commerical real estate financing- a webinar

COMMERICAL REAL

ESTATE FINANCING-

A WEBINAR

Heidi K. Hoffman Shalloo, Esq. Schenck Price Smith & King, LLP (Florham Park) Anthony Romano, II, Esq. Connell Foley (Jersey City) William J. Skala Vice President and Senior Loan Officer TD Bank (New Brunswick)

WRPP027017

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Requests for such permission should be sent to NJICLE, a Division of the New Jersey

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Brunswick, New Jersey 08901-1520.

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COMMERCIAL REAL ESTATE FINANCE

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ATTENDANCE VERIFICATION

PLEASE FAX OR E-MAIL YOUR ATTENDANCE VERIFICATION FORM TO NJICLE

FAX: 732-249-1428

E-MAIL: [email protected]

SEMINAR MATERIALS AND CLE FORMS

TO ACCESS SEMINAR MATERIALS, ATTENDANCE VERIFICATION AND CLE FORMS

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TO THE LINK THAT WAS E-MAILED TO YOU TODAY.

William Skala

Anthony Romano, Esq.

Heidi K. Hoffman, Esq.,Schenck, Price, Smith & King, LLP

Schenck Price Smith & King, LLP 8

Establishes the essential loan terms between Borrower and Lender and collateral for loan

LOAN TERMS◦ Financial Terms such as loan amount, rate i.e. fixed, variable, interest rate swap, term, prepayment

penalties, and fees; ◦ Establishes the borrower and guarantors of the loan; ◦ Financial reporting requirements; ◦ Financial covenants; ◦ Legal covenants/requirements such as Event of Default Provisions or Cross-Collateralization; ◦ General pre-conditions to closing;

COLLATERAL◦ Mortgage or Deed of Trust, ◦ Assignment of Leases and Rents, ◦ Business Assets secured by a UCC under the Uniform Commercial Code, ◦ Notes, ◦ Shares of Stock or Membership in an Entity, ◦ DMV Liens, ◦ Assignment of Contract, ◦ Permits and Licenses, ◦ Assignment of Management Agreements.

Many lenders will not issue commitments, but simply terms sheets.


Term Amortization Loan Call Option Who is the obligor and guarantor of the Indebtedness?

Prepayment Penalties◦ Yield Maintenance Premium◦ Reset of Prepayment Penalty◦ Fixed Prepayment based upon percentage of amount prepaid◦ Exclusions in the event prepayments result from condemnation or casualty or operating

revenue

Breakage Fee on swap

Interest Rate◦ Hedging Instrument◦ Fixed◦ Variable◦ Interest Only with Balloon◦ Combination of Interest Rates throughout term of loan◦ Rate Reset Provisions◦ Floating to Permanent Rates in Construction Loans


Affirmative• Financial Reporting and Records• Paying Taxes• Maintaining Insurances• Maintaining its Entity Status in Good Standing• Maintaining Licenses• Complying with all Legal Requirements• Continue in the business presently operated• Maintenance of Bank accounts with Lender

Negative• Restricting Junior or Subordinate Financial• Restrictions on Guarantor and Borrower Indebtedness Generally• Restrictions on Distributions• Restrictions on Investments• Restrictions on Sale or Transfer of Assets

Financial Covenants• Ratios a Borrower or Guarantor may not exceed or Fall Below


Financing Submissions◦ Tax Returns◦ Financial Statements◦ Rent Rolls◦ Borrowing Base◦ Accounts Payable Agings Reporting ◦ Accounts Receivable Agings Reporting◦ Inventory Reporting


Types of Financial Statements Prepared in Accordance with GAAP◦ Compiled

Determine if Free of material misstatements and discloses relationship to Borrower

◦ Reviewed Limited level of assurances from a CPA with an independent relationship

to Borrower◦ Audited

Highest level of assurances including opinion of independent CPA

Frequency of Reporting Obligations◦ Annually

within 150 days after the end of each fiscal year◦ Semi-Annually

By August 15th each year◦ Quarterly

within 45 days after the end of each calendar quarter


Financial Covenants-Ratios Borrower has to stay above or below◦ Loan to Value Ratio◦ Debt Service Coverage Ratio-Pre and/or Post

Distributions Measured annually

Net income after tax plus depreciation, amortization and interest plus depreciation, amortization and interest (minus distributions) plus or minus non-recurring items divided by principal and interest payments under the Note

