CONSTRUCTION LOAN AGREEMENT
Maximum Principal Amount: $45,000,000.00
Dated as of March 18, 2024
by and between
IRONHAVEN LOUDOUN EDGE LLC, a Virginia limited liability company, as Borrower
and
PINNACLE FEDERAL SAVINGS BANK, a federally chartered savings bank, as Lender
Property: 44350 Prentice Drive, Ashburn, Loudoun County, Virginia 20147 Tax Map Parcel No. 087-23-5571
Project: Loudoun Edge Facility — 4.5 MW Edge Data Center
Prepared by Hargrove, Liddell & Pace LLP, 1750 K Street NW, Suite 900, Washington, DC 20006. After recording, return to Pinnacle Federal Savings Bank, 800 Constitution Avenue NW, Suite 550, Washington, DC 20001, Attention: Thomas R. Whitfield, SVP, Technology & Data Center Lending.
RECITALS
WHEREAS, Ironhaven Loudoun Edge LLC, a Virginia limited liability company (VA SCC Entity ID S9103284; EIN 93-4178226) ("Borrower"), was formed on January 8, 2024, as a single-purpose, bankruptcy-remote entity organized and existing under the laws of the Commonwealth of Virginia, the sole member of which is Ironhaven Data Centers LLC, a Virginia limited liability company (VA SCC Entity ID S7842196; EIN 84-3291057) ("IHDC");
WHEREAS, IHDC is a portfolio company of Cobalt Ridge Capital Partners, LP, a Delaware limited partnership (EIN 82-6504391) ("Cobalt Ridge" or "Equity Sponsor"), which holds an eighty-two percent (82%) membership interest in IHDC, with Cobalt Ridge GP LLC, a Delaware limited liability company, serving as the general partner of Cobalt Ridge;
WHEREAS, Borrower holds fee simple title to that certain parcel of real property consisting of approximately 3.2 acres, located at 44350 Prentice Drive, Ashburn, Loudoun County, Virginia 20147, and identified as Tax Map Parcel No. 087-23-5571 in the records of the Loudoun County Commissioner of Revenue (the "Property");
WHEREAS, Borrower intends to develop on the Property a single-story, approximately fifty-two thousand (52,000) square foot purpose-built edge data center facility with 4.5 megawatts ("MW") of critical IT load capacity, featuring N+1 redundancy on power and cooling systems, two independent utility feeds from Northgate Partners LLC, and on-site emergency diesel generation consisting of three (3) 2.5 MW generators (collectively, the "Project" or the "Loudoun Edge Facility");
WHEREAS, Borrower has entered into a guaranteed maximum price construction contract dated March 4, 2024, with Marlowe Asset Management-Pacific Construction, Inc., a Virginia corporation ("General Contractor"), for a contract price of Thirty-Three Million Seven Hundred Fifty Thousand Dollars ($33,750,000.00) (the "Construction Contract");
WHEREAS, the total cost of the Project, including land acquisition, hard and soft construction costs, furniture, fixtures, and equipment, mechanical/electrical/plumbing equipment, contingency, interest reserve, and developer fee, is estimated at Fifty-Seven Million Dollars ($57,000,000.00) (the "Total Project Cost"), as more fully described in the Approved Budget attached hereto as Exhibit A;
WHEREAS, Cobalt Ridge Capital Partners, LP, in its capacity as Guarantor and Equity Sponsor, has agreed to provide a cash equity contribution of Twelve Million Dollars ($12,000,000.00) (the "Equity Contribution"), representing approximately 21.1% of the Total Project Cost, and has further agreed to execute and deliver a Completion Guaranty in favor of Lender;
WHEREAS, Borrower has requested that Pinnacle Federal Savings Bank, a federally chartered savings bank (RSSD ID 1038742) ("Lender"), extend to Borrower a construction-to-permanent loan facility in the maximum principal amount of Forty-Five Million Dollars ($45,000,000.00), and Lender has agreed to make such loan upon the terms and conditions set forth in this Agreement;
WHEREAS, Lender has retained Hargrove, Liddell & Pace LLP as its counsel in connection with this transaction, and Borrower has retained Calderwood & Harkness LLP as its counsel;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following capitalized terms shall have the meanings set forth below. All other capitalized terms used in this Agreement that are not defined in this Section 1.1 shall have the meanings assigned to them elsewhere in this Agreement or in the other Loan Documents.
