Rio Rancho Executive Plaza Project Receives Balance of Funding Required to Complete Project

Rio Rancho Executive Plaza, a 48,000 square-foot office condominium project being constructed in Rio Rancho, New Mexico, received on August 9, 2006 the $3,773,000 in additional funding the borrower needed to complete the project. The loan matures on January 20, 2007. The borrower is Russell A/D Development, LLC (PDF). The approved budget for the loan is $6,100,000. The loan principal balance had been increased to $2,250,000 since its origination. The projected value of the project upon completion is $10,000,000.

The U.S. Bankruptcy Court granted an order (PDF) to USACM on August 8, 2006 to allow Fertitta Enterprises, or its affiliate, to provide an additional advance of $3,773,000 for the loan. The additional advance shall be secured by a pari-passu interest in the Deed of Trust. The additional advance also fully funds the interest reserve to maturity bringing the loan to “performing” status.

The order also approved the assignment of the greater of $400,000 or 50 percent of the success fee from USACM to Fertitta or its affiliate. This means original direct lenders who opt to participate in the additional advance for the loan will also participate in the success fee.

Prior to receiving court approval, USACM was granted a waiver (PDF) request from the State of Nevada Mortgage Lending Division (MLD) on August 7, 2006 that allowed Fertitta Enterprises, or its affiliate, to provide the additional funding, subject to two conditions:

1. The 32 original direct lenders in the project be given up to 30 days from the order the right of first refusal to fund the additional advance, not to exceed their original percentage of ownership.
2. Fertitta may be substituted as a new servicer of the loan upon the consent of the direct lenders who hold at least 51 percent of the outstanding balance of the loan.

The order also stipulated that participants in the new funding advance would not have the principal and interest payments on the new advance portion of their funding subjected to hold backs, offsets or other impairments in the bankruptcy proceedings.

The 32 original direct lenders were mailed consent notices on August 3, 2006, pursuant to Section 2(e) of the Loan Servicing Agreement, informing them of the motion.

The Rio Rancho project was one of 17 projects USACM described to the court in a previous hearing that required additional advances. USACM believes that funding the additional advance through this offer presents the best opportunity for completion of the project and will enhance the prospects of repayment in full of the loan.