Philip,
We acknowledge receipt of the revised pricing and restructured terms delivered by Pinnacle Atlantic Capital, LLC ("PAC") on January 27, 2023, in connection with the proposed $160,000,000 first mortgage loan to our client, Coral Palms Resort Holdings LLC (the "Borrower"), as contemplated by the Commitment Letter dated December 9, 2022, between the Borrower and PAC (the "Commitment Letter"). We understand that the revised terms were delivered following PAC's review of the appraisal report prepared by Hargrove & Whitley Valuation Services LLC, dated January 20, 2023, which concluded a market value of $192,000,000 for the Coral Palms Grand Resort & Spa as of January 6, 2023.
Having carefully reviewed the revised terms, we note the following modifications to the original commitment: (i) a reduction of the loan amount from $160,000,000 to $139,000,000, representing a loan-to-value ratio of approximately 72.5% based on the appraised value; (ii) an increase in the fixed interest rate from 5.35% to 6.90% per annum, an increase of 155 basis points; (iii) a conversion of the guaranty structure from a limited recourse, "bad boy" carve-out guaranty to a full recourse guaranty by Verimark Hospitality Group Inc. ("VHG"); (iv) a requirement for cross-collateralization with a second VHG-owned property, the Driftwood Bay Hotel located in Sarasota, Florida; and (v) the imposition of an additional $3,200,000 upfront PIP/capital improvement reserve, over and above the $4,800,000 in upfront reserves contemplated by the original commitment. VHG and the Borrower consider these revised terms, taken together, to constitute a material modification of the Commitment Letter and not merely an adjustment within the contemplated parameters of the original commitment.
VHG and the Borrower expressly reserve all rights and remedies under the Commitment Letter, the side letter relating to deposit and rate lock provisions, and applicable law, including but not limited to all rights with respect to the refundability of the $1,600,000 good faith deposit and the $800,000 rate lock deposit, both of which are currently held in escrow by Meridian Title & Escrow, Inc. Nothing in this correspondence, nor any further discussions between the parties regarding the revised terms, shall constitute or be deemed to constitute a waiver of any such rights or remedies.
VHG and its advisors are currently evaluating the revised terms and their commercial and legal implications. VHG intends to respond with a counter-proposal and expects to be in a position to do so in the near term. In the interim, we respectfully request that PAC and your firm refrain from taking any action with respect to the deposits or the Commitment Letter pending VHG's response.
I am available to discuss any of the foregoing by telephone at your convenience. Please do not hesitate to reach out.
Regards,
Douglas Fairchild Partner, Real Estate Calderwood & Harkness LLP 100 Southeast Second Street, Suite 3800 Miami, FL 33131 T: (305) 554-6200 E: dfairchild@calderwoodharkness.com
Matter No. 1021-00007