EXHIBIT 10.17.3
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COMMITMENT LETTER
April 26, 2005
This commitment letter (the "COMMITMENT LETTER") is intended to set forth the
results of discussions between Xxxxxxx Xxxxx Mortgage Lending, Inc. ("MLML"),
and Ashford Hospitality Trust, Inc., and Ashford Hospitality Limited Partnership
(collectively, "SPONSOR"), relating to the financing of the Properties (as
defined herein), as more particularly set forth below. We are pleased to inform
you that MLML (including all required credit committees) has approved the Loans
(as defined below) to Borrower (as defined below) up to a maximum principal
amount of $370,000,000.00, subject to the terms and conditions that follow. The
following sets forth the terms and conditions upon which Xxxxxx will make the
Loans:
LOAN AMOUNT: Up to $370,000,000. The Loan Amount will be
divided into between 4 and 8 Loans, each of
which shall be secured by a pool of between 4
and 9 Properties.
LENDER: MLML, or an affiliate ("XXXXXXX XXXXX"), its
successors, transferees and assigns ("LENDER").
BORROWER: Each Borrower shall be a single purpose,
bankruptcy remote entity organized under United
States law acceptable to Xxxxxxx Xxxxx and
meeting rating agency criteria (collectively,
"BORROWER"), controlled directly or indirectly
by Sponsor.
PROPERTIES: 30 hotels located in various cities and states,
as set forth on Exhibit A (collectively, the
"PROPERTIES").
LOAN TERM: 10 years.
INTEREST RATE: Interest on the Loans shall be calculated by
adding 58 basis points (the "SPREAD") to the sum
of the 10-year mid-market Swap Spread appearing
on Telerate Screen 19901 and the bid side yield
of the on-the-run 10-year Treasury bond at the
time Borrower locks the coupon with Xxxxxxx
Xxxxx in accordance with the Rate Lock section
below. Notwithstanding the foregoing, if
Borrower elects to finance any one or more of
the Held For Sale Properties (as defined on
Exhibit A) individually (i.e., on a non-pooled
basis) as permitted under the fourth sentence of
the section entitled "Security" below, the
Spread on each such individual non-crossed Loan
shall be 74 basis points.
Interest will be calculated on an actual/360
basis. The Interest Rate shall be subject to
change, based on variations in, among other
things, treasury rates, swap rates, swap
spreads, and spreads in the generic CMBS fixed
rate markets, until the earlier to occur of (i)
the date on which the Borrower locks the coupon
with Xxxxxxx Xxxxx in accordance with the "Rate
Lock" section below and (ii) the funding of the
Loan.
RATE LOCK: Lender will lock the Interest Rate on the Loans
upon receipt by Xxxxxx of a good faith deposit
equal to 2% of the Loan Amount and the execution
by Sponsor of Xxxxxx's standard rate lock
agreement. Upon receipt of such good faith
deposit and rate lock agreement, Lender will
hedge the Loan. Sponsor shall be responsible for
all hedge carrying costs, except for the first
ten (10) days of hedge carrying costs (i.e.,
Borrower shall be entitled to a 10-day free rate
lock). The good faith deposit, less the cost of
the hedge, shall be refunded to the Borrower at
closing.
AMORTIZATION: 5 years interest only, 25 year amortization
schedule thereafter, except for Loans secured by
individual non-crossed Held For Sale Properties
(as defined on Exhibit A) which shall amortize
over a 25-year amortization schedule without any
interest only period.
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ANTICIPATED
CLOSING DATE: Borrower and Lender shall use commercially
reasonable efforts to close the Loans on or
about June 17, 2005.
FEES AND EXPENSES: Borrower will be required to pay no origination
fee.
Xxxxxxx Xxxxx will be entitled to: (i) the
Initial Deposit (as defined below), which Lender
acknowledges it has received, (ii) a Loan
Underwriting Fee of $25,000, which Lender
acknowledges it has received, (iii) a Commitment
Deposit of $300,000, payable upon execution of
this Commitment Letter, and (iv) reimbursement
of its out-of-pocket expenses, including
reasonable fees and expenses of counsel,
incurred in connection with this transaction
whether or not it actually closes (the "LENDER
EXPENSES").
Borrower will be directly responsible for
payment of any additional fees incurred by
Borrower in connection with the origination of
the Loan (e.g., Xxxxxxxx's counsel, brokers
fees, title, survey, etc.).
"INITIAL DEPOSIT" shall be equal to $450,000.
The Initial Deposit and the Commitment Deposit,
less any Lender Expenses, shall be returned to
the Borrower upon closing or if the closing of
the Loan fails to occur for reasons beyond
Borrower's control.
