1021-00007
· Verimark Hospitality Group · Transaction Overview
due-diligence-checklist.xlsx
DOCUMENT
Real Estate
[sheet: Cover & Instructions]
| Field | Detail |
| Matter Name | Verimark Hospitality Group Inc. — Coral Palms Resort Refinancing |
| C&H Matter Number | 1021-00007 |
| Borrower | Coral Palms Resort Holdings LLC (a Florida limited liability company) |
| Guarantor | Verimark Hospitality Group Inc. (a Delaware corporation; Nasdaq: VMRK) |
| Lender | Pinnacle Atlantic Capital, LLC |
| Lender's Counsel | Whitford Baines & Driscoll LLP (Philip Tarrant Corporation / Catherine Yee) |
| Borrower's Counsel | Calderwood & Harkness LLP (Douglas Fairchild / Angela Fontaine / Grace Nakamura / Rafael Dominguez) |
| Property | Coral Palms Grand Resort & Spa, 99000 Overseas Highway, Key Largo, Monroe County, FL 33037 |
| Loan Amount | $160,000,000 First Mortgage Loan |
| Existing Lender (Payoff) | Tidewater National Bank, N.A. |
| Title Company / Escrow Agent | Meridian Title & Escrow, Inc. (Lisa Portman) |
| Appraiser | Hargrove & Whitley Valuation Services LLC (Scott Tremaine, MAI, MRICS) |
| Environmental Consultant | Oakridge Environmental Consulting Group, Inc. (Dr. James Whitmore) |
| Insurance Broker | Castlegate Risk Advisors LLC (Monica Iglesias) |
| Surveyor | Landis & Shaw Surveying, Inc. (Robert Tran, PLS) |
| VHG Auditor | Keswick & Holt LLP (Andrew Calloway, CPA) |
| Prepared By | Grace Nakamura / Rafael Dominguez, Calderwood & Harkness LLP |
| Date Prepared | December 14, 2022 |
| Last Updated | January 27, 2023 |
| Instructions | Track status of each item using the Status column: 'Delivered,' 'Pending,' 'In Progress,' 'N/A,' or 'Outstanding.' Flag items requiring follow-up in the Notes column. |
[sheet: Entity & Organizational]
| Item No. | Category | Document / Item Description | Responsible Party | Requested By | Date Requested | Date Delivered | Status | Notes |
| 1 | Entity / Organizational | Certificate of Formation — Coral Palms Resort Holdings LLC (Florida LLC) | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | Filed with FL Secretary of State |
| 2 | Entity / Organizational | Certificate of Good Standing — Coral Palms Resort Holdings LLC (Florida) | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-03 | Delivered | Dated within 30 days of closing; request from FL Secretary of State |
| 3 | Entity / Organizational | Operating Agreement of Coral Palms Resort Holdings LLC (as amended) | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | Include all amendments |
| 4 | Entity / Organizational | Certificate of Incorporation — Verimark Hospitality Group Inc. (Delaware corporation) | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | Delaware incorporation; Nasdaq: VMRK |
| 5 | Entity / Organizational | Certificate of Good Standing — Verimark Hospitality Group Inc. (Delaware) | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-03 | Delivered | Request from DE Secretary of State |
| 6 | Entity / Organizational | Certificate of Authorization / Foreign Qualification — VHG (Florida) | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-03 | Delivered | VHG qualified to do business in FL |
| 7 | Entity / Organizational | Bylaws of Verimark Hospitality Group Inc. (as amended) | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | |
| 8 | Entity / Organizational | Organizational chart showing ownership chain from VHG to Coral Palms Resort Holdings LLC | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | CPRH is wholly owned indirect subsidiary of VHG |
| 9 | Entity / Organizational | Manager/Member Resolutions — Coral Palms Resort Holdings LLC authorizing refinancing and execution of loan documents | C&H / Grace Nakamura | WBD | 2022-12-19 | In Progress | C&H preparing draft; to be finalized pre-closing | |
| 10 | Entity / Organizational | Board Resolutions — Verimark Hospitality Group Inc. authorizing execution of Guaranty and Environmental Indemnity | C&H / Grace Nakamura | WBD | 2022-12-19 | In Progress | Draft prepared; authorized signatories: Conrad W. Elliston (Chairman & CEO), Natasha Ricard (CFO) | |
| 11 | Entity / Organizational | Incumbency Certificate — Coral Palms Resort Holdings LLC | VHG / Derek Huang | WBD | 2022-12-19 | Pending | To identify authorized signatories | |
