Saint Cloud Mortgage

1. There is a maximum first mortgage L-IV ratio of 55% based upon the lower of cost, appraisal, or market value of the subject property. 

2. The first mortgage loan amount per room generally should not exceed $30,000. An exception may be made for newer properties, suites, resorts properties, and those that include a restaurant or convention center. 

3. The borrower must inject a minimum of 20% of eligible project costs or appraised value, whichever is less, plus ineligible costs such as working capital, franchise fees, etc. The source of the equity injection must be legitimate and verified. 

4. If the property is proposed or a start-up, the borrower must show the ability to cover at least 30% of the new debt service from other independent sources of income/cash flow. 

5. Existing properties must show a historical debt service coverage (including the new debt) of 1.4x St. Cloud Mortgage loan and > 1.3x DSC on total debt with consistent and improving trends. 

6. The borrowers are required to have sufficient prior motel management and ownership experience. 

7. The property should have been constructed or have had substantial remodeling within the last 20 years. 

8. The land vesting shall be in fee simple interest. 

9. The remaining economic life of the improvements must be at least five years greater than the loan maturity date. 

10. All FF&E must be included as part of the collateral with a UCC-1 first lien position. 

11. The property should be part of a national or regional franchise system with a strong preference for AAA rating of three stars of higher. 

12. Properties should be located in areas that are economically diverse and where the population of the county is greater than 20,000. 

13. The first mortgage loan amount should not exceed $4,000,000. 

14. St. Cloud Mortgage must review a copy of the most recent franchisers inspection report and/or property improvement plan indicating the required capital improvements or repairs and verify that funds are available to cover such costs. 

Other: 

1. The maturity date and amortization period will generally not exceed 20 years unless the property is newer and the properry's remaining economic life is > 30 years. Maximum loan term is 25 years. 

2. The par interest rate is WSJ Prime + 2.5% with quarterly rate adjustments (no fixed rate pricing is available for hotel/motel properties at this time); there is a minimum prepayment penalty required consisting of a declining 5-4-3-2-1-% during the first five (5) years. 

3. If the property has a regional or national franchise affiliation, the Loan Agreement must include a covenant to retain a franchise acceptable to St. Cloud Mortgage Bank. 

4. A debt service coverage covenant of 1.25x is required. An FF&E replacement reserve of between 3% and 5% of annual gross room revenues will be included as part of the numerator. 

5. Hotel/motel valuation guidelines: (a) NOI of 35% to 37.5% of gross room revenues; (b) cap rate of 11% to12%. 

6. Hotels and motels may qualify for an L'I-V in excess of 55%, up to a maximum LTV of 60% - 65%, provided the borrower/owners represent higher quality industry experience, good credit experience, and a stronger financial condition, net worth, and liquidity characteristics. The property will be required to be: (a) national franchise, (b) limited service, (c) interior corridor, (d) generally 100 units or less, and (e) have at least a two year historical total DSC > 1.4x on St. Cloud Mortgage loan, and > 1.3x on total debt. Those properties that are: • <10 yrs old are eligible up to 65% LTV • 11-20 yrs old are eligible up to 60% LTV 

7. St. Cloud Mortgage will avoid as a matter of policy, those hotel/motel properties that are > 20 years old (without major renovations), exterior corridor, independent or now on 3rd or 4th franchise, and greater than 100 units. Properties that have excess capacity with > 10% of the rooms non-rentable would clearly fall into this category.