◦ Minimum Tangible Net Worth◦ Working Capital Minimums◦ Environmental Ratings


◦ Sale or Transfer of Assets of Borrower in the Ordinary Course

◦ Sale or Transfer of Assets of Guarantor

◦ Junior Financing

◦ Additional and Permitted Indebtedness Definitions

◦ Change in Use

◦ Mergers or Acquisitions

◦ Change in Ownership/Limitations on Permitted Transfers

◦ Restrictions on Permitted Investments

◦ Acquisitions

◦ Restrictions on guaranteeing additional Indebtedness

◦ Payments of Bonus Compensation or Distributions


Events of Defaults◦ Failure to pay payments and other charges when due◦ Covenant defaults◦ Uninsured Losses◦ Defaults in Agreements with Others◦ Financial Statements or Tax Returns are untrue◦ Misleading Statements-Breach in Warranties or Representations◦ Change in Control of Borrower◦ Appointment of a Receiver◦ Entry of Judgments◦ Assignment for the Benefit of Creditors◦ Bankruptcy or Dissolution◦ Liens in Favor of Lender cease to be valid◦ Material Adverse Change◦ Breach of any other Loan Document

Cross-Collateralization◦ Cross Collateralization with existing or future indebtedness with Lender◦ Cross Guarantee with existing or future indebtedness with Lender◦ Cross Default with existing or future indebtedness with Lender


Consistency among commitment letter, credit write-up, and loan authorization◦ Commitment letter◦ Credit write-up/Loan Approval◦ Loan Authorization

Consistency and accountability◦ Checklist: Accountability and Deadlines

Review with the Borrowers and Guarantors Accountants and Financial Advisors to ensure loan terms can be met with success

Verify which initial preconditions to closing are in place or need to be obtained with client


Managing expectations

Establishing a consistent process

Assigning responsibilities for each checklist requirement and imposing deadlines

Checklist Due Diligence

The Closing Process

Avoiding Common Closing Issues


Borrower

◦ Accountability

Borrower? Borrower’s counsel? Borrower’s broker? Seller’s attorney?

◦ Time and dollars

Checklists (updated); deadlines met or closing date pushed (need support of entire team)


Third Parties

◦ Environmental/appraisal/title and survey; landlord/lease; life insurance

Lender

◦ Team approach (BDOs, loan officers, processors, closers, and underwriters mutually supportive = increased morale and greater efficiency); open lines of communication; one primary point of contact with closing counsel


Entity Documents Financial Documentation Title Searches/Non-Title Related Searches/Survey Business Asset List and Location of Same Licensing Franchise Documentation Construction Related Documents Contracts for Sale Collateral Contracts Conveyancing Documents Insurance Related Documents-The ACORD Form Insurance Leases Environmental Compliance Third Party Reports Miscellaneous


Limited Liability Companies• Certification of Formation Executed by Members• Resolution/Membership Certificate• EIN Number/SS4• Driver’s Licenses for Members or Other Identification• Company Licenses• Filed Fictitious Name Certificate• Foreign Registration, if applicable

Corporations◦ Certificate of Incorporation◦ Biennial Registration/Publication (requirements of jurisdiction)◦ Bylaws Executed by Shareholders◦ Copies of Issued Shares of Stock/Ledger◦ Resolution/Secretary’s Certificate◦ EIN Number/SS4◦ Driver’s License for Shareholders holding 20% interest or more in the corporation◦ Company Licenses◦ Filed Fictitious Name or Alternate Name Certificate

Partnerships◦ Partnership Agreement◦ See Above

Trusts◦ Trust Agreement◦ Trust Certificate

Sole Proprietorships


Title Commitment and Loan Policy v Search Only◦ Identify property accurately◦ 60 year search◦ Include copies of all restrictions and easements in BII exceptions◦ Marked up Title Commitment or Loan Policy required at closing depending upon jurisdiction◦ Title endorsements specific to each jurisdiction◦ Gap coverage if required or available in jurisdiction versus Notice of Settlement◦ Closing Protection Letter if available in your jurisdiction

Judgment/Upper Courts-County and State

Defendant Litigation

Good Standing Searches/Corporate Status Searches

UCC Searches-County and State◦ Must search name exactly as it reads on formation documents to insure search accuracy

Franchise Tax (if applicable)

Municipal Violations Searches◦ Identifying open permits/certificates of occupancy and open local property, health, or code violations

ALTA Survey v. Boundary Survey◦ Should include all BII exceptions listed in Title Commitment/Search

ABC Searches and COD Searches

Flood Search of the Mortgaged/Deed of Trust Property or any location where collateral is located

Tax & Assessment Search

State specific searches◦ Tidelands Search


Closing Protection Letters (“CPL”): ◦ A CPL is an agreement where a title insurance company indemnifies the

lender for actual losses caused by certain kinds of misconduct by the closing agent. This includes issues arising from a closing agent’s errors, fraud or negligence.