| 12 | Entity / Organizational | Incumbency Certificate — Verimark Hospitality Group Inc. | VHG / Derek Huang | WBD | 2022-12-19 | Pending | ||
| 13 | Entity / Organizational | List of all subsidiaries and affiliates of VHG | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | VHG owns/operates 14 luxury and upscale resort properties |
| 14 | Entity / Organizational | EIN / Tax ID confirmation — Coral Palms Resort Holdings LLC | VHG / Natasha Ricard | WBD | 2022-12-19 | 2022-12-28 | Delivered | IRS Form W-9 |
| 15 | Entity / Organizational | EIN / Tax ID confirmation — Verimark Hospitality Group Inc. | VHG / Natasha Ricard | WBD | 2022-12-19 | 2022-12-28 | Delivered | IRS Form W-9 |
| 16 | Entity / Organizational | Patriot Act / KYC / AML compliance documentation for Borrower and Guarantor | VHG / Derek Huang | PAC / Jennifer Kwon | 2022-12-19 | 2023-01-05 | Delivered | Beneficial ownership certification included |
[sheet: Property & Title]
| Item No. | Category | Document / Item Description | Responsible Party | Requested By | Date Requested | Date Delivered | Status | Notes |
| 17 | Property / Title | Title Commitment issued by Meridian Title & Escrow, Inc. | Meridian Title / Lisa Portman | PAC / WBD | 2022-12-19 | 2023-01-08 | Delivered | C&H reviewing; Schedule B-II exceptions under analysis; see Title Commitment Review Memo |
| 18 | Property / Title | Copies of all Schedule B-II exception documents (easements, covenants, restrictions, encumbrances) | Meridian Title / Lisa Portman | WBD | 2022-12-19 | 2023-01-10 | Delivered | Multiple instruments; title objection letter in preparation |
| 19 | Property / Title | ALTA/NSPS Land Title Survey | Landis & Shaw Surveying, Inc. / Robert Tran, PLS | PAC / WBD | 2022-12-19 | 2023-01-12 | Delivered | Survey of ~22.4-acre waterfront site; C&H reviewing for encroachments, easements, setback compliance, flood zone |
| 20 | Property / Title | Warranty Deed — Coral Palms Resort Holdings LLC (fee owner) | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | Recorded in O.R. Book 2847, Page 1122, Monroe County, FL |
| 21 | Property / Title | Legal Description of Property | Meridian Title / VHG | WBD | 2022-12-19 | 2022-12-28 | Delivered | Section 27, Township 60 South, Range 39 East, Monroe County, FL; Folio No. 00460780-000100 |
| 22 | Property / Title | Existing Mortgage — Tidewater National Bank, N.A. | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | Recorded in O.R. Book 2892, Page 0445, Monroe County, FL; original principal $125,000,000; outstanding ~$118,500,000 |
| 23 | Property / Title | UCC-1 Financing Statement — existing Tidewater loan | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | FL Secured Transaction Registry, File No. 202219087643; UCC-3 termination to be filed at payoff |
| 24 | Property / Title | LIBOR-to-SOFR Fallback Amendment (existing loan) | VHG / Derek Huang | WBD | 2022-12-19 | 2022-12-28 | Delivered | Dated March 15, 2022; rate converted to SOFR + 2.25% |
| 25 | Property / Title | Property tax bills and receipts (current and prior 2 years) | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | Monroe County property taxes; Folio No. 00460780-000100; confirm no delinquencies |
| 26 | Property / Title | Copies of all ground leases, subleases, or space leases affecting the property | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | Marina slip agreements, F&B outlet leases, spa lease (if applicable), retail leases |
| 27 | Property / Title | Rent roll (current) | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | Includes ancillary commercial leases; hotel rooms N/A for rent roll (transient) |
| 28 | Property / Title | Copies of all CC&Rs, declarations, and reciprocal easement agreements | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-08 | Delivered | |
| 29 | Property / Title | Payoff letter / payoff statement from Tidewater National Bank, N.A. | C&H / Rafael Dominguez | WBD / PAC | 2022-12-19 | Pending | Payoff request letter sent to Alan Prescott, SVP – CRE, at 600 Waterside Drive, Norfolk, VA 23510; prepayment premium of 1.0% ($1,185,000) applies if prepaid before March 1, 2023 | |
