,477
|
|
|
Management fees to AAMC
|
|
3,697
|
|
|
Other income
|
|
(849
|
)
|
|
Stabilized Rental NOI
|
|
$
|
26,393
|
|
|
|
|
||
Rental revenues
|
|
$
|
40,906
|
|
Stabilized Rental NOI Margin
|
|
65
|
%
|