What is covered:

o Closing agent’s negligence and failure to follow the lender’s written closing instructions.

o Fraud or misappropriation in handling the lender’s funds or documents.

▪ Agency Letter – New York: CPLs are not issued in NY. It isbest practice to obtain an “Authorized Agent” letter from theunderwriter that at least confirms that the agent is an agentof the underwriter and has the authority to prepare titlereports, to clear and omit title exceptions, to collect titleinsurance premiums and to issue title insurance policies andendorsements. In New York title policies are issued atclosing.


Notice of Settlement (“NOS”)

▪ Under N.J.S.A. 46:26A-11, prior to closing of title a creditor or buyer may

record a NOS with the county clerk where the real property is located to notify

prospective purchasers of an impending sale and/or a mortgage commitment.

▪ “The notice of settlement shall be signed by a party to the settlement or a party's

authorized representative and shall state the names of the parties to the

settlement and a description of the real property.” N.J.S.A. 46: 26A-11(b)

▪ The notice expires 60 days after filing and must be re-filed if the transaction has

not closed.

▪ New York, has no law such law protecting buyers or lenders from claims

arising between the record date at the time of a pre-closing rundown and the

date that closing documents are recorded. For that reason, New York title

insurance policies provide for “gap” coverage that insures against such losses.


Zoning Permits◦ Is the use of the property a permitted use in the zone?◦ Do the improvements on the property comply with the

zoning ordinances◦ The zoning report◦ The zoning letter from municipal zoning officer◦ Zoning endorsement from title company Often 10% premium-Verify with particular jurisdiction

Certificates of Occupancy/Continued Certificate of Occupancy◦ If required for transfer of title of the real estate collateral◦ If required for the tenant to occupy the property◦ May or may not include fire inspection

Business Licenses Fire Inspection Certificate


Executed Franchise Agreement◦ Underwriting review of franchise terms and control

by franchisor

Statement from Franchise of monies due for effective transfer

Franchise Agreements between Borrower and Franchisor or Landlord◦ Collateral Assignment of Lease

◦ Rights of Landlord or Franchisor in mutual collateral


Construction and Architect’s Contracts◦ Contractor’s Letter and Architect’s Letter confirming

compliance with the plans, specifications and approvals.

Plans and Specifications (Sealed) Approvals ◦ Variance◦ Minor/Major Subdivision Approval◦ Bulk relief◦ Zoning approval◦ Resolution

Conditions of Approvals Building Permits Performance Bonds Builder’s Risk Insurance


Contract for Sale of Real Estate◦ Description of Real Property◦ Timing of Closing (Is time of the essence in your

jurisdiction)

Asset Purchase Agreement◦ Verify list of assets being transferred is consistent

with collateral package

Stock Purchase Agreement◦ Liabilities being assumed◦ Indemnified Liabilities◦ Escrow for Liabilities◦ Restrictive Covenants


Bill of Sale Deed Affidavits

◦ Of Compliance with Representations and Warranties◦ Of Title

Resolutions◦ To sell or acquire

Assignments◦ Contracts◦ Leases

FIRPTA◦ Foreign Investment in Real Property Tax Act of 1980

Indemnity Agreements Restrictive Covenants and Non-Solicitation Agreements Tenant Estoppel Certificates Subordination Non-Disturbance and Attornment Agreements Tenant Financials


Life Insurance◦ Collateral Assignment of Life Insurance Stamped Received by the Home Office◦ Copy of original life insurance policy

General Liability◦ Determined by Size of Loan and Type of Business◦ Generally $1,000,000.00 and 2,000,000.00 in the aggregate per occurrence

Hazard/Casualty◦ Replacement Cost Value◦ No Co-Insurance◦ Deductibles◦ 30 days notice of cancellation for other than nonpayment◦ 10 days notice of cancellation for nonpayment◦ Mortgagee/Loss Payee Clause

Business Personal Property ◦ Replacement Cost Value /Maximum Insurable Value◦ Lender Loss Payable Clause