| 30 | Property / Title | Estoppel certificates from tenants/lessees (if required) | VHG / Derek Huang | WBD | 2022-12-19 | Pending | Determine which tenants require estoppels | |
| 31 | Property / Title | Marina slip license/permit agreements | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-06 | Delivered | 42-slip marina |
[sheet: Environmental]
| Item No. | Category | Document / Item Description | Responsible Party | Requested By | Date Requested | Date Delivered | Status | Notes |
| 32 | Environmental | Phase I Environmental Site Assessment (ESA) | Oakridge Environmental Consulting Group, Inc. / Dr. James Whitmore | PAC | 2022-12-19 | 2023-01-15 | Delivered | Commissioned by PAC; Oakridge Environmental engaged directly by lender; reliance letter to be issued to borrower |
| 33 | Environmental | Phase II ESA (if recommended by Phase I) | Oakridge Environmental | PAC | 2022-12-19 | N/A | Phase I did not recommend Phase II; no recognized environmental conditions identified | |
| 34 | Environmental | Prior environmental reports for the property (all available) | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | Includes reports from 2006 original construction and 2021 renovation |
| 35 | Environmental | Asbestos / lead paint survey reports | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | Originally constructed 2006; comprehensive renovation completed August 2021 |
| 36 | Environmental | Underground storage tank (UST) records and compliance documentation | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-04 | Delivered | Emergency generator fuel tank; compliance records on file |
| 37 | Environmental | Environmental permits and regulatory correspondence | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-06 | Delivered | DEP and Monroe County permits |
| 38 | Environmental | Environmental Indemnity Agreement (to be executed at closing) | C&H / Grace Nakamura | WBD | 2022-12-19 | In Progress | C&H redline of WBD draft in negotiation; to be executed by Borrower and Guarantor |
[sheet: Insurance]
| Item No. | Category | Document / Item Description | Responsible Party | Requested By | Date Requested | Date Delivered | Status | Notes |
| 39 | Insurance | Evidence of property insurance (all-risk / special form) | Castlegate Risk Advisors LLC / Monica Iglesias | WBD / PAC | 2022-12-19 | 2023-01-10 | Delivered | Carrier: Southland Mutual Insurance Company; C&H reviewing for compliance with PAC requirements |
| 40 | Insurance | Evidence of general liability insurance | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | 2023-01-10 | Delivered | Carrier: Southland Mutual Insurance Company |
| 41 | Insurance | Evidence of windstorm / named storm insurance | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | 2023-01-10 | Delivered | Carrier: Southland Mutual Insurance Company; Monroe County, FL — mandatory windstorm coverage |
| 42 | Insurance | Evidence of flood insurance (NFIP and excess / surplus lines) | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | 2023-01-10 | Delivered | Surplus lines flood carrier: Bayfront Specialty Insurance Corp.; NFIP policy also in place; waterfront property in Monroe County flood zone |
| 43 | Insurance | Evidence of business interruption / loss of rents insurance | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | 2023-01-10 | Delivered | Minimum 12 months coverage required by PAC |
| 44 | Insurance | Evidence of workers' compensation insurance | VHG / Derek Huang | WBD | 2022-12-19 | 2023-01-10 | Delivered | |
| 45 | Insurance | Evidence of liquor liability insurance | Castlegate / Monica Iglesias | WBD | 2022-12-19 | 2023-01-10 | Delivered | 3 food & beverage outlets on property |
| 46 | Insurance | Evidence of umbrella / excess liability insurance | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | 2023-01-10 | Delivered | |
| 47 | Insurance | Additional insured / mortgagee endorsement naming Pinnacle Atlantic Capital, LLC | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | Outstanding | C&H letter to Castlegate requesting endorsements; see Insurance Compliance Memo | |
| 48 | Insurance | Insurance certificates (ACORD) for all policies | Castlegate / Monica Iglesias | WBD / PAC | 2022-12-19 | In Progress | Certificates being updated to reflect lender requirements | |
