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Exhibit B -- Specifics of the Loan
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California Residents Only Loan Number: N1958 |
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PROPERTY Project: SOHO LOFTS Property
address: 900 S. Las Vegas Blvd. #140, Las Vegas, NV EQUITY ANALYSIS
OPERATING STATEMENT
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TERMS
BORROWERS
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SOHO LOFTS George says, "I've been nagging you guys for the last two months to lower your yield demands from 11% to 7%. I've said repeatedly that I personally would not invest in any first trust deed yielding more than 9%. And that's still probably true ... but this 13% deal would sorely-sorely tempt me. You've got new property, beautiful property, the ability to repay (just one of the leases covers our payments), a borrower with excellent credit, and a scheduled yield (if the borrower pays, of course) of 13%. This looks like a very, very reasonable deal." We are pleased to offer this first deed of trust investment, secured by a commercial condominium in Las Vegas, Nevada. Arguably, this is one of the nicest properties we have ever financed - a newer property in walking distance to the Las Vegas Strip and Downtown Las Vegas, to a very strong borrower. Las Vegas is at the southern tip of Nevada and is the most populated city in the state at 550,000 (2008). It has grown by over 16% this decade. World famous South Las Vegas Boulevard is the highlight of the city. Known as “The Strip”, this seven mile stretch of road is littered with world famous hotel/casinos, such as Caesars Palace, The Bellagio and the MGM Grand, along with an endless supply of restaurants and retail outlets. At the northern end of the boulevard is historical Downtown Las Vegas, where the city first took root. The Downtown area, while not quite as large, is also packed with historical hotels, casinos and the famous Fremont Street Experience, an 80 ft. tall light display that spans the length of four city blocks. In recent years the Downtown area has been undergoing several major projects such as high-rise condominiums, retail and restaurant outlets. This first-floor retail condominium is part of a 120 unit, 16-story SOHO Lofts condominium tower, built in 2006. It rests on South Las Vegas Boulevard in the Central Business District between Downtown Las Vegas and the “The Strip”. The high-rise is primarily residential condos and penthouses with a five-story indoor parking garage and retail condos on the lower floors. The building is modeled after similar high-rise condominiums found in New York’s SOHO art district. The subject condominium consists of two contiguous retail units totaling 5,216SF located on the first floor of the building. Customers have access through the main lobby, outside the condo entrance, as well as outside to the street. One of the two units is occupied by a 1,050SF hair salon; the remaining unit is empty and ready for build out. With built-in patrons living upstairs and the close proximity to major tourist locations and local businesses, this is looked at as a good location. A single-asset corporation holds title to this commercial condominium unit; it is owned by a semi-retired commercial developer from Chicago, IL. He and his son-in-law were the original developers of this high-rise condo project and he will be personally guaranteeing the loan. Our guarantor owns one of the eight penthouse suites and four first-floor retail condos. He boasts a net worth of over $13 million with a credit mid-score of 733. His 2007 and 2008 income tax returns have an adjusted gross income of $1,087,375 and -$103,103. Our loan proceeds will be used to build out an 1,800SF high-end bar adjacent to the hair salon. Primary management of the bar will be handled by the son-in-law. We will advance $200,000 for hard construction costs, to be disbursed after inspection and verification of the completed work by an independent nationally-known construction inspection/management firm. The condo is currently owned free & clear. Our loan funds will additionally provide another $144,000 for bar equipment, high-end furniture and slot machines. The bar will have both street access and to the lobby. The current tenant lease is enough to cover our monthly payment. When completed, the condominium will be divided into three components: the 1,050 SF hair salon (the current tenant lease is enough to cover our monthly payment.), the 1,800SF bar and a 2,366SF partially-finished section (separated by a demising wall). The owners hope to attract a restaurant tenant for this section, which is currently in a “gray shell” condition - awaiting floor finishings, wall treatments and a dropped ceiling, in addition to customized plumbing & electrical, for the tenant’s specific use. The tenant would be responsible for their tenant improvements, probably with an owner’s allowance. We engaged a Nevada appraiser to provide his opinion of value; which he deduced to be $1,200,000 “As-Is” and $1,425,000 “As-Complete”. We were also given an appraisal dated May 5, 2009 with $1,195,000 “As-Is” and $2,055,000 “As-Complete” values. To be conservative and for disclosure purposes, we used the newer values. At a 27.7% LTV and an 13.0% yield, this looks like a reasonable investment. Every first mortgage investment involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular before investing. A substantial and prolonged decline in real estate values is possible.
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