EXHIBIT 10.22
(JPMORGAN LOGO)
(UBS INVESTMENT BANK LOGO)
December 22, 2004
Commitment Letter
Education Realty Operating Partnership, LP
000 Xxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Ladies and Gentlemen:
You (the "Borrower") have requested that X.X. Xxxxxx Securities Inc.
and UBS Securities LLC (the "Arrangers"), agree to structure, arrange and
syndicate a revolving senior secured credit facility in an aggregate amount of
up to $75,000,000 (the "Facility"), that JPMorgan Chase Bank, N.A. ("JPMCB") and
UBS Loan Finance LLC ("UBS") each commit to provide one-half (1/2) of the entire
principal amount of the Facility, and that JPMCB agrees to serve as
administrative agent for the Facility.
The Arrangers are pleased to advise you that they are willing to act as
exclusive co-arrangers for the Facility.
Furthermore, each of JPMCB, UBS and the Arrangers, respectively, are
pleased to advise you of their commitment to provide the entire amount of the
Facility, upon the terms and subject to the conditions set forth or referred to
in this commitment letter (the "Commitment Letter") and in the Summary of Terms
and Conditions attached hereto as Exhibit A (the "Term Sheet").
It is agreed that JPMCB will act as the sole and exclusive
Administrative Agent, and that the Arrangers will act as the sole and exclusive
Co-Lead Arrangers and Joint Bookrunners (in such capacities, the "Lead
Arrangers") for the Facility. You agree that no other agents, co-agents or
arrangers will be appointed, no other titles will be awarded and no compensation
(other that that expressly contemplated by the Term Sheet and the Fee Letter
referred to below) will be paid in connection with the Facility unless you and
we shall so agree.
We intend to syndicate the Facility (including, in our discretion, all
or part of JPMCB's and UBS's commitment hereunder) to a group of financial
institutions (together with JPMCB and UBS, the "Lenders") identified by us in
consultation with you. The Arrangers intend to commence syndication efforts
promptly upon the execution of this Commitment Letter, and you agree actively to
assist the Arrangers in completing a syndication satisfactory to them. Such
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assistance shall include (a) your using commercially reasonable efforts to
ensure that the syndication efforts benefit materially from your existing
lending relationships, (b) direct contact between senior management and advisors
of the Borrower and the proposed Lenders, (c) assistance in the preparation of a
Confidential Information Memorandum and/or other marketing materials
(collectively, the "Offering Materials") to be used in connection with the
syndication and (d) the hosting, with the Arrangers, of one or more meetings of
prospective Lenders. At the Arrangers' request when "public-side" investors will
be invited to be Lenders, the Borrower will assist in the preparation of an
additional version of the Offering Materials for distribution to "public-side"
investors that consists exclusively of information and documentation that is
either publicly available or not material with respect to the Borrower, its
affiliates and any of their respective securities for purposes of United States
federal and state securities laws (the "Public-Side Version"). Prior to our
distribution of the Offering Materials and the Public-Side Version to
prospective Lenders, as applicable, the Borrower will execute and deliver to us
a letter authorizing the distribution of the Offering Materials and a separate
letter authorizing the distribution of the Public-Side Version for inclusion in
the respective information packages.
As the Lead Arranger, the Arrangers will manage all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate, the allocations of the
commitments among the Lenders and the amount and distribution of fees among the
Lenders. In acting as the Lead Arrangers, the Arrangers will have no
responsibility other than to arrange the syndication as set forth herein and
shall in no event be subject to any fiduciary or other implied duties. To assist
the Arrangers in their syndication efforts, you agree promptly to prepare and
provide to JPMCB, UBS and the Arrangers all information with respect to the
Borrower and the transactions contemplated hereby, including all financial
information and projections (the "Projections"), as we may reasonably request in
connection with the arrangement and syndication of the Facility. You hereby
represent and covenant that (a) all information other than the Projections (the
"Information") that has been or will be made available to JPMCB, UBS or the
Arrangers by you or any of your representatives is or will be, when furnished,
complete and correct in all material respects and does not or will not, when
furnished, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such statements
are made and (b) the Projections that have been or will be made available to
JPMCB, UBS or the Arrangers by you or any of your representatives have been or
will be prepared in good faith based upon reasonable assumptions. You understand
that in arranging and syndicating the Facility we may use and rely on the
Information and Projections without independent verification thereof.
As consideration for JPMCB's and UBS's commitment hereunder and the
Arrangers' agreement to perform the services described herein, you agree to pay
to JPMCB and UBS the nonrefundable fees set forth in the Term Sheet and in the
Fee Letter dated the date hereof and delivered herewith (the "Fee Letter").
JPMCB's and UBS's commitment hereunder and the Arrangers' agreement to
perform the services described herein are subject to (a) there not occurring or
becoming known to us any material adverse condition or material adverse change
in or affecting the business, operations, property, condition (financial or
otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole,
(b) our completion of and satisfaction in all respects with a due diligence
investigation of the Borrower, (c) our not becoming aware after the date hereof
of any information or other matter affecting the Borrower or the transactions
contemplated hereby
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which is inconsistent in a material and adverse manner with any such information
or other matter disclosed to us prior to the date hereof, (d) there not having
occurred a material disruption of or material adverse change in financial,
banking or capital market conditions that, in our judgment, could materially
impair the syndication of the Facility, (e) our satisfaction that prior to and
during the syndication of the Facility there shall be no competing offering,
placement or arrangement of any debt securities or bank financing by or on
behalf of the Borrower or any affiliate thereof, (f) the negotiation, execution
and delivery on or before March 1, 2005 of definitive documentation with respect
to the Facility satisfactory to JPMCB and its counsel and (g) the other
conditions set forth or referred to in the Term Sheet. The terms and conditions
of JPMCB's and UBS's commitment hereunder and of the Facility are not limited to
those set forth herein and in the Term Sheet. Those matters that are not covered
by the provisions hereof and of the Term Sheet are subject to the approval and
agreement of JPMCB, UBS, the Arrangers and the Borrower.