INITIAL UNDERWRITABLE
CASH FLOW/MINIMUM
DSCR: At closing, the Properties shall provide an
Initial Underwritable Cash Flow (the "INITIAL
UCF"), as determined by Lender and using
applicable rating agency criteria, of at least
$36.7 million (assuming a Loan Amount of
$370,000,000) and each Loan shall have a minimum
DSCR of 1.35x. In addition, prior to closing
Borrower shall demonstrate a Loan-to-cost ratio
acceptable to Lender of not more than 75% and a
Loan-to-purchase price ratio of not more than
79.6%. Xxxxxx confirms, based on information
provided to date, Initial UCF of at least $36.7
million.
"DSCR" shall be defined as the ratio of (i) Net
Cash Flow (defined below) divided by (ii) annual
debt service due on the Loan assuming a 25-year
amortization period.
"NET CASH FLOW" shall be defined as the trailing
12-month net operating income from the
Properties ("NOI") less (i) management fees
equal to the greater of 3% of gross revenues per
annum and the actual management fees payable
under the applicable management agreements, (ii)
FF&E reserves equal to greater of 4% of gross
revenues per annum and the amount required to be
reserved under the applicable management
agreements, and (iii) actual franchise fees. The
calculation of NOI and Net Cash Flow shall be
determined by Lender in its reasonable
discretion.
SECURITY: Each of the Loans shall be secured by a pool of
between four and nine Properties, as more
particularly set forth on Exhibit A attached
hereto, it being understood that Lender may
require a reallocation of Properties and/or
principal balances among the Loans and/or a
bifurcation of certain Loans prior to
Securitization and prior to any assumption of a
Loan. The Loans will not be cross-collateralized
with each other after Securitization or after
the sale of a pool of Properties subject to a
Loan, but Lender may require the Loans to be
cross-collateralized prior to Securitization and
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prior to any assumption of a Loan. The
collateral pools have been selected by mutual
agreement of Sponsor and Lender, based upon
diversification of geography, flag and
performance. In addition, Borrower may elect,
prior to closing, to finance any one or more of
the Properties identified on Exhibit A as Held
For Sale Properties, except for the two
TownePlace Suites located in Miami and Miami
Lakes, Florida, individually (i.e., on a
non-pooled basis, with only one Property
securing each Loan), provided that at the time
of closing each such non-crossed Loan shall have
a minimum DSCR of 1.45x (except for Loans
secured by the Residence Inn Xxx Arbor,
Residence Inn Tyler and Residence Inn Silicon
Valley, which shall have a minimum DSCR of
1.40x) and a maximum Loan-to-value ratio of 70%,
subject to Lender approval of the composition of
the remaining Loan pools.
Security for each Loan will include, but not be
limited to, the following:
1. Perfected first (and second if
requested) priority mortgage liens on
the Properties;
2. A pledge of 100% of the equity ownership
interest in the owner(s) of the
Properties (only if required by Lender
in connection with the creation of a
mezzanine loan at the time of a
Securitization);
3. A perfected first and second priority
security interest in any reserve
accounts, including the tax insurance
escrow account, FF&E Account and Cash
Management Account;
4. Assignment of all leases and rents.
NONCONSOLIDATION
OPINION: A Nonconsolidation Opinion acceptable to Lender
from an independent counsel reasonably
acceptable to Lender will be required.
MANAGEMENT: Management of each Property shall be conducted
pursuant to a management agreement with Marriott
Hotel Services, Inc., or other affiliate of
Marriott International, Inc. ("MANAGER").
Manager shall enter into a subordination,
non-disturbance and attornment agreement
acceptable to Lender and shall deliver to Lender
an estoppel certificate satisfactory to Lender,
provided however that Loan defaults shall not
give rise to any right to terminate Manager.
Manager may only be terminated if it commits a
default under the hotel management agreement for
which termination is a remedy and that default
remains uncured beyond any applicable cure
period.
CASH MANAGEMENT ACCOUNT: Borrower, Manager and all applicable credit card
companies shall be required to deposit all
revenues from the Property directly into a
Manager-controlled account (the "MANAGER
ACCOUNT"). Manager shall administer the Manager
Account and deposit all amounts due to Borrower
under the Management Agreement directly into a
Lender-controlled account (the "CASH MANAGEMENT
ACCOUNT"). Prior to an Event of Default, all
amounts remaining after application of the debt
service payment and all other amounts required
to be paid to or deposited with the Lender under
the Loan documents shall be swept to an account
specified by Borrower. Xxxxxx will receive a
first priority pledge of the Cash Management
Account as additional security for the Loan.