"Advance" or "Draw" means each disbursement of Loan proceeds made by Lender to or for the benefit of Borrower hereunder in accordance with the terms and conditions of Article III.
"Applicable Margin" means (a) during the Construction Period, two hundred seventy-five basis points (2.75% or 275 bps) per annum, and (b) during the Permanent Loan Period, two hundred twenty-five basis points (2.25% or 225 bps) per annum.
"Appraisal" means the appraisal of the Property and the Project prepared by Graystone Appraisal Group LLC (David Huang, MAI, Certified General Real Estate Appraiser, Virginia License No. 4401-003879), dated February 12, 2024, prepared in accordance with the Uniform Standards of Professional Appraisal Practice ("USPAP") and the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), reflecting an as-stabilized appraised value of the Property and the Project of Seventy-Four Million Five Hundred Thousand Dollars ($74,500,000.00).
"Approved Budget" means the total project cost budget in the aggregate amount of Fifty-Seven Million Dollars ($57,000,000.00), as set forth on Exhibit A attached hereto and incorporated herein by reference, as the same may be modified from time to time with Lender's prior written consent in accordance with Section 3.6.
"As-Stabilized Value" means Seventy-Four Million Five Hundred Thousand Dollars ($74,500,000.00), as determined by the Appraisal.
"Assignment of Construction Contract" means the Collateral Assignment of Construction Contract, Plans, and Permits dated as of the date hereof, executed by Borrower in favor of Lender, and consented to by the General Contractor, pursuant to which Borrower has collaterally assigned to Lender all of Borrower's rights, title, and interest in and to the Construction Contract, the Plans and Specifications, and all permits and approvals relating to the Project.
"Assignment of Leases" means the assignment of leases, rents, and profits from the Property contained within and constituting a part of the Deed of Trust.
"Borrower" means Ironhaven Loudoun Edge LLC, a Virginia limited liability company (VA SCC Entity ID S9103284; EIN 93-4178226), and its permitted successors and assigns.
"Builder's Risk Insurance" means the builder's risk insurance policy issued by Atlas Property & Casualty Insurance Company, Policy No. BRA-2024-00417, providing "all risk" coverage of not less than Forty-Eight Million Dollars ($48,000,000.00) on a replacement cost basis, naming Lender as an additional insured and loss payee, as more fully described in Section 6.5(a).
"Building Permit" means Loudoun County Building Permit No. BLD-2024-001287, issued on February 28, 2024, by the Loudoun County Department of Building and Development, authorizing the construction of the Project on the Property.
"Business Day" means any day other than a Saturday, Sunday, or any other day on which Lender's offices are not open for the conduct of regular banking business or on which commercial banks in Washington, D.C. are authorized or required by law to close. In addition, when used in connection with any SOFR-related determination, "Business Day" means any day that is also a U.S. Government Securities Business Day.
"Cash Management Agreement" means the Cash Management Agreement dated as of the date hereof, by and between Borrower and Lender, governing the collection, deposit, and disbursement of revenues from the Project and the establishment and operation of the Lockbox Account and related accounts.
"Certificate of Occupancy" or "COO" means a permanent or temporary certificate of occupancy (or the functional equivalent thereof) issued by the Loudoun County Department of Building and Development for the Project, certifying that the Project has been constructed in substantial compliance with all applicable building codes and may be lawfully occupied for its intended use.
"Closing Date" means March 18, 2024.
"Collateral" means all Property, Improvements, personal property, equipment, fixtures, leases, rents, accounts, contract rights, general intangibles, and other assets of Borrower that are subject to the liens and security interests granted under the Loan Documents.
"Commitment" means Lender's commitment to make the Loan in a maximum aggregate principal amount of Forty-Five Million Dollars ($45,000,000.00), subject to the terms and conditions of this Agreement.
"Completion Date" means the date on which Substantial Completion is achieved.