You agree (a) to indemnify and hold harmless JPMCB, UBS, the Arrangers
and their respective affiliates and their respective officers, directors,
employees, advisors, and agents (each, an "indemnified person") from and against
any and all losses, claims, damages and liabilities to which any such
indemnified person may become subject arising out of or in connection with this
Commitment Letter, the Facility, the use of the proceeds thereof or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any indemnified person is a party
thereto, and to reimburse each indemnified person upon demand for any legal or
other expenses incurred in connection with investigating or defending any of the
foregoing, provided that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found by a final, non-appealable judgment of a court to arise
from the willful misconduct or gross negligence of such indemnified person, and
(b) to reimburse JPMCB, UBS, the Arrangers and their affiliates on demand for
all out-of-pocket expenses (including due diligence expenses, syndication
expenses, consultant's fees and expenses, travel expenses, and reasonable fees,
charges and disbursements of counsel) incurred in connection with the Facility
and any related documentation (including this Commitment Letter, the Term Sheet,
the Fee Letter and the definitive financing documentation) or the
administration, amendment, modification or waiver thereof. No indemnified person
shall be liable for any indirect or consequential damages in connection with its
activities related to the Facility.
This Commitment Letter shall not be assignable by you without the prior
written consent of JPMCB, UBS, and the Arrangers (and any purported assignment
without such consent shall be null and void), is intended to be solely for the
benefit of the parties hereto and is not intended to confer any benefits upon,
or create any rights in favor of, any person other than the parties hereto. This
Commitment Letter may not be amended or waived except by an instrument in
writing signed by you, JPMCB, UBS, and the Arrangers. This Commitment Letter may
be executed in any number of counterparts, each of which shall be an original,
and all of which, when taken together, shall constitute one agreement. Delivery
of an executed signature page of this Commitment Letter by facsimile
transmission shall be effective as delivery of manually executed counterpart
hereof. This Commitment Letter and the Fee Letter are the only agreements that
have been entered into among us with respect to the Facility and set forth the
entire understanding of the parties with respect thereto.
This Commitment Letter shall be governed by, and construed in
accordance with, the law of the State of New York. The Borrower consents to the
nonexclusive jurisdiction and venue of the state or federal courts located in
the City of New York. Each party hereto irrevocably waives,
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to the fullest extent permitted by applicable law, (a) any right it may have to
a trial by jury in any legal proceeding arising out of or relating to this
Commitment Letter, the Fee Letter or the transactions contemplated hereby or
thereby (whether based on contract, tort or any other theory) and (b) any
objection that it may now or hereafter have to the laying of venue of any such
legal proceeding in the state or federal courts located in the City of New York.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet nor the Fee Letter, nor any of
their terms or substance, shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, agents and advisors who are directly
involved in the consideration of this matter, (b) as may be required in
connection with your initial public offering or (c) as may be compelled in a
judicial or administrative proceeding or as otherwise required by law.
You acknowledge that JPMCB, UBS, the Arrangers and their affiliates may
be providing debt financing, equity capital or other services (including
financial advisory services) to other companies in respect of which you may have
conflicting interests regarding the transactions described herein and otherwise.
Neither JPMCB, UBS nor the Arrangers will use confidential information obtained
from you by virtue of the transactions contemplated by this letter or their
other relationships with you in connection with the performance by JPMCB, UBS or
the Arrangers of services for other companies, and neither JPMCB, UBS or the
Arrangers will furnish any such information to other companies. You also
acknowledge that JPMCB, UBS and the Arrangers have no obligation to use in
connection with the transactions contemplated by this letter, or to furnish to
you, confidential information obtained from other companies.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or JPMCB's and UBS's commitment hereunder.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., New York City time, on January 14, 2005. JPMCB's and UBS's
commitment and the Arrangers' agreements herein will expire at such time in the
event JPMCB has not received such executed counterparts in accordance with the
immediately preceding sentence.
JPMCB, UBS and the Arrangers are pleased to have been given the
opportunity to assist you in connection with this important financing.
Very truly yours,
JPMORGAN CHASE BANK, N.A.
By: /s/ Xxxx Xxxxxx
--------------------------
Name: Xxxx Xxxxxx
--------------------
Title: Sr. Vice President
-------------------
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X.X. XXXXXX SECURITIES INC.
By: /s/ Xxxx X. Xxxxx
--------------------------
Name: Xxxx X. Xxxxx, Xx.
--------------------
Title: Managing Director
-------------------
UBS LOAN FINANCE LLC
By: /s/ Xxxxxx X. X. Xxxxxx
--------------------------
Name: Xxxxxx X. X. Xxxxxx
--------------------
Title: Director
-------------------
By: /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
--------------------
Title: Director and Counsel
-------------------
UBS SECURITIES LLC
By: /s/ Xxxxxx X. X. Xxxxxx
--------------------------
Name: Xxxxxx X. X. Xxxxxx
--------------------
Title: Director
-------------------
By: /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
--------------------
Title: Director and Counsel
-------------------
Accepted and agreed to as of the date first written above by:
EDUCATION REALTY OPERATING
PARTNERSHIP, LP
By: Education Realty OP GP, Inc.
General Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------
Name: Xxxxxxx X. Xxxxx
------------------
Title: Executive Vice President and Chief Financial Officer
----------------------------------------------------
EXHIBIT A
TERM SHEET
[follows this page]
EDUCATION REALTY TRUST DECEMBER 2004
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SUMMARY OF TERMS AND CONDITIONS
THIS TERM SHEET IS INTENDED AS AN OUTLINE FOR DISCUSSION PURPOSES ONLY AND DOES
NOT PURPORT TO SUMMARIZE ALL THE CONDITIONS, COVENANTS, REPRESENTATIONS,
WARRANTIES AND OTHER PROVISIONS WHICH WOULD BE CONTAINED IN DEFINITIVE LEGAL
DOCUMENTATION FOR THE FINANCING CONTEMPLATED HEREBY. IN ADDITION, THE
ORGANIZATIONAL STRUCTURE OF THE BORROWER AND THE FINANCIAL, LEGAL, ACCOUNTING,
TAX AND ALL OTHER ASPECTS OF THE TRANSACTION, WHICH IS THE SUBJECT HEREOF, SHALL
BE SATISFACTORY TO THE LENDERS AND THEIR RESPECTIVE COUNSEL.
BORROWER: Education Realty Operating Partnership, LP ("ERTOP")
and each Project Subsidiary (the "Borrower"). Project
Subsidiary is each subsidiary of ERTOP which is
contributing a property to the Collateral Pool.
GUARANTOR: Education Realty Trust, Inc. (the "Guarantor").
CO-LEAD ARRANGERS
AND JOINT BOOK
RUNNER: X.X. Xxxxxx Securities Inc. and UBS Securities LLC
(the "Arrangers").
ADMINISTRATIVE
AGENT: JPMorgan Chase Bank ("JPMCB" or the "Agent").
SYNDICATION AGENT: UBS Securities LLC
LENDERS: JPMorgan Chase Bank, UBS AG and a group of lenders
selected by the Arrangers and satisfactory to Agent
and the Borrower (collectively, together with the
Agent in its capacity as lender, the "Lenders").
DOCUMENTATION: The Facility is evidenced by a credit agreement (the
"Credit Agreement"), notes and other legal
documentation (collectively, together with the Credit
Agreement, the "Loan Documents") satisfactory to the
Lenders.
FACILITY: The amount of the Facility shall be equal to
$75,000,000. Advances under the Facility (the
"Facility") shall be limited in aggregate to the
lesser of: i) the amount of the Aggregate Commitment
and ii) the aggregate Borrowing Base Availability.
Up to $10,000,000 of the Facility shall be available
for the issuance of letters of credit by JPMCB
("Letter of Credit Sub-Facility", or "Sub-Facility").
Letters of credit issued and outstanding under the
Sub-Facility shall be treated as an advance under the
Facility for calculation of the Borrowing Base
Availability. The expiry dates of the letters of
credit issued under the Sub-Facility shall not exceed
the Maturity Date. The fronting fee for JPMCB shall
be 12.5 bps. Annual letter of credit fees shall be
equal to the LIBOR credit spread, payable quarterly
in advance. The minimum amount of each letter of
credit shall be $100,000.00.
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X.X. XXXXXX SECURITIES INC. UBS SECURITIES LLC
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EDUCATION REALTY TRUST DECEMBER 2004
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If necessary to meet the Borrower's funding
deadlines, JPMCB will make swing loans to the
Borrower prior to the Maturity Date, not to exceed an
amount at any one time outstanding equal to the
lesser of $10,000,000.00 or the unused portion of the
Facility. Each Lender shall purchase its portion of a
swing loan within five (5) business days after the
swing loan is funded.
ACCORDION: The Borrower shall have the ability during the
initial term of the Facility to request that the
Aggregate Commitment be increased to a maximum of
$125,000,000, subject to commercially reasonable
efforts by the Arrangers to arrange such increase
under customary terms, including the absence of
default or event of default. Each increase in the
Aggregate Commitment shall be in a minimum amount of
$15,000,000, unless Agent consents to a smaller
amount. The increase will be syndicated on a "best
efforts" basis, and no Lender shall be required to
escalate commitments to facilitate such increase. The
accordion feature will not be available if the
Borrower has previously reduced the Aggregate
Commitment pursuant to the terms of the Credit
Agreement.
TERM: The Aggregate Commitment shall terminate, and all
loans and other amounts outstanding under the
Facility shall be due and payable three years from
the date of execution of the Credit Agreement (the
"Maturity Date") provided, that the Borrower shall
have the option, exercisable not more than 120 or
less than 60 days prior to the initial Maturity Date,
to extend the Maturity Date for one year, subject
only to (i) the payment by the Borrower of an
extension fee for the pro-rata account of all of the
Lenders equal to 20 basis points of the Aggregate
Commitment at the time of the extension, (ii)
delivery of such documents as the Agent may
reasonably request to confirm that the extension has
been authorized on behalf of the Borrower and (iii)
the condition that no default or unmatured default
under the Facility shall exist at the time of the
extension.
USE OF PROCEEDS: The proceeds available under the Facility shall be
used by the Borrower to fund debt refinancing;
capital improvements, expansion or additional
development; working capital, payment of costs in
connection with the Facility; acquisitions of student
housing communities provided that such
acquisitions/uses constitute Permitted Investments.