| 49 | Insurance | Schedule of all insurance policies with coverage limits, deductibles, and expiration dates | Castlegate / Monica Iglesias | WBD | 2022-12-19 | 2023-01-10 | Delivered | C&H analyzing gaps vs. PAC loan document requirements |
| 50 | Insurance | Flood zone determination / FEMA flood map | Meridian Title / Lisa Portman | WBD / PAC | 2022-12-19 | 2023-01-08 | Delivered | Property located in Monroe County, FL; flood zone confirmed on survey |
[sheet: Financial & Operating]
| Item No. | Category | Document / Item Description | Responsible Party | Requested By | Date Requested | Date Delivered | Status | Notes |
| 51 | Financial / Operating | Trailing 12-month (T-12) operating statement — Coral Palms Grand Resort & Spa (ending September 30, 2022) | VHG / Natasha Ricard | PAC / WBD | 2022-12-19 | 2022-12-28 | Delivered | Total Revenue: ~$62,800,000; NOI: ~$18,400,000; Occupancy: 71.3%; ADR: $389; RevPAR: $277.36 |
| 52 | Financial / Operating | Monthly operating statements — Coral Palms (prior 3 years) | VHG / Natasha Ricard | PAC / WBD | 2022-12-19 | 2023-01-04 | Delivered | |
| 53 | Financial / Operating | Annual operating budgets — Coral Palms (current year and projection) | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-04 | Delivered | |
| 54 | Financial / Operating | STR report / competitive set analysis (trailing 12 months) | VHG / Derek Huang | PAC | 2022-12-19 | 2023-01-04 | Delivered | Occupancy 71.3%, ADR $389, RevPAR $277.36 |
| 55 | Financial / Operating | Capital expenditure history and schedule (including 2021 renovation) | VHG / Natasha Ricard | PAC / WBD | 2022-12-19 | 2023-01-04 | Delivered | Comprehensive renovation completed August 2021 at ~$47,000,000 cost |
| 56 | Financial / Operating | FF&E reserve schedule and balances | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-04 | Delivered | |
| 57 | Financial / Operating | Audited financial statements — Verimark Hospitality Group Inc. (prior 3 fiscal years) | VHG / Natasha Ricard | PAC / WBD | 2022-12-19 | 2022-12-28 | Delivered | Audited by Keswick & Holt LLP (Andrew Calloway, CPA); VHG 2022 consolidated revenue ~$487,000,000 |
| 58 | Financial / Operating | VHG 10-K and 10-Q filings (most recent) | VHG / Natasha Ricard | PAC | 2022-12-19 | 2022-12-28 | Delivered | Publicly traded; Nasdaq: VMRK; TEV ~$1,900,000,000 |
| 59 | Financial / Operating | Debt schedule — all VHG and subsidiary indebtedness | VHG / Natasha Ricard | PAC / WBD | 2022-12-19 | 2023-01-04 | Delivered | Existing Tidewater loan: $118,500,000 outstanding; SOFR + 2.25%; maturity June 1, 2024 |
| 60 | Financial / Operating | Guarantor financial statements (personal / corporate, as applicable) | VHG / Natasha Ricard | PAC | 2022-12-19 | 2022-12-28 | Delivered | VHG as guarantor; limited recourse / bad boy carve-out guaranty |
| 61 | Financial / Operating | Tax returns — Coral Palms Resort Holdings LLC (prior 2 years) | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-06 | Delivered | |
| 62 | Financial / Operating | Tax returns — Verimark Hospitality Group Inc. (prior 2 years) | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-06 | Delivered | |
| 63 | Financial / Operating | Appraisal report — Hargrove & Whitley Valuation Services LLC | PAC (lender-commissioned) | PAC | 2022-12-19 | 2023-01-20 | Delivered | Appraised value: $192,000,000 (effective date Jan 6, 2023); VHG internal valuation was $235,000,000; shortfall of $43,000,000 (18.30%); LTV at appraised value: 83.33% vs. 68.0% max |
| 64 | Financial / Operating | Guest room revenue breakdown by segment (transient, group, contract) | VHG / Derek Huang | PAC | 2022-12-19 | 2023-01-04 | Delivered | 342 guest rooms and suites |
| 65 | Financial / Operating | Food & beverage revenue and expense detail | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-04 | Delivered | 3 F&B outlets |
| 66 | Financial / Operating | Spa and marina revenue detail | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-04 | Delivered | 18,000 sq ft spa; 42-slip marina |
| 67 | Financial / Operating | Accounts receivable aging report (current) | VHG / Natasha Ricard | PAC | 2022-12-19 | 2023-01-04 | Delivered |