PREPAYMENT: The Loans will be locked out from prepayment,
except during the 60 days prior to maturity,
when the Loans may be prepaid in full without
penalty. Notwithstanding the foregoing, after
the second anniversary of Securitization (as
defined below) of each Loan (the "DEFEASANCE
LOCKOUT PERIOD"), Borrower may defease the Loan
in whole; prior to the Defeasance Lockout Period
Borrower may prepay each Loan in
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whole subject to payment of a prepayment premium
equal to the greater of yield maintenance or 1%.
PARTIAL DEFEASANCE: After the Defeasance Lockout Period, each Loan
may be defeased in part and any one or more of
the underlying Properties may be released and
replaced with U.S. treasury securities in the
amount of 125% of the aggregate allocated loan
amounts of the Property(ies) to be released
(which allocated loan amounts shall be agreed
upon by Sponsor and Xxxxxxx Xxxxx prior to
closing), provided that Borrower complies with
standard defeasance provisions for loans of this
type, including the requirement that after such
partial defeasance the DSCR on the applicable
Loan is equal to or greater than the DSCR at the
time of closing and immediately prior to such
partial defeasance ("STANDARD DEFEASANCE
PROVISIONS"). Nothwithstanding the foregoing,
with respect to all Loans other than those
secured by pools of Held For Sale Properties,
after the Defeasance Lockout Period Borrower may
obtain the release up to 25% of the Properties
(by allocated loan amount) and replace them with
U.S. treasury securities in the amount of 100%
of the aggregate allocated loan amounts of the
Property(ies) to be released, provided that
Borrower complies with Standard Defeasance
Provisions.
PROPERTY SUBSTITUTIONS: Borrower shall be permitted to substitute up to
50% of the Properties (by allocated loan amount)
securing each Loan provided that, among other
things, (1) no event of default exists, (2) the
market value and net operating income of each
substitute Property are equal to or greater than
that of the replaced Property, (3) after the
substitution the DSCR on the applicable Loan is
equal to or greater than the DSCR at the time of
closing and immediately prior to such
substitution, (4) Borrower delivers an
acceptable REMIC opinion, and (5) Borrower
obtains Lender consent not to be unreasonably
withheld or delayed prior to a Securitization
and a rating agency confirmation letter after a
Securitization.
PERMITTED TRANSFERS: The Properties securing a Loan, and/or direct or
indirect equity interests in the applicable
Borrower, may be transferred without payment of
an assumption fee , provided that, among other
things, (1) a new non-consolidation opinion is
delivered to Lender, and such non-consolidation
is in substantially the same form and has
substantially the same substance as the
non-consolidation opinion delivered at closing,
(2) all entities required to be single-purpose
entities at closing remain single-purposes
entities under criteria established by the
rating agencies, (3) borrower provides 30 days
advance written notice to Lender of such
transfer, (4) Borrower obtains Lender consent
not to be unreasonably withheld or delayed prior
to a Securitization and a rating agency
confirmation letter after a Securitization, and
(5) no event of default exists.
BORROWER REQUESTS: In the instance a Borrower intends to effectuate
a transaction that is not permitted under the
Loan documents, Borrower shall be required to
pay a maximum fee of $10,000 plus any reasonable
out-of-pocket expenses to Lender or any loan
servicer in connection with obtaining the
consent of Lender or such servicer.
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REPLACEMENT RESERVE: An initial amount will be deposited into a
reserve account equal to 125% of any deferred
maintenance or environmental remediation costs
as determined by new third party studies,
provided that all amounts so deposited will be
returned to Borrower upon completion of the
required deferred maintenance work and/or
environmental remediation. A replacement reserve
equal to the greater of 4% of gross revenues per
annum and the amount required to be reserved
under the applicable management agreements (the
"REPLACEMENT RESERVE ACCOUNT") will be
established and funded monthly from excess cash
flow. The Replacement Reserve will be available
to Borrower for reimbursement of FF&E and
capital expenditures incurred. In addition to
the Replacement Reserve, Ashford Hospitality
Limited Partnership shall provide a payment and
completion guaranty, in form and substance
acceptable to Lender, in the amount of
$26,000,000, for items identified in certain
property improvement plans and additional
upfront capital expenditures to be mutually
agreed upon by Xxxxxxxx and Lender.
TAXES AND INSURANCE ESCROW: Borrower will be required to reserve, on a
monthly basis, an amount equal to one-twelfth of
(i) all annual tax bills and (ii) the annual
insurance premium(s) for the Properties.