RATES AND FEES: Unused Fee
----------
A per annum fee (as set forth in the Pricing Schedule
attached hereto) shall be payable on the amount of
the committed but unfunded portion of the Facility,
based upon the average outstanding balance of the
entire Facility (swing loans will be deemed a
utilization of the Facility for this purpose) during
the quarter, payable to the Agent on behalf of the
Lenders, quarterly in arrears.
Interest Rate
-------------
At the election of the Borrower, all advances under
the Facility (other than swing loans) shall bear
interest at either LIBOR or Base Rate based pricing
plus the applicable spread (as set forth in the
Pricing Schedule attached hereto), which shall be
determined by the Agent from time to time, based
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X.X. XXXXXX SECURITIES INC. UBS SECURITIES LLC
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EDUCATION REALTY TRUST DECEMBER 2004
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on the Total Leverage Ratio. Swing loans shall bear
interest at the Base Rate based pricing plus the
applicable spread. No more than six LIBOR borrowings
can be outstanding at any time.
Amounts not applied to a LIBOR contract will accrue
at the Base Rate. LIBOR interest periods shall be
one, two or three months. Any adjustment to the
interest rate spreads shall be effective as of the
date the quarterly financial statements are required
to be delivered to the Agent.
"Base Rate" means, at any time, the higher
of (1) JPMCB prime rate, and (2) the federal
funds effective rate most recently
determined by the Agent plus 1/2% per annum.
The Credit Agreement will include customary
provisions (a) protecting the Lenders against
increased costs or loss of yield resulting from
changes in reserve, tax, capital adequacy and other
requirements of law and (b) indemnifying the Lenders
for breakage costs incurred in connection with among
other things, any prepayment of a LIBOR loan on a day
other than the last day of an interest period with
respect thereto. After maturity or default, the
interest rate will be equal to the Base Rate plus 3%
per annum.
INTEREST
CALCULATION: Interest shall be calculated on the basis of a three
hundred sixty (360) day year based on twelve (12)
thirty (30) day months, except that interest due and
payable for a period of less than a full month shall
be calculated by multiplying the actual number of
days elapsed in such period by a daily rate based on
said 360-day year.
INTEREST
PAYMENTS: Interest shall be due on the first day of each month.
COLLATERAL: The Facility will be secured by cross-collateralized,
mortgage liens on all Collateral Pool properties
including:
o First priority mortgage liens (or first lien deed
of trust) and security agreements on real estate;
and
o First priority assignment of rents, leases, and
other income and contracts for each property; and
o Other standard and customary collateral
documentation, for real estate secured credits,
including but not limited to title policies,
surveys and environmental indemnification, as
reasonably required by the Agent.
INTEREST RATE
PROTECTION: At Borrower's option, interest rate protection is
available through JPMCB.
RECOURSE: The Facility shall be full recourse on a joint and
several basis to Borrower and the Guarantor.
REPAYMENT: Outstanding principal plus interest due on the
Maturity Date. Proceeds may be borrowed, repaid, and
re-borrowed so long as availability exists under the
Facility.
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X.X. XXXXXX SECURITIES INC. UBS SECURITIES LLC
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EDUCATION REALTY TRUST DECEMBER 2004
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PREPAYMENT: Amounts outstanding under the Facility may be prepaid
in whole or in part (subject to the Minimum Paydown
Amount provisions below) on one business day's prior
written notice, without penalty or premium. If
prepayment of a LIBOR based portion is made on a date
other than the last day of the applicable Interest
Period, the Borrower will indemnify Lenders for all
costs and expenses actually incurred as a result of
such prepayment, including, without limitation, the
cost of terminating any LIBOR contracts.
MINIMUM
PAYDOWN
AMOUNT: $500,000 with additional increments of $100,000.
MINIMUM
FUNDING
AMOUNT: For all advances, $1,000,000 with additional
increments of $100,000. Fundings are at Borrower's
option with three business days' prior notice for
LIBOR borrowings and with one business day's notice
for Base Rate borrowings, each accompanied by
certification of continued compliance with covenants,
representations and warranties.
FACILITY
REDUCTIONS: The Borrower may irrevocably cancel undrawn amounts
of the Aggregate Commitment upon three business days'
prior written notice. The minimum cancellation amount
is $5,000,000, and cancellations above the minimum
shall be in increments of $500,000. Notwithstanding
the foregoing, the Aggregate Commitment may not be
reduced below $37,500,000, unless entirely canceled.
All such reductions shall be applied on a pro rata
basis among the Lenders.
COSTS AND
EXPENSES: Borrower will reimburse Agent and Arrangers for all
reasonable costs and expenses in connection with the
Facility and any subsequent amendments and waivers,
including but not limited to reasonable attorney's
fees, consultant costs, and recording charges.
MATERIAL ADVERSE
EFFECT PROVISIONS: Any condition which causes or continues the
occurrence of an Event of Default or has a material
adverse effect upon (i) the business, operations,
properties, assets, prospects, corporate structure or
condition (financial or otherwise) of Borrower or the
Guarantor, taken as a whole, (ii) the ability of
Borrower or the Guarantor, taken as a whole, to
perform, or of Agent or any Lender to enforce, any of
the Facility obligations.
