{"id":1004096062,"date":"2014-05-07T11:54:02","date_gmt":"2014-05-07T19:54:02","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004096062"},"modified":"2022-12-08T20:26:31","modified_gmt":"2022-12-09T04:26:31","slug":"reducing-costs-headaches-at-term-sheet-stage","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/reducing-costs-headaches-at-term-sheet-stage\/","title":{"rendered":"Reducing Costs (&amp; Headaches) at Term-Sheet Stage"},"content":{"rendered":"<p><em>By Michael Scheinberg, Partner,\u00a0Pircher, Nichols &amp; Meeks<\/em><\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/05\/Scheinberg-Headshot-2014.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004096066\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/reducing-costs-headaches-at-term-sheet-stage\/scheinberg-headshot-2014\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/05\/Scheinberg-Headshot-2014.jpg\" data-orig-size=\"256,235\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;4&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;NIKON D700&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;1372242374&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;85&quot;,&quot;iso&quot;:&quot;100&quot;,&quot;shutter_speed&quot;:&quot;0.016666666666667&quot;,&quot;title&quot;:&quot;&quot;}\" data-image-title=\"Scheinberg Headshot 2014\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/05\/Scheinberg-Headshot-2014.jpg?w=256\" class=\"alignleft size-thumbnail wp-image-1004096066\" alt=\"Scheinberg Headshot 2014\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/05\/Scheinberg-Headshot-2014.jpg\" width=\"150\" height=\"150\" \/><\/a>\u00a0With the increasing size of funds, expansion of activity by REITs and family offices and inflow of foreign capital, portfolio transactions are occurring with greater frequency.\u00a0 Addressing issues unique to portfolio loans in the term sheet can reduce surprises and make loan document negotiations more efficient and closing easier. Set forth herein are some silent issues that may be considered at the term-sheet stage, and some thoughts on addressing such issues.<\/p>\n<p><span style=\"text-decoration: underline\">Dove-tailing with PSA Transaction<\/span>:\u00a0 The term sheet should account for kick-out rights or conditions to inclusion of properties under the portfolio purchase agreement.\u00a0 Borrowers beware: differences between purchase-price allocations and loan allocations could limit loan proceeds and decrease leverage.<\/p>\n<p><span style=\"text-decoration: underline\">Property Pools<\/span>:\u00a0 Borrowers may try, in the term sheet, to divide portfolios into different \u201cpools,\u201d thereby limiting cross defaults for some property-specific defaults to properties only within a specific pool.<\/p>\n<p><span style=\"text-decoration: underline\">Concentration Limitations on Release<\/span>:\u00a0 A \u201crelease price\u201d for sale or refinancing is typically some multiple (e.g., 115 percent) of allocated loan amount.\u00a0 Lenders may also impose \u201cconcentration\u201d limitations, such as limiting the percentage of NOI, geography or affiliated tenants represented by one remaining property (or a specific group of properties) in relation to all remaining properties.\u00a0 The term sheet should address these limitations to be consistent with borrower\u2019s business plan and disposition strategy.<\/p>\n<p><span style=\"text-decoration: underline\">Relationship Lenders<\/span>:\u00a0 Syndication among lenders is common for portfolio loans.\u00a0 If a borrower chooses a relationship lender, it may want assurance in the term sheet that such lender will be the \u201clead\u201d and try to limit which lender decisions will require approval of all (or some percentage) of participating lenders.<\/p>\n<p><span style=\"text-decoration: underline\">Post-Closing Estoppel and SNDA Delivery<\/span>:\u00a0 If it is impractical to obtain Estoppels or SNDAs from all required tenants prior to closing of the loan, the term sheet may establish a lower threshold and obligate borrower to use commercially reasonable efforts to obtain estoppels or SNDAs from key tenants post-closing.<\/p>\n<p><span style=\"text-decoration: underline\">Organization and Loan Document Structure<\/span>:\u00a0 Use of an SPE for each property can insulate against risks from other properties.\u00a0 Alternatively, a single entity can be administratively efficient and limit transaction costs.\u00a0 With multiple SPE owners, some lenders require all owners to sign a single note as co-borrowers; others will have a parent holding company as borrower and the property owners giving mortgages, effectively as sureties.\u00a0 Additionally, for a multi-state portfolio loans, lenders may have special structuring requirements to address so called \u201cone-action\u201d foreclosure protections.\u00a0 Addressing structure in the term sheet will lead to more efficient execution.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Michael Scheinberg, Partner, Pircher, Nichols &amp; Meeks: Addressing issues unique to portfolio loans in the term sheet can reduce surprises and make loan document negotiations more efficient and closing easier. Read on.<\/p>\n","protected":false},"author":1619,"featured_media":1004096066,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004096062","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v24.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Reducing Costs (&amp; Headaches) at Term-Sheet Stage - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/reducing-costs-headaches-at-term-sheet-stage\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Reducing Costs (&amp; Headaches) at Term-Sheet Stage\" \/>\n<meta property=\"og:description\" content=\"By Michael Scheinberg, Partner, Pircher, Nichols &amp; Meeks: Addressing issues unique to portfolio loans in the term sheet can reduce surprises and make loan document negotiations more efficient and closing easier. 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