HW Quiz 9 Flashcards
(15 cards)
Which are examples of negative covenants? (select all that apply)
-you must maintain a certain number of deposits
-prepayment penalty
-a restriction of the amount of dividends you can pay
-you must have a certain percentage of your property leased to credit tenants
-a lender can review leases prior to the landlord executing leases
-prepayment penalty
-a restriction of the amount of dividends you can pay
-you must have a certain percentage of your property leased to credit tenants
Lenders sometimes require that the borrowers ____ certain events such as construction completion or leasing to a specific level of occupancy. For example, lenders often require that the developers ____ the receipt of a certificate of occupancy for their property. Once this certificate is received, the newly constructed property can legally move tenants into the building, and the borrower is relieved from
____ to their personal assets.
guarantee, guarantee, recourse
True or False: If the loan is solely secured by the property’s assets, it is referred to as a recourse loan. This means the lender only has recourse to the property’s assets and cannot seize any of the borrower’s personal assets to recoup losses.
False
The primary cost of refinancing a commercial property is
Prepayment penalties
For construction loans, as the borrower you must generally present the lender with supporting documentation on the use of loan proceeds. Any money you ask for in a ____ must have a legitimate and fully documented purpose for the requested loan funding to be considered or approved. Examples are copies of ____ or a ____ packet from the general contractor. For acquisition loans that also allow for delayed draws for capital costs relating to the occupancy of new tenants, the borrower will need to provide as proof the ____, which includes the interior space fit-out specifications ____ and the signed ____ agreement.
draw request, permit, pay requisition, signed lease, work letter, broker leasing commission
The five key loan sizing ratios that lenders consider are:
- debt yield
- loan-to-value
- interest coverage ratio
- fixed charges ratio
- debt service coverage ratio
True or False: Most first mortgages in commercial real estate lending are full- or partial-recourse loans.
False
From the borrower’s perspective, what are the risks of locking in a long-term fixed rate mortgage? (Select all that apply)
-rates increasing
-overpaying for the loan if interest rates fall during your loan term
-the loan coming due during a down market
-expensive prepayment penalties
-none of these
-overpaying for the loan if interest rates fall during your loan term
-expensive prepayment penalties
Any money that comes into the property must generally be paid to the lender until contractual loan obligations are satisfied. Such loan provision is commonly called as:
the sweep provision
Which are examples of positive covenants? (select all that apply)
-a lender can review leases prior to the landlord executing leases
-you must have a certain percentage of your property leased to credit tenants
-you must maintain a certain number of deposits
-prepayment penalty
-a restriction on the amount of dividends you can pay
-a lender can review leases prior to the landlord executing leases
-you must maintain a certain number of deposits
Debt yield ratio
Property NOI/Loan amount
Loan to value ratio
Loan amount/Property value
Interest coverage ratio
EBIT(NOI-depreciation-amortization)/Interest payment for that period
Debt service coverage ratio
NOI/Debt service (annual payment)
Fixed charges ratio
(EBIT + fixed costs)/(Fixed costs + interest)