CONDITIONS
PRECEDENT TO
CLOSING DATE: The Credit Agreement will contain conditions
precedent to Closing of the Facility which are
customary for this type of transaction, including
without limitation:
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X.X. XXXXXX SECURITIES INC. UBS SECURITIES LLC
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EDUCATION REALTY TRUST DECEMBER 2004
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o Documentation on terms consistent with
the provisions of this summary and in
form and substance reasonably
satisfactory to the Agent and its
counsel.
o Satisfactory opinions from Xxxxxxxx and
Guarantor's counsel, including opinions
relating to the enforceability of the
loan documents, due organization and
other items, as specified.
o The contemplated initial public offering
("IPO") of the Guarantor's stock shall
have been completed.
CONDITIONS
PRECEDENT TO
EACH ADVANCE: Concurrent with each request for funding under the
Facility, the Borrower will provide to the Agent:
o Calculation of Borrowing Base
Availability, and
o Certificate signed by the Chief Financial
Officer of the Managing Member of ERTOP
indicating continued compliance with all
covenants under the Facility.
DUE DILIGENCE
FOR THE ADMISSION
OF EACH PROPERTY
INTO THE COLLATERAL
POOL: Each property is subject to certain due diligence
requirements. The due diligence information of each
property shall include, but not be limited to: a
valid certificate of occupancy or similar
certificate, proof of insurance (satisfactory to
Agent), property insurance, a copy of a current title
report along with copies of all items of record, an
ALTA survey certified to the Agent, an inspection
report by an architect or engineer approved by the
Agent, an environmental report (acceptable to Agent),
UCC searches by county and state, a current rent
roll, a FIRREA conforming appraisal, a copy of the
purchase agreement, recent photos of the property,
last three years of operating statements, a site
visit by the Agent and a pro forma operating
statement. The Borrower will also provide such other
information as may be reasonably requested by the
Agent.
The Agent, its counsel and other professionals
engaged by Agent shall have sufficient time to review
and approve the due diligence information prior to
inclusion of a property in the Collateral Pool.
The Borrower will purchase and provide a mortgagee's
title policy in the amount of the Aggregate
Commitment by a title underwriter acceptable to the
Agent subject only to coverage exceptions and
encumbrances approved by the Agent in its sole
discretion.
APPRAISALS: All references to appraised value shall refer to the
valuation set forth in a third party FIRREA
conforming appraisal acceptable to the Agent and the
Required Lenders. Each appraisal must be no more than
twelve (12) months old, and will be updated annually
if requested by Agent or the Required Lenders.
RELEASE PROVISIONS
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X.X. XXXXXX SECURITIES INC. UBS SECURITIES LLC
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EDUCATION REALTY TRUST DECEMBER 2004
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FOR THE FACILITY: The Borrower may sell or release individual
properties from the Collateral Pool, provided:
1) After the release of properties there is no
default under the Credit Agreement;
2) The Borrower has provided to the Agent a
certificate and calculations signed by ERTOP
indicating continued compliance with all
covenants under the Facility after the release
of properties.
3) If a Borrower's or Guarantor's property has
been released from the Collateral Pool, then
that Borrower or Guarantor shall be released
from liability under the Facility.
REPRESENTATIONS
AND WARRANTIES: Customary for this type of Facility, including but
not limited to the following:
1. Valid existence and qualification,
including qualification as a real estate
investment trust or real estate investment
trust subsidiary (as applicable);
2. Corporate authorization;
3. No contravention of laws or contracts;
binding effect;
4. Financial and other information is true and
correct;
5. No material adverse change that has a
Material Adverse Effect;
6. No material environmental matters;
7. Compliance with laws and regulations,
including zoning, fire safety and building
requirements of properties, ERISA,
environmental and REIT laws;
8. Maintenance of required licenses and
permits with respect to all properties;
9. No material litigation, casualty or
condemnation proceedings pending with
respect to Borrower or any properties;
10. Payment of taxes and insurance premiums
when due;
11. Good title;
12. Properties are in good condition and
repair, no deferred maintenance;
13. No default or Events of Default under the
Facility.
COVENANTS:
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X.X. XXXXXX SECURITIES INC. UBS SECURITIES LLC
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EDUCATION REALTY TRUST DECEMBER 2004
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AFFIRMATIVE: Customary for a loan of this size and type including,
but not limited to, covenants relating to compliance
with laws, maintenance of insurance, maintenance of
corporate existence and REIT status, keeping of books
and records, maintenance of properties, payment of
taxes, furnishing of periodic financial statements
and reports and compliance certificates and other
financial information.
The REIT shall at all times remain listed and in good
standing on the New York Stock Exchange and shall
maintain its tax status as a real estate investment
trust in compliance with all applicable tax
provisions.
NEGATIVE: Customary for a loan of this size and type, including
but not limited to:
Limitation on change in control of ERTOP and the
REIT.
ERTOP will not, nor will it permit any subsidiary to
enter into any merger, consolidation, reorganization
or liquidation or transfer or otherwise dispose of,
over any one-year period during the term of the
Facility, properties which either (i) exceed more
than 25% of the Total Asset Value of all of their
income-producing properties or (ii) contribute more
than 25% of the consolidated Net Operating Income of
ERTOP and the Guarantor derived from their
income-producing properties ("Substantial
Properties"), except for transactions between
wholly-owned subsidiaries and/or ERTOP. The ERTOP
will not, nor will it permit any of its subsidiaries
to, enter into a sale/leaseback of any of its real
property assets (in a single or multiple
transactions).
Borrower and Guarantor primary operations shall
consist of the ownership, development, operation, and
management of student housing communities.