"Completion Guaranty" means the Completion Guaranty dated as of the date hereof, executed by Cobalt Ridge Capital Partners, LP, a Delaware limited partnership, in favor of Lender, guarantying the lien-free completion of the Project in accordance with the Plans and Specifications, the Approved Budget, and the construction schedule on or before the Outside Completion Date.
"Construction Contract" means that certain guaranteed maximum price construction contract dated March 4, 2024, by and between Borrower and Marlowe Asset Management-Pacific Construction, Inc., a Virginia corporation, for the construction of the Project, in the guaranteed maximum price contract amount of Thirty-Three Million Seven Hundred Fifty Thousand Dollars ($33,750,000.00), together with all amendments, change orders, and supplements thereto approved by Lender in accordance with this Agreement.
"Construction Loan Interest Rate" means a variable rate per annum equal to SOFR (subject to the SOFR Floor) plus the Applicable Margin for the Construction Period (i.e., SOFR plus 275 basis points), as determined on each Interest Determination Date.
"Construction Period" means the period commencing on the Closing Date and continuing through the earlier of (a) the Conversion Date and (b) the Construction Period Expiration Date, as the same may be extended in accordance with Section 2.9.
"Construction Period Expiration Date" means September 29, 2025, being the date that is eighteen (18) months following the Closing Date, as the same may be extended by one six-month period in accordance with Section 2.9.
"Contingency" means the contingency reserve in the amount of One Million Six Hundred Eighty-Seven Thousand Five Hundred Dollars ($1,687,500.00), which amount represents five percent (5%) of the hard construction costs under the Construction Contract, as reflected in the Approved Budget.
"Conversion Conditions" means the conditions precedent to conversion of the Loan from a construction loan to the Permanent Loan, as set forth in Section 2.8.
"Conversion Date" means the date on which all Conversion Conditions have been satisfied or waived in writing by Lender and the Loan converts from a construction loan to the Permanent Loan in accordance with Section 2.8.
"Debt Service" means, for any period, the aggregate of all scheduled payments of principal and interest on the Loan (and any other permitted indebtedness secured by the Property) during such period.
"DSCR" or "Debt Service Coverage Ratio" has the meaning set forth in Section 7.1(a).
"Deed of Trust" means the Deed of Trust, Assignment of Leases and Rents, Security Agreement, and Fixture Filing dated as of the date hereof, executed by Borrower (as Grantor) for the benefit of Lender (as Beneficiary), to be recorded in the Clerk's Office of the Circuit Court of Loudoun County, Virginia, encumbering the Property, the Improvements, and related personal property and fixtures, and securing all obligations of Borrower under the Loan Documents.
"Default Rate" means (a) during the Construction Period, the Construction Loan Interest Rate then in effect plus four percent (4.00%) per annum, and (b) during the Permanent Loan Period, the Permanent Loan Interest Rate plus four percent (4.00%) per annum.
"Developer Fee" means the developer fee in the amount of Nine Hundred Fifty Thousand Dollars ($950,000.00) as set forth in the Approved Budget.
"Draw Request" means a written request for an Advance submitted by Borrower to Lender, substantially in the form attached hereto as Exhibit B, together with all required supporting documentation as described in Section 3.1.
"Environmental Indemnity" means the Environmental Indemnity Agreement dated as of the date hereof, executed by IHDC and Cobalt Ridge Capital Partners, LP, jointly and severally, in favor of Lender, indemnifying and holding harmless Lender from and against all environmental liabilities relating to the Property.
"Environmental Report" means the Phase I Environmental Site Assessment of the Property, dated February 16, 2024, prepared by an environmental consultant acceptable to Lender in accordance with ASTM Standard E1527-21 and the EPA All Appropriate Inquiries Rule (40 CFR Part 312).
"Equity Contribution" means the cash equity contribution of Twelve Million Dollars ($12,000,000.00) to be made by Cobalt Ridge Capital Partners, LP to fund a portion of the Total Project Cost, representing approximately 21.1% of Total Project Cost.
"Escrow Agent" means Meridian Surety & Title Company, acting through Karen Pavelka, Title Officer, or such other title company as may be approved in writing by Lender.
"Event of Default" has the meaning set forth in Article VIII (specifically, Section 9.1).
"Exit Fee" means a fee equal to twenