Magazine article The RMA Journal

Prospective Borrower: Tries to Obtain Refund of Loan Deposit

Magazine article The RMA Journal

Prospective Borrower: Tries to Obtain Refund of Loan Deposit

Article excerpt

IN 2004, Ladco Properties XVII submitted a loan application to Jefferson-Pilot Life Insurance Company (JP) for permanent financing for a medical office facility called Mercy North. In December 2004, JP approved a $12.59 million loan to Ladco with an interest rate of 5.66% per annum. Ladco's attorney reviewed the approval and Ladco negotiated several of the terms, including a clause calling for a loan deposit.

On January 5, 2005, JP and Ladco executed a formal mortgage loan commitment in which JP agreed to make the permanent loan of $12.59 million to Ladco if certain conditions were satisfied. One of the conditions was that Ladco secure leases generating annual rents of at least $1.265 million prior to the date the commitment expired. The mortgage loan commitment was set to expire on July 29, 2005, but Ladco had options to extend it to September 28.

The commitment also required Ladco to make a loan deposit of $377,700 that was to be retained by JP if the loan did not close prior to the expiration of the commitment.

Because it could not satisfy the leasing requirements by July 29, Ladco exercised its option to extend the maturity date of the commitment to September 28 and then requested a further extension to December 16. JP was willing to extend the maturity to December 30 if Ladco returned an executed copy of an addendum to the commitment dated October 4 no later than October 10. Ladco did not comply. Nonetheless, JP prepared for a closing based on Ladco's assurances that the addendum would be signed.

On December 13, 2005, Ladco requested still another extension to September 30, 2006. Attached to the request was a modified version of the October 4 addendum to the mortgage loan commitment. By letter dated December 15, 2005, JP replied that no further extension would be granted because Ladco did not accept the October 4 addendum by October 10, that the commitment had expired, and that Ladco had forfeited its loan deposit. …

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