Merger restriction on the REIT, which shall mean a
merger or consolidation following which the REIT or
an entity wholly owned by the REIT is no longer the
sole general partner and majority shareholder of
ERTOP; or a merger or consolidation, or any other
event, where the REIT shall own less than a 51%
interest in ERTOP.
Substantially all of the business operations of the
REIT shall be performed through ERTOP and its
subsidiaries, and all but $10,000,000 of the assets
of the REIT shall be owned through ERTOP. Further,
all net proceeds from any equity or debt offerings of
the REIT shall be promptly distributed to the
Borrower.
FINANCIAL: In addition to all other conditions herein and those
conditions typically required in similar facilities,
the following financial covenants will apply (for the
purposes of calculating financial covenants, the
Borrower's pro rata share of its interest in
unconsolidated affiliates shall be included) :
Total Leverage Ratio
--------------------
At all times shall not exceed 65%.
Interest Expense Coverage
-------------------------
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Commencing with the earlier of the first
time that at least $25,000,000 is
outstanding under the Facility (the
"Commencement Date"), or the quarter ending
March 31, 2006, REIT, Borrower and their
consolidated subsidiaries total EBITDA
divided by total Recurring Interest Expense
shall not be less than 2.00, calculated
based on the preceding twelve months, or
such shorter period commencing on the
Commencement Date. If EBITDA is calculated
over a period of less than twelve months,
and one of the months is August, then the
average EBITDA for the months used in the
calculation other than August will be
substituted for the August EBITDA.
Fixed Charge Coverage
---------------------
Commencing with the earlier of the
Commencement Date, or the quarter ending
March 31, 2006, REIT, Borrower and their
consolidated subsidiaries total EBITDA (less
a capital expenditure reserve of $125 per
bed) divided by total fixed charges
(including total debt service, preferred
stock dividends and scheduled capitalized
lease payments) shall not be less than 1.50,
calculated based on the preceding twelve
months, or such shorter period commencing on
the Commencement Date. If EBITDA is
calculated over a period of less than twelve
months, and one of the months is August,
then the average EBITDA for the months used
in the calculation other than August will be
substituted for the August EBITDA.
Maximum Distributions
---------------------
Dividends/distributions of ERTOP, both
individually and combined with the REIT,
made on or after January 1, 2006, shall not
exceed greater of 95% of ERTOP's Funds From
Operations calculated for each on a trailing
twelve-month period (or such shorter period
as applicable from the Closing Date), or
amount necessary to maintain REIT tax
status.
Minimum Tangible Net Worth
--------------------------
Minimum Borrower GAAP net worth at all times
of 85% of net worth at the Closing Date
(after giving effect to the consummation of
the IPO), plus 75% of the aggregate net
proceeds received by Borrower in connection
with any subsequent stock offerings of the
REIT consummated after the Closing Date.
Borrower GAAP net worth includes an add-back
of accumulated depreciation.
Maximum Variable Rate Debt
--------------------------
REIT, Borrower and their consolidated
subsidiaries total variable rate debt to
Total Indebtedness ratio at all times not
greater than 30%, calculated as unhedged
variable rate indebtedness divided by Total
Indebtedness.
The following covenants will apply to the Collateral
Pool properties:
o There shall be, at all times, at least
four separate properties in the
Collateral Pool.
o There shall be, at all times, at least
$50,000,000 of aggregate Property Asset
Value in the Collateral Pool.
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o At all times during the term of the
Facility, no single Collateral Pool
property shall represent more than 30%
of the aggregate Property Asset Value in
the Collateral Pool, except for the
property known as Jefferson Pointe.
o The Borrower shall not encumber the
Collateral Pool properties with debt
other than those encumbrances approved
in writing by the Agent.
PERMITTED
INVESTMENTS: Borrower and Guarantor may make the following
permitted investments so long as (i) the aggregate
amount of such permitted investments does not exceed
30% of the Borrower's Total Asset Value and (ii) the
amount of each of the following categories of
permitted investments does not exceed the specified
percentage of the Borrower's Total Asset Value at any
time during the term of the Facility:
Investments in Undeveloped Land 10%
----------------------------------------------------
Investments in Construction in Progress 20%
----------------------------------------------------
Investments in Joint Ventures 20%
----------------------------------------------------
Investments other than those relating to
Borrower's core business of developing,
constructing, owning, leasing to consumers,
operating and selling or otherwise disposing
of student housing communities 10%
----------------------------------------------------
REPORTING: Borrower will provide to the Agent, for the benefit
of the Lenders, certain financial and other
information with respect to the Borrower, the
Guarantor and the properties as may be reasonably
requested by the Agent including the following:
o Within 120 days of the end of each fiscal
year, annual audited financial statements of
the Borrower.
o Within 45 days of the end of each fiscal
quarter, quarterly financial statements, a
calculation of compliance with the Borrowing
Base Availability, compliance with covenant
compliance and related reports, including a
balance sheet, statements of operations and
cash flows, listing of properties acquired
during the quarter including their NOI, and
summary property-by-property operating
information.
o Along with the statements required above, a
quarterly compliance certificate from the
Chief Financial Officer or Chief Accounting
Officer of the Managing Member of ERTOP
confirming that there are no defaults under
the credit agreement.
o Within 30 days of the beginning of any
fiscal year, an annual operating budget for
the Borrower.
o All reports to or filings for ERTOP or the
REIT with the Securities Exchange
Commission.
o Any other reports as the Agent may
reasonably request.
