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Transaction Summary
$4,500,000 first mortgage bridge loan
40-room condominium hotel with 5 street-level commercial condominiums. Lender held a security interest in 16 hotel rooms and 4 commercial units
The Borrower was an experienced Miami developer
The Purpose of the loan was to facilitate the renovation and disposition of the remaining condominium units
Workout was completed post maturity, at which time the full principal balance was repaid along with accrued interest and fees.
Investment Highlights
Location – Premier location along famed Ocean Drive, across from South Beach Park, with panoramic ocean views
Market – Strong hospitality market, as evidenced by consistently high occupancy and ADR growth figures, as well as a vibrant condominium market for both residential and commercial assets
Workout Trigger – Borrower triggered a default in February 2000, upon selling units at prices below stipulated release prices as set forth in the loan documents
Workout History
The Property’s performance indicated that cash flow was insufficient to cover debt service payments. At this time interest reserves were depleted, cost overruns in the commercial space and common areas had occurred, and mechanics liens were accumulating. Complicating matters, the borrowing entity was a foreign national
A market analysis proved to support original sales estimates and the underlying value of the Property was determined to be in excess of the loan balance
An in-depth financial analysis revealed the Borrower had been retaining condominium deposits and applying the funds to cover cost overruns instead of placing the funds in escrow. As a result, deposits were netted against the sales price, which caused the net sales prices to fall below release prices
A workout strategy was formulated that compelled the Borrower to infuse additional capital to fund operating deficits and satisfy the liens
Asset Management worked with the Borrower to secure alternate financing in an amount sufficient to retire Lender’s full principal balance plus accrued interest and fees
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