Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Lender's Counterproposal

• Bifurcate the loan into A1 and A2 pieces.
• The A1 piece would be $5,000,000 and earn interest at the Note rate of 6 percent.
• The A2 piece would be $1,754,570 plus any past due interest at the Note rate of 6 percent.
• Borrower to put up $1,000,000 (New Equity) into an account to be held by the lender for the thrift store build-out.
• The existing reserves to be keep in place, for example, for taxes and insurance, leasing commissions, and capital expenses.
• Lender to waive all default interest and penalties.
• The loan shall not be assumable, but the existing prepayment penalty shall remain in full force and effect.
• Lender to charge interest on an interest-only basis.
• Borrower to put up an additional $100,000 as a debt service reserve to be used to keep the A1 piece current during the build-out of the thrift store (estimated at four months) as well as to support the loan service, as needed.
• Borrower to agree to a receiver if there is a future default.
• Borrower to pay for all attorney fees documenting the loan modification and a 1 percent loan modification fee.
• Lender to impose a “hard lock box.” All income goes to the lender and it would take out reserves, forward to the borrower monies to pay the approved operating expenses, retain funds—if available to pay the A1 and A2 pieces—and place any remaining funds into the debt service reserve account.

Cash Flow

Monies from the project to go first to pay the reserves for taxes and insurance, leasing commissions, and ...