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EVENTS OF
DEFAULT: Customary for this type of Facility, including but
not limited to the following:
o Failure to pay principal, interest or fees
when due;
o Failure to observe covenants (subject, in
certain cases, to cure periods provided in
the Credit Agreement);
o Material breach of representations and
warranties (subject, in certain cases, to
cure periods provided in the Credit
Agreement);
o Final unsatisfied adverse judgment of an
aggregate of $10,000,000 or more against
Borrower or Guarantor that has not been
stayed, discharged or bonded within 30 days;
o Default with respect to any indebtedness of
Borrower or Guarantor in excess of
$10,000,000; o Other usual defaults,
including insolvency, bankruptcy, and ERISA
violations in excess of $10,000,000.
ASSIGNMENTS/
PARTICIPATIONS: The Lenders shall be permitted to assign all or a
portion of their loans and commitments with the
consent, not to be unreasonably withheld, of (a) the
Borrower, unless (i) the assignee is a Lender, an
affiliate of a Lender or an approved fund or (ii) an
Event of Default has occurred and is continuing, (b)
the Agent or (c) the Issuing Bank. In the case of
partial assignments (other than to another Lender, to
an affiliate of a Lender or an approved fund), the
minimum assignment amount shall be $5,000,000. The
Lenders shall also be permitted to sell
participations in their loans. Participants shall
have the same benefits as the Lenders with respect to
yield protection and increased cost provisions.
Voting rights of participants shall be limited to
those matters with respect to which the affirmative
vote of the Lender from which it purchased its
participation would be required. Pledges of loans in
accordance with applicable law shall be permitted
without restriction.
GOVERNING LAW
AND JURISDICTION: State of New York
COUNSEL TO JPMCB: Xxxxx Xxxxxxx & Xxxx LLP
DEFINITIONS: Actual Calculated Loan Amount - As to each Collateral
Pool property, the loan amount which would produce a
debt service coverage ratio of 1.30 using the NOI for
the Collateral Pool property and an interest rate
equal to the then current three-month LIBOR based
pricing plus the applicable spread for the Facility.
Aggregate Commitment - Means, as of any date, the
aggregate of the then-current commitments of all the
Lenders, which is, as of the Closing Date, Seventy
Five Million Dollars ($75,000,000.00).
Assets Under Development - Means, as of any date of
determination, all projects and expansion areas of
existing projects for which a certificate of
occupancy has not been issued, upon which
income-producing improvements are under construction,
and upon which construction is progressing with
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diligence in accordance with a reasonable, industry
standard construction schedule.
Borrowing Base Availability - The aggregate of the
following, calculated for each Collateral Pool
property: the lesser of (a) 65% of the Property Asset
Value OR (b) the lesser of the Actual Calculated Loan
Amount and the Imputed Loan Amount.
Closing Date - The date on which all Conditions
Precedent to Closing have been met and all required
documents have been executed and delivered to and
accepted by the Agent.
Collateral Pool - Each property meeting all of the
following criteria, as certified by the Chief
Financial Officer or Chief Accounting Officer of the
Managing Member of ERTOP, will be deemed eligible for
the Collateral Pool:
1. is a student housing community located in the
continental United States; and
2. is owned Fee Simple or under Eligible Ground
Leases by the Borrower, Guarantor or contributing
wholly-owned Subsidiary; and
3. is not an Asset Under Development; and
4. is self-managed by the Borrower or one of its
subsidiaries, provided that JPI, as the seller of
some of the property, may manage the properties
sold to Borrower for up to ninety (90) days after
the sale(all management rights shall be expressly
subordinate to the Facility); and
5. has a valid certificate of occupancy or similar
certificate of approval for use as a student
housing facility; and
6. has no material title defects which affect the
marketability of the property; and
7. has no material deferred maintenance or capital
improvements required to continue operation as a
first class student housing community as
determined by an architectural or engineering
report approved by the Agent; and
8. has been approved by the Agent and the Required
Lenders, such approvals not to be unreasonably
withheld.
If a property does not meet the conditions above, the
Borrower may request that the Agent and the Required
Lenders approve inclusion of the property in the
Collateral Pool by submitting the required due
diligence materials to the Agent for the benefit of
the Lenders.
EBITDA - with respect to any Person, income before
payment or charges of applicable interest, taxes,
depreciation, amortization, and extraordinary items
excluding any gains or losses from pay-off or
retirement of debt and from sales of assets, as
reported by such Person and its Subsidiaries on a
consolidated basis in accordance with GAAP.
Eligible Ground Lease -A ground lease which (a) has a
remaining term (including any renewal options
exercisable at the sole option of the lessee) of at
least 40 years, (b) may be transferred and/or
assigned without consent of the lessor, (c) contains
customary lender protection provisions which
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provide or allow for, without consent of the lessor,
(i) notice and cure rights, (ii) pledge and mortgage
of the leasehold interest, (iii) recognition of a
foreclosure of leasehold interest including entering
into new lease with the lender and (iv) no right of
landlord to terminate without consent of xxxxxx's
lender. Ground leases which do not meet these
conditions may be considered Eligible Ground Leases
with approval of Agent and Required Lenders.
Funds From Operations - Net income plus depreciation,
minority interests and amortization exclusive of any
gain or loss from debt restructuring and property
sales, to be consistent with NAREIT standards.