RECOURSE CARVEOUTS: Borrower will execute Xxxxxx's standard
non-recourse carveout guaranty consistent with
the prior $210 million Xxxxxxx Xxxxx financing
with affiliates of Sponsor (the "PRIOR
FINANCING").
LOAN RECOURSE: Consistent with the Prior Financing, Xxxxxx's
recourse in the event of a default will be
limited to Xxxxxx's security interest in the
Properties and to Borrower's interest therein;
provided, however, that Borrower shall be
personally liable for all standard carveouts,
including without limitation, damages arising
from (i) any fraud or willful misrepresentation,
(ii) intentional misapplication or
misappropriation of insurance proceeds,
condemnation proceeds, tenant security deposits,
rents and any other funds due Lender under the
Loan documents, (iii) damage to any Property
resulting from intentional acts, (iv) if
sufficient cash flow exists, failure to pay
taxes or other Property related liens. In
addition, the Loan will become fully recourse to
Borrower if (a) Borrower or any related entity
interferes with Xxxxxx's pursuit of any remedy
provided under any of the Loan documents, (b)
any or all of the Properties become an asset in
a voluntary bankruptcy or insolvency proceeding,
(c) all or any part of any Property (including
the removal of any equipment) or ownership
interest in all or any part of any Property or
Borrower is transferred in violation of the Loan
documents or (d) violation of the single-purpose
bankruptcy remote status of Borrower.
In addition, Xxxxxxxx will execute a hazardous
waste indemnity.
INSURANCE: Borrower will be required to maintain "all-risk"
perils insurance (including terrorism coverage),
business interruption and liability insurance
including flood, windstorm and earthquake
insurance if a Property is located in a flood,
hurricane or earthquake zone, as applicable,
acceptable to Lender.
THIRD PARTY
REPORTS: Xxxxxx acknowledges that it has received
satisfactory MAI appraisals (in accordance with
FIRREA standards) demonstrating a loan-to-value
ratio of 75% with respect to each of the Loan
pools set forth on Exhibit A, and environmental
and engineering reports, or acceptable updates
to existing reportsfor the Properties.
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ADDITIONAL
ENCUMBRANCES: Borrower will not be permitted to further
encumber the Properties while the Loan is
outstanding, except as approved by Xxxxxx as set
forth in the definition of "Permitted
Encumbrances" as set forth in the Loan
documentation executed in connection with the
Prior Financing.
NO ADDITIONAL
INDEBTEDNESS: Borrower may not incur any indebtedness other
than the Loan during the term thereof and the
owner of Borrower may not pledge any direct or
indirect interest in Borrower to secure any
financing during the term of the Loan.
Nothwithstanding the foregoing, provided that
the DSCR on a Loan is greater than 1.5x and the
Loan-to-value ratio on such Loan based on new
appraisals is not more than 70%, then the owner
of the applicable Borrower may incur mezzanine
indebtedness such that the ratio of total
indebtedness (i.e., Loan plus mezzanine loan)
does not exceed 75% and the all-in DSCR does not
exceed 1.35x; provided further that in
connection with the sale of any Property or
Properties where the purchaser assumes the
applicable Loan in accordance with the
"Permitted Transfers" section above, the
applicable Borrower or Sponsor may provide
mezzanine financing to the purchaser in an
amount which, when taken together with any other
financing obtained by such purchaser, does not
exceed 90% of the sale price, subject to receipt
of Lender consent prior to a Securitization and
a rating agency confirmation letter after a
Securitization.
OTHER COVENANTS: The Loan documents will include standard
covenants for secured loans of this type, as
Lender may require, including, without
limitation, financial reporting covenants,
covenants regarding insurance, due on sale and
due on encumbrance covenants, covenants
prohibiting changes to the governing documents
of Borrower, budget approval covenants (subject
to the limitations of the applicable management
agreements), covenants prohibiting amendments to
the Property management agreement without
Lender's consent and covenants regarding the
bankruptcy remote special purpose status of
Borrower.
COOPERATION: Lender intends to sell all or a portion of the
Loans by certificates, participations,
securities or pari passu notes evidencing whole
or component interests therein, through one or
more public or private offerings (each a
"SECURITIZATION"). Borrower and Sponsor shall
cooperate with Lender and its affiliates in
connection with any such transaction, including,
without limitation:
1. Separating the Loan into two or more
separate notes and/or participation
interests including, but not limited to,
separate senior and junior or mezzanine
notes, participations or components.
Such notes or components may be assigned
different interests rates, so long as
the initial weighted average of such
rates equals the Interest Rate as of the
closing of the Loan.