Builder’s Risk◦ Should cover all materials, whether installed or stored at the property location

Liquor Liability/Dram Shop Coverage Business Interruption for a period of 12 months or to cover rental loss Workman’s Compensation Flood Insurance Malpractice Insurance Marine Insurance Umbrella Policy

◦ Determined by Size of Loan and Type of Business


Real Property◦ Length of Term of Lease◦ Occupancy Rates◦ Rent Rolls◦ Priority of Lease over Mortgage/Deed of Trust◦ Subordination Provision

Self-Operating Subordination Agreement Subordination, Non Disturbance, and Attornment Agreement

◦ Triple Net◦ Tenant Estoppel Requirements◦ Landlord’s Waiver and Consent/Non-Interference Agreement

Does the landlord in your jurisdiction have a landlord lien? Look to terms in lease in some jurisdictions

Should the lender pre-file its UCC? Lien may attach when assets are located at the premises

◦ Consent to Collateral Assignment of Lease◦ Options to Purchase during Term of Loan◦ Options to Renew on Unfavorable Terms◦ Financial Terms

Debt Service Coverage Ratio

Equipment


Does the jurisdiction of the collateral require any environmental compliance prior to transfer of the assets?

Ongoing Site Remediation◦ Escrows

◦ Indemnity Agreements

Removal of Oil Tanks◦ No Further Action Letter

◦ Response Action Outcome [Unrestricted/Restricted]


MCLE CODE

PLEASE RECORD THIS CODE ON YOUR AFFIRMATION FORMS:

17298cref

Accounts With Financial Institution Escrow Agreements

◦ Environmental◦ Baskets◦ Repair/Due Diligence Disputes◦ Judgments◦ Tenant Disputes

Financial Documents Subordinated/Standby Debt Transfer Fees/Bulk Sales Identification Addresses for Notice Provisions Payoffs (Seller or Borrower) Attorney Opinion Letters Closing Fees

◦ Mortgage or Recording Tax◦ Transfer Taxes◦ Lender’s Counsel Fees◦ Recording Fees


Codified as N.J.S.A. 54:50-38: Protects the purchaser from successorliability to the Division of Taxation for taxes owed by the seller.

Under the NJ statute, the purchaser, assignee or transferee of any “businessassets,” other than in the ordinary course of business, must notify the stateat least 10 business days in advance so an escrow can be established if theseller, assignor or transferor has potential tax liabilities to the Division ofTaxation.

A business asset can include goodwill, materials, supplies, licenses, patents,copyrights, equipment, leases, merchandise or other inventory and realty.

C-9600 Form must be completed and submitted to the Division of Treasury. The following information is needed:◦ Valid Tax ID numbers for both seller and purchaser;◦ Specific closing date;◦ Proper mailing address for both parties’ representatives;◦ Copy of executed contract of sale, court order or assignment agreement clearly

showing the sales price and all the terms and conditions of the transfer;◦ Form must be executed by purchaser or their representative.

The Form must be received by the Division of taxation at least 10 days prior to the scheduled closing date.

Visit http://www.state.nj.us/treasury/taxation/faqbulksale.shtml for access to the C-9600 form and answers to other frequently asked questions.


http://www.state.nj.us/treasury/taxation/faqbulksale.shtml

Lender’s Appraisal

Environmental Risk Assessment Report/Phase I/Phase II

Property Conditions Report

Zoning Report

Business Evaluation


◦ Mortgage/Deed of Trusts◦ Security Agreement and UCC Financing Statements or Control

Agreements◦ DMV Liens◦ Guarantees◦ Collateral Pledge Agreements◦ Assignment of Lease and Rents◦ Assignment of Contracts, Permits and Licenses◦ Assignment of Notes and Mortgages◦ Leasehold Mortgage◦ Liquor Licenses

Determine if valuable in your jurisdiction Are unlimited licenses available? Are there restrictions on issuance based upon population? UCC typically will not secure same

Assignment of Shareholder or Membership Interest in Entity holding the license


In all 50 states, Article 9 of the Uniform Commercial Code (UCC) governs secured transactions where

security interests are taken in personal property –◦ Regulates creation and enforcement of security

interests in movable property, intangible property, and fixtures

◦ Provides the rules governing transactions that couple a debt with a creditor’s interest in a debtor’s personal property

Creditor’s interest is called a security interest

[Transactions where security interests are taken in real property regulated by real property laws that vary among jurisdictions, notby Article 9]