Imputed Loan Amount- As to each Collateral Pool
property, the loan amount which would produce a debt
service coverage ratio of 1.30 using the NOI for the
Collateral Pool property and annual interest and
principal payments that would be needed to fully
amortize such loan amount, based on a 30-year
mortgage-style amortization at an interest rate of
175 basis points above the yield on the then 10-year
U.S. Treasury Note, such (combined) interest rate to
be not less than 7.00%.
Indebtedness - For any Person, without duplication,
(A) as shown on such Person's balance sheet prepared
in accordance with GAAP (i) all indebtedness of such
Person for borrowed money or for the deferred
purchase price of property and, (ii) all indebtedness
of such Person evidenced by a note, bond, debenture
or similar instrument (whether or not disbursed in
full in the case of a construction loan), (B) the
face amount of all letters of credit issued for the
account of such Person and, without duplication, all
unreimbursed amounts drawn thereunder, (C) all
payment obligations and mark-to-market exposure of
such Person under any interest rate protection
agreement (including, without limitation, any
interest rate swaps, caps, floors, collars and
similar agreements) and currency swaps and similar
agreements and (D) all obligations of such Person
guaranteeing or in effect guaranteeing any
indebtedness, leases or other obligations of any
third party.
Net Operating Income ("NOI") - As of any date of
determination, with respect to all real property
assets owned for at least four quarters, Property
Income for the previous four consecutive quarters
including the quarter then ended (or such other
period as may be specified herein), less Property
Expenses for the same period. For real property
assets owned less than four full quarters the NOI
shall be calculated for the period of ownership, and
annualized; provided, however, that if the period of
ownership includes August, then August will be
disregarded in the annualization calculation. The NOI
shall be reduced by a capital expenditure reserve of
not less than $125 per bed.
Property Asset Value - During the first 12 months
immediately following acquisition of a property in
the Collateral Pool, the lesser of (a) the
"as-stabilized" value contained in appraisals meeting
the Credit Agreement requirements, OR (b) the
purchase price of such property (in the case of
portfolio acquisitions, established as the property's
pro rata portion of the total acquisition price, as
determined by the property's proportion of
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portfolio NOI); thereafter, the "as-is" value
contained in current appraisals meeting the Credit
Agreement requirements.
Property Expenses - When used with respect to any
real property asset, the costs of operating such
asset, including, without limitation, taxes,
insurance, three percent (3%) property management
fee, repairs and maintenance, but excluding
depreciation, amortization, and Recurring Interest
Expense, calculated, in each case, in accordance with
GAAP.
Property Income - When used with respect to any real
property asset, revenues therefrom (including,
without limitation, lease termination fees
appropriately amortized to the extent there is no new
tenant in the space for which the lease termination
fee was paid), calculated, in each case, in
accordance with GAAP.
Recurring Interest Expense - Measured as of the last
day of each calendar month, an amount equal to
interest (whether accrued, paid or capitalized)
actually payable (without duplication) by the
Borrower and the Guarantor.
Required Lenders - For the purpose of making
amendments or waivers to the credit agreement or
related documents, approval by Xxxxxxx whose
commitments under the Facility aggregate 66 2/3 % of
the Facility will be required. However, unless agreed
to by all Lenders, no amendment or waiver shall
increase the principal amount, reduce the rate of
interest or fees, postpone the scheduled payment of
any principal, interest or fees, or change the
definition of Required Lenders.
Total Asset Value - (a) for properties in the
Collateral Pool, the aggregate Property Asset Value,
and (b) for all properties not in the Collateral
Pool, Borrower's consolidated NOI from properties not
in the Collateral Pool (or Borrower's pro rata share
of NOI in the case of a property not wholly owned)
divided by a capitalization rate of 8.25%, plus (ii)
the amount of cash and cash equivalents, plus (iii)
undepreciated book value of Assets Under Development
and unimproved land. For properties owned for less
than four quarters, NOI from such property shall not
be used, and instead the purchase price of such
property shall be included in the calculation of
Total Asset Value.
Total Indebtedness - Means Indebtedness of REIT,
Borrower and its subsidiaries on a consolidated
basis, plus the pro-rata share of Indebtedness of
joint venture investment affiliates (as determined in
accordance with GAAP).
Total Leverage Ratio - Total Indebtedness divided by
Total Asset Value.
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ANY OR ALL OF THE TERMS OF THIS TERM SHEET SHALL NOT BE DISCLOSED TO ANY PERSON
OTHER THAN EMPLOYEES, ATTORNEYS OR ACCOUNTANTS OF THE BORROWER, IN EACH CASE, TO
WHOM IT IS NECESSARY TO DISCLOSE THE INFORMATION (AND WHOM, IN EACH CASE, SHALL
BE MADE AWARE OF THIS PROMISE NOT TO DISCLOSE) OR AS MAY BE REQUIRED BY LAW OR
ANY COURT OR REGULATORY AGENCY HAVING JURISDICTION OVER BORROWER.
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PRICING SCHEDULE
Interest Rate
BASE RATE
LEVEL TOTAL LEVERAGE RATIO LIBOR SPREAD (BPS) SPREAD (BPS)
----- -------------------- ------------------ ------------
1 less than or equal to 45% 150 25
2 greater than 45% and less than or equal to 50% 175 50
3 greater than 50% and less than or equal to 60% 200 75
4 greater than 60% 225 100
Unused Fee
RATIO OF LOAN OUTSTANDINGS TO
AGGREGATE COMMITMENT FEE (BPS)
----------------------------- ---------
less than 50% 25
greater than or equal to 50% 20
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