2. Entering into any amendments or
modifications to the Loan documents
(including to re-allocate the principal
amounts among one or more of the Loans
or to re-arrange the pools serving as
collateral for the Loans) which may be
requested by Lender or any rating agency
provided same do not modify: (i) the
Interest Rate; (ii) the stated maturity
date of the Loan; (iii) the amortization
of the principal amount, if any; (iv)
any other material economic terms of the
Loan; and (v) any other provision, the
effect of which would increase
Borrower's obligations or decrease
Borrower's rights under the Loan
documents.
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3. Borrower will provide such legal
opinions, cooperate in good faith with
Lender in effecting securitization of a
portion of or the entire Loan and
provide other information necessary for
Lender to make the offered certificates
saleable in the secondary market and to
obtain ratings from two or more rating
agencies selected by Lender.
CONDITIONS PRECEDENT: Funding of the Loan is subject to: (i)
satisfactory completion of due diligence on the
Properties, Borrower and Sponsor, provided
however that Lender acknowledges and agrees that
it has reviewed and approved the engineering and
environmental reports and the appraisals as set
forth above, (ii) no material adverse change in
the fair market value of the Properties or the
financial condition of Borrower and Sponsor
prior to closing, (iii) completion and execution
of acceptable Loan documentation consistent with
the terms hereof and materially consistent, to
the extent applicable, with the Prior Financing,
and (iv) the absence of any material disruption
or material adverse change in current financial,
banking or capital market conditions that, in
the sole reasonable judgment of Lender could
materially impair the satisfactory syndication
of the Loan. Xxxxxx has received final approval
by Xxxxxx's loan committee. This Commitment
Letter shall be kept confidential, shall not be
reproduced or disclosed, and shall not be used
by you other than in connection with the
transaction described herein.
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XXXXXXX XXXXX MORTGAGE LENDING, INC.
BY: /S/ XXXXXX XXXXXX
----------------------------------
NAME: XXXXXX XXXXXX
---------------------------------
TITLE:
--------------------------------
ACCEPTED AND AGREED TO AS OF THIS
26TH DAY OF APRIL, 2005:
ASHFORD HOSPITALITY TRUST, INC.
BY: /S/XXXXX X. XXXXXX
-------------------------------------------
NAME: XXXXX X. XXXXXX
-----------------------------------------
TITLE: CHIEF LEGAL OFFICER
----------------------------------------
ASHFORD HOSPITALITY LIMITED PARTNERSHIP
BY: ASHFORD OP GENERAL PARTNER LLC
BY: /S/XXXXX X. XXXXXX
-------------------------------------------
NAME: XXXXX X. XXXXXX
-----------------------------------------
TITLE: CHIEF LEGAL OFFICER
----------------------------------------
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EXHIBIT A - THE PROPERTIES
# OF
PROPERTY NAME STATE ROOMS
------------- ----- -----
POOL 1
Residence Inn Orlando Sea World FL 350
Residence Inn Cottonwood UT 144
Courtyard Palm Desert CA 151
Residence Inn Palm Desert CA 130
Spring Hill Suites University Research Park NC 136
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Subtotal 911
POOL 2
Residence Inn Fairfax VA 159
Residence Inn Sorrento Mesa CA 000
Xxxxxxxxx Xxxxxx Xxxxxxxx XX 156
SpringHill Suites Durham Airport NC 120
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Subtotal 585
POOL 3
Courtyard Xxxxxx Airport VA 000
Xxxxxxxxx Xx. Lauderdale FL 174
Courtyard Overland Park KS 000
Xxxxxxxxx Xxxxxxxxxx XX 154
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Subtotal 768
POOL 4
Residence Inn Fishkill* NY 139
Residence Inn Orlando* FL 176
Residence Inn River Plaza* TX 120
Residence Inn Tyler* TX 128
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Subtotal 563
POOL 5
Residence Inn Sacramento* CA 176
Residence Inn Wilmington* DE 120
Residence Inn Providence* RI 96
Residence Inn Xxx Arbor* MI 114
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Subtotal 506
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POOL 6
SpringHill Suites Gaithersburg MD 162
SpringHill Suites Centreville VA 136
TownePlace Suites Miami Airport* FL 95
TownePlace Suites Miami Lakes* FL 95
TownePlace Suites Mt. Laurel* NJ 95
TownePlace Suites Ft. Worth* TX 95
TownePlace Suites Silicon Valley* CA 127
TownePlace Suites Portland* ME 95
TownePlace Suites Boston* MA 95
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Subtotal 995
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PORTFOLIO TOTAL 4,328
* PROPERTIES MARKED WITH AN ASTERISK SHALL BE DEEMED "HELD FOR SALE PROPERTIES."
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