39

What collateral is security for the loan?◦ Must attach collateral and perfect security interest

Financing Statement alone is insufficient Security Agreement must contain value given as consideration, the name

of collateral owner who has rights to the collateral, describe collateral in the land in certain instances, and be authenticated by Debtor

Will collateral be controlled by the Lender? Does the collateral include after acquired property? Does the bank intend the UCC to cover future advances? Who owns the collateral?◦ Correct Name is Critical

Review Entity Formation Documents Review individuals passport, driver’s license or birth certificate for

correct name Trade name insufficient All records are indexed by name

◦ Ownership in UCC and Security Agreement should match


COLLATERAL PERFECTION

Accounts Filing

Agricultural Liens Attachment; Filing

Chattel Paper Filing; Possession; Control

Commercial Tort Claims (no perfection in after-acquired commercial tort claims)

Filing

Commodity AccountsAttachment (security interest created by an intermediary); otherwise, Filing; Control

Consumer Goods (other thanvehicles, boats, etc.)

Attachment (purchase money); otherwise Filing

Deposit Accounts Control

Equipment Filing

Farm Products Filing

FixturesFiling (in county where R/E is located)

41


General IntangiblesFiling; Attachment (sale of payment intangible)

Goods Subject to statute or treaty such as boats, cars, aircraft

Compliance with applicable federal or state regulations

Health Care Insurance Receivables assigned to a service provider

Attachment

Instruments Filing; Possession

Inventory (including motor vehicles, boats, manufactured homes)

Filing

Investment Property Filing; Control

Letter of Credit Rights Filing; Control

Manufactured Home, Motor Vehicle, Boats

Filing is inventory; Possession; Compliance with state regulations (non-inventory)

42


Membership Interest in Limited Liability Company (a subset of either General Intangibles or Investment Property)

Filing as a General Intangible; Filing or Control as Investment Property

Money Possession

Negotiable DocumentsFiling; Possession; Control (electronic documents)

Partnership Interest (a subset of either General Intangibles or Investment Property)

Filing as a General Intangible; Filings or Control as Investment Property

ProceedsAutomatic if interest in the original collateral was perfected See UCC § 9-306(3)

Promissory Note (sale) Attachment

Securities (a subset of Investment Property)

Attachment of created by broker or intermediary; Filing; Control

Software (that is not part of goods)

Filing unless statute governs

43

Verify Consistency of Terms with Loan Commitment/Approval

Default Rate

Events of Default◦ Failure to make payments when due◦ Failure to pay other charges when due◦ Covenant defaults◦ Uninsured Losses◦ Defaults in Agreements with Others◦ Financial Statements or Tax Returns are untrue◦ Misleading Statements-Breach in Warranties or Representations◦ Change in Control of Borrower◦ Appointment of a Receiver◦ Entry of Judgments◦ Assignment for the Benefit of Creditors◦ Bankruptcy or Dissolution◦ Liens in Favor of Lender cease to be valid◦ Material Adverse Change◦ Breach of any other Loan Document

Reporting Requirements

Covenants◦ Affirmative◦ Negative◦ Financial

Collateral Package

Representations and Warranties


Exchange of Original Checklist Documentation already reviewed and approved by Lender

Exchange of Collateral Documentation◦ Original Life Insurance Policy◦ Original Note◦ Original Shares of Stock

Execution of Loan Documents already reviewed and approved by Borrower prior to closing

Disbursement of Loan Proceeds


Unauthorized use of proceeds◦ Proceeds disbursed for purpose(s)

inconsistent with the loan commitment. Failure of Borrower’s counsel to review loan

documents in advance with the Borrower. Unexpected escrows arising from disputes

between a Borrower and Seller. Rundown liens or open litigation. Follow up on ALL Post Closing Compliance

Requirements


Heidi K. Hoffman, Esq.Schenck, Price, Smith & King, [email protected](973) 540-8234


mailto:[email protected]

Thank you

Thanks to our speakers for presenting today’s program.

Please remember to sign your affirmation form and either fax or e-mail it to ICLE:

Fax: 732-249-1428

E-Mail: [email protected]

mailto:[email protected]

4055044-2

LOAN CLOSING CHECKLIST As of August 29, 2017

Proposed Loan of $________________________________

Lender:__________________________________________

Borrower: ________________________________________

Property:_________________________________________.

