Appendix G: Form of Loan Agreement

• Author: Gregory M Stein - Michael D Goodwin - Morton P Fisher Jr
• Pages: 447-511

Appendices 447

Appendix G

Form of Loan Agreement

Note: The particular provisions of loan agreements vary widely, depend-

ing on the lender’s underwriting practices, the type of loan (such as land

development, construction, permanent, conduit, or refinance), the type of

collateral (such as raw land or improved land), and local real estate prac-

tice. Some lenders employ loan agreements while others prefer to use loan

commitments, and there is substantial overlap in the content of these two

types of agreements. The following form, which is in the format of a loan

agreement, attempts to include only typical provisions that appear in most

permanent loan agreements to fund the acquisition of improved property.

The practitioner should become familiar with the lender’s underwriting

practices, the type of loan, the type of collateral, and local real estate prac-

tice before preparing a loan agreement or commitment. The practitioner

also should be aware that, instead of a loan agreement or commitment,

some lenders use a loan application format in which similar terms and

conditions appear in an application document from the borrower to the

lender that the lender will approve in writing when it is acceptable. What-

ever format the parties use, the lender’s lawyer customarily prepares the

document at the borrower’s expense.

LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of , 20__ (as

amended, restated, replaced, supplemented, or otherwise modified from

time to time, this “Agreement”), between

, a ,

having an address at

(“Lender”), and , a having an

address at (“Borrower”).

RECITALS

A. Borrower desires to obtain the Loan from Lender; and

B. Lender is willing to make the Loan to Borrower, subject to and in

accordance with the conditions and terms of this Agreement and the other

Loan Documents.

NOW, THEREFORE, in consideration of the covenants set forth in this

Agreement, and other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties hereto hereby

agree, represent, and warrant as follows:

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448 Appendices

I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1 Definitions. For all purposes of this Agreement, except as

otherwise expressly provided:

“Affiliate” shall mean, as to any Person, any other Person that, directly

or indirectly, owns ten percent (10%) or more of, is in control of, is con-

trolled by, or is under common ownership or control with such Person or

is a director or officer of such Person or of an Affiliate of such Person. As

used in this definition, the term “control” means the possession, directly or

indirectly, of the power to direct or cause the direction of the management,

policies, or activities of a Person, whether through ownership of voting

securities, by contract, or otherwise.

“ALTA” shall mean American Land Title Association, or any successor

thereto.

“Alteration Threshold” shall mean $______________.

“Annual Budget” shall mean the operating and capital budget for the

Property setting forth Borrower’s good faith estimate of Gross Revenue,

Operating Expenses, and Capital Expenditures for the applicable Fiscal

Year.

“Approved Annual Budget” shall have the meaning set forth in

Section 4.1.6(e),

“Assignment of Leases” shall mean that certain first priority Assign-

ment of Leases and Rents, dated as of the date hereof, from Borrower, as

assignor, to Lender, as assignee, as the same may be amended, restated,

replaced, supplemented, or otherwise modified from time to time.

“Assignment of Management Agreement” shall mean that certain

Assignment of Management Agreement and Subordination of Manage-

ment Fees dated the date hereof among Borrower, Manager, and Lender, as

the same may be amended, restated, replaced, supplemented, or otherwise

modified from time to time.

“Award” shall mean any compensation paid by any Governmental

Authority in connection with a Condemnation in respect of all or any part

of the Property.

“Bankruptcy Code” shall mean Title 11 of the United States Code enti-

tled “Bankruptcy,” as amended from time to time, and any successor stat-

ute or statutes and all rules and regulations from time to time promulgated

thereunder, and any comparable foreign laws relating to bankruptcy, insol-

vency, or creditors’ rights.

“Basic Carrying Costs” shall mean the sum of the following costs asso-

ciated with the Property for the relevant Fiscal Year or payment period:

(i) Taxes and (ii) Insurance Premiums.

“Borrower” shall have the meaning set forth in the preamble to

this Agreement.

“Business Day” shall mean any day other than a Saturday, a Sun-

day, or a legal holiday on which national banks are not open for general

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Appendices 449

business in (i) the State of New York or (ii) the state where the servicing

offices of the Servicer are located.

“Capital Expenditures” for any period shall mean amounts expended

for replacements and alterations to the Property and required to be capital-

ized according to GAAP.

“Capital Expenditure Funds” shall have the meaning set forth in Sec-

tion 6.4.1.

“Capital Expenditures Work” shall mean any labor performed or

materials installed in connection with any Capital Expenditure.

“Casualty” shall mean the occurrence of any casualty, damage, or

injury, by fire or otherwise, to the Property or any part thereof.

“Casualty Consultant” shall have the meaning set forth in Section

5.3.2(c).

“Casualty Retainage” shall have the meaning set forth in Section

5.3.2(d).

“Closing Date” shall mean the date of funding the Loan.

“Code” shall mean the Internal Revenue Code of 1986, as amended,

and as it may be further amended from time to time, any successor statutes

thereto, and applicable U.S. Department of Treasury regulations issued

pursuant thereto in temporary or final form.

“Condemnation” shall mean a temporary or permanent taking by any

Governmental Authority as the result or in lieu or in anticipation of the

exercise of the right of condemnation or eminent domain, of all or any part

of the Property, or any interest therein or right accruing thereto, including

any right of access thereto or any change of grade affecting the Property or

any part thereof.

“Debt” shall mean the outstanding principal amount of the Loan

together with all interest accrued and unpaid thereon and all other sums

(including the Prepayment Premium) due to Lender in respect of the Loan

under the Note, this Agreement, the Mortgage, the Environmental Indem-

nity, or any other Loan Document.

“Debt Service” shall mean, with respect to any particular period of

time, scheduled principal and interest payments under the Note.

“Debt Service Coverage Ratio” shall mean the ratio of (i) Underwrit-

able Cash Flow for the twelve (12) calendar month period immediately

preceding the date of calculation to (ii) the projected Debt Service that

would be due for the twelve (12) calendar month period immediately

following such calculation based upon an assumed interest rate for such

period equal to ____ percent (____%) per annum.

“Default” shall mean the occurrence of any event hereunder or under

any other Loan Document that, but for the giving of notice or passage of

time, or both, would be an Event of Default.

“Default Prepayment Premium” shall have the meaning set forth in

Section 2.3.3.

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