Responsible Party

Document

Status

A. LOAN DOCUMENTS

LC A-1. Loan Agreement – Issues: Prepayment Rights; Borrower Right to Use Insurance Proceeds; Debt Service Coverage Ratio; Loan to Value Ratio; Minimum Tangible Net Worth; Notice and Cure Rights; Waiver of Trial by Jury and Filing of Counterclaims; Assignment Rights; Exculpation

LC A-2. Promissory Note

LC A-3. Mortgage, Assignment of Leases and Rents and Security Agreement (Fixture Filing);

LC A-4. Assignment of Leases and Rents

LC A-5. Guaranty of Recourse Obligations - Exculpation

LC A-6. Assignment of Management Agreement and Subordination of Management Fees

LC A-7 Assignment of Development Agreement and Subordination of Development Fees

LC A-8. Environmental Indemnity Agreement

LC A-9. Cash Management Agreement

LC A-10. Clearing Account Agreement

LC A-11. UCC-1 Financing Statements

LC A-12. Disbursement Letter (Settlement Statement)

LC A-13. Escrow letter with Title Company

LC A-14. IRS Form W-9

LC A-15. Receipt and Closing Certificate (including Rent Roll, Residential Leases and Service Contracts)

LC A-16 Escrows, O&M Agreements, Post Closing Requirements

4055044-2 2

Responsible Party

Document

Status

B. LOAN ASSIGNMENT DOCUMENTS

LC B-1. Allonge LC B-2. Assignment of Mortgage LC B-3. Assignment of Assignment of Leases and Rents LC B-4. General Assignment

C. OPINION LETTERS

BC C-1. Counsel for Borrower, Managing Member of Borrower and Guarantor(s) with respect to due execution of the loan documentation, due authorization, formation, perfection of security interests in accounts, enforceability and other matters.

BC C-2. Counsel for Borrower with respect to zoning (including compliance with current zoning, any conditions attached to the site plan approval for condo conversion, if building is non-conforming then a right to rebuild section, and a provision regarding the expiration of the Redevelopment Plan except for the still-effective non-discrimination covenants)

BC C-3. Non-Consolidation Opinion (if required) BC C-4. Condominium “As of Right” Opinion (if required) BC C-5. Single Member, Bankruptcy Remote LLC opinion (if required) BC C-6 Other Specific Opinions

D. TITLE INSURANCE / SURVEYS / TITLE

BC D-1. Title Insurance Commitment for ALTA 1970 (amended 84) form or if not available, ALTA 1992 form (deleting arbitration and creditors rights, if permissible) or if not available, form commonly used in state, together with required endorsements (including zoning endorsement – not offered or required in NJ generally) or affirmative insurance

BC D-2. Copies of all recorded easements, rights of way, restrictive covenants, leases and other instruments of record

BC D-3. UCC-1 Financing Statement searches, tax lien searches, pending litigation searches, PATRIOT Act searches, bankruptcy searches and judgment searches (for Borrower, Managing Member of Borrower and Guarantors in Secretary of State and county where property is located, where Borrower is organized and where principals reside)

BC D-4. Survey D-5. Affidavit of Title D-6 Insured Closing Letter from title insurance company (if

required)

4055044-2 3

Responsible Party

Document

Status

E. EXISTING MORTGAGES TO BE SATISFIED

BC E-1. Pay-off letter(s) from the holder(s) of the Existing Mortgages with instructions for method of payment

BC E-2. Satisfactions of Existing Mortgages (If Private Loan) BC E-3. Termination of Existing Assignments of Rents (If Private Loan) BC E-4. UCC-3 Termination Statements

F. ZONING, ENVIRONMENTAL, USE AND OCCUPANCY

BC F-1. Letter from municipality stating use of property and compliance with zoning laws

BC F-2. Compliance letter stating no violation of building, property maintenance, fire codes, etc. exist of record

BC F-3. Permanent Certificate of Occupancy (or equivalent) LC F-4. Zoning Report BC F-5. Letter from municipality regarding requirement of new C of O

or CCO

G. CASUALTY AND LIABILITY INSURANCE (to be delivered to

Lender’s insurance consultant only)

BC G-1. ACORD Certificates (or Insurance Policies if ACORD

certificates are not available) for: a) Commercial Property insurance, with Special Perils, on a replacement cost basis, together with Rental Value, Business Income and Extra Expenses coverage, naming Lender as mortgagee and loss payee and b) Commercial General Liability coverage, naming Lender as additional insured; c) such other insurance as Lender may require.

H. FINANCIAL STATEMENTS

B H-1. Certified Rent Roll B H-2. Certified Operating Statements B H-3. Approved Operating Budget (if required or for cash

management deals)

B H-4. Conversion Budget (Rental to Condo), if applicable I. BORROWER ORGANIZATIONAL DOCUMENTS Limited Liability Company Borrower

BC I-1. Certificate of Formation and all amendments thereto, certified as filed by Secretary of State where organized

4055044-2 4

Responsible Party

Document

Status

BC I-2. Operating Agreement, and all amendments thereto, certified by

Borrower

BC I-3. Certificate of Good Standing issued by Secretary of State where organized

BC I-4. Certificate of Good Standing issued by Secretary of State where property is located or evidence of qualification in such state

BC I-5. Certificate of Resolutions and Incumbency BC I-6. Borrower Organizational Chart

J. SECOND AND THIRD TIER ENTITY ORGANIZATIONAL

DOCUMENTS

Sole Member of Limited Liability Company Borrower

BC J-1. Certificate of Formation and all amendments thereto, certified as filed by Secretary of State where organized

BC J-2. Operating Agreement, and all amendments thereto, certified by Borrower

BC J-3. Certificate of Good Standing issued by Secretary of State where organized

BC J-4. Certificate of Good Standing issued by Secretary of State where property is located or evidence of qualification in such state (if applicable)

BC J-5. Certificate of Resolutions and Incumbency Manager of Sole Member of Limited Liability Company Manager

BC J-6. Certificate of Formation and all amendments thereto, certified as filed by Secretary of State where organized

BC J-7. Operating Agreement, and all amendments thereto, certified by Borrower

BC J-8. Certificate of Good Standing issued by Secretary of State where organized

BC J-9. Certificate of Good Standing issued by Secretary of State where property is located or evidence of qualification in such state

BC J-10. Certificate of Resolutions and Incumbency K. PROJECT DOCUMENTS

BC K-1. Leases (Commercial Leases)

BC K-2. Leases (Residential Leases)

BC K-3. Parking Lease (if applicable)

4055044-2 5

Responsible Party

Document

Status

LC K-4. Subordination Agreement (if required)

BC K-5. Tenant estoppel letters for all commercial tenants

BC K-6. Subordination Non-Disturbance Agreements (if permitted by

Lender or required by Lease)

BC K-7. Copies of Service or Maintenance Contracts, Agreements, etc.

related to the property

BC K-8. Copies of all licenses, permits, certificates, etc. related to the

property

BC K-9. Property Management Agreement

BC K-10. Development Management Agreement

L K-11. Appraisal

L K-12 Environmental Assessment

L K-13 Physical/Structural Assessment L. CONDOMINIUM DOCUMENTS

BC L-1. Proposed Offering Plan, Order of Registration (if issued) and all other condominium documents necessary for the legal operation and sale of units

BC L-2. Copies of Plans and Specifications, all architectural and engineering agreements, construction contracts, budgets and other material agreements

BC L-3. Declarations of Covenants and Restrictions or Master Deed of Condominium or both

BC L-4. Form of Management Agreement (if any) BC L-5. Form of Contract for Sale of Units BC L-6. All other reports, disclosure statements and documents,

including any documents to establish the statutory Association to manage and administer the Condominium

BC L-7. Collateral Assignment of Condominium Documents, Contracts, Contract Deposits and Sale Proceeds

BC L-8 Collateral Assignment and Subordination of Sales Agency Agreement (if any)

M. NEW JERSEY SPECIFIC ITEMS

BC M-1. Non-applicability letter from New Jersey Department of Environmental Protection confirming that the Property is not subject to the Industrial Site Recovery Act (if available).

4055044-2 6

Responsible Party

Document

Status

BC M-2. No Further Action Letter and Covenant Not to Sue if issued

before the effective date of the Site Remediation Reform Act or with respect to any Underground Storage Tank issued by the New Jersey Department of Environmental Protection (if applicable)

BC M-3. Approval of Remedial Action Workplan or issuance of a Remedial Action Permit or a Response Action Outcome (if applicable)

BC M-4. Superlien Environmental Lien search for Property and any other property owned by Borrower or Guarantors in the State of New Jersey

BC M-5. Certificate of Registration and current Certificate of Inspection (“Green Card”) under the Hotel and Multiple Dwelling Act (including any open violations and related correspondence)

BC M-6. Copies of notices regarding amount and location of security deposits, if any (notice to be sent to tenants within 5 days of closing)

N. ACQUISITION DOCUMENTS

BC N-1. Purchase and Sale Agreement BC N-2. Assignment of Purchase and Sale Agreement BC N-3. Copy of Deed BC N-4. Bill of Sale for Personalty BC N-5. Assignment and Assumption of Leases and Security Deposits BC N-6. General Assignment, if applicable

ALTERNATE LOAN TRANSACTIONS O. MEZZANINE LOAN

LC O-1 Pledge and Security Agreement

LC O-2 Member Interest Assignment LC O-3 Intercreditor Agreement LC O-4 Loan UCC Financing Statements: Local & NJ Sec of State LC O-5 Senior Loan Documents as follows:

a) Purchase Money Mortgage Note. b) Purchase Money Mortgage c) Assignment of Leases and Rents

BC O-6 Eagle 9 UCC Insurance Policy

4055044-2 7

Responsible Party

Document

Status

P. CONSTRUCTION LOAN

LC P.1 Building or Construction Loan Agreement - Permanent Loan

Conversion

LC P.2 Assignment of all Approvals, Plans, Drawings and Specifications and Copies of Permits, Approvals, Plans, Drawings and Specs.

LC P.3 Assignment of any Individual or Bulk Sales Contracts LC P.4 Assignment of the Construction Contract between Borrower

and a) GC; b) Architect; and c) Engineer and Copies of Contracts with GC, Architect & Engineer

LC P.5 Assignment of Development Agreement; Subordination of Development Fees

BC P.6 ACORD Certificates of Insurance: CGL; Builder’s Risk; Workers Comp

B/L P.7 Establish Operating Account

B/L P.8 Establish Interest Reserve Account L P.9 Engineering Consultant’s Review of Projected Plans and

Costs

B P.10 Copies of Budget, Schedule of Values & Construction Timeline

B P.11 Utility “will serve” letters (water, sewer, electric, gas, telephone, etc

B P.12 Evidence of Payment of Developer Fees, Performance and Maintenance Bonds, as applicable

LC P.13 Guaranty of Completion

B P.14 Certification from Architect (Requisition)

B P.15 AIA Forms G702 and AIA Forms G703 (Requisition)

BC P.16 “Title Rundown”

Q. Q. BRIDGE LOAN

B means Borrower(s) – BC means Borrower's Counsel G means Guarantor(s) L means Lender LC means Lender’s Counsel

Anthony Romano is a highly regarded real estate attorney with over 40 years of experience in the full range of real property transactions. With an intimate knowledge of residential and commercial property acquisitions, sales, loans and leasing matters, he represents sellers, purchasers, lenders, borrowers, landlords and tenants across all property types and sizes . Tony advises property owners and investors in the development of new properties as well as the conversion of existing multi-family and commercial buildings in both rental and condominium ownership schemes. Several of the high-rise residential buildings on the Jersey City waterfront are the product of the creative and innovative condominium regimes authored by Tony. Having spent 10 years as General Counsel to a real estate development firm, Tony applies practical and business experience to both borrowers and lenders in acquisition, construction, mezzanine and all other forms of real estate related loans, as well as complex commercial loan workouts, dating back to the Resolution Trust Corporation and the Office of Thrift Supervision.

Tony is a founding trustee of the Hudson-Bergen Inn of Transactional Counsel and is a frequent speaker on real estate topics. He is "AV" Peer Rated by Martindale-Hubbell since 2001 and is annually listed on "New Jersey's Top Rated Lawyers" by Inside Jersey and "New York's Top Rated Lawyers" by New York Magazine.

Active in both regional and local community activities, Tony is a member of the Alumni Representative Committee of Columbia University, from which he graduated, served as a Docent at Storm King Art Center, Cornwall, New York until recently and was a premier level soccer coach for over 15 years before retiring 2 years ago.

Internal

William "Bill" Skala, is a Sr. Relationship Manager who has been with TD Bank, NA

since 2005 and focuses on closely held Real Estate Investors/Developers and Commercial

& Industrial clients within Central New Jersey for relationships up to $50 Million. His

responsibilities include new loan origination while ensuring the highest credit quality

within the portfolio. Bill conducted is undergraduate studies receiving a Bachelor's of

Science in Business Administration with a concentration in Finance from Villanova

University as well as a MBA in Real Estate from Monmouth University. Outside of

work, Mr. Skala is a married father of two and is active in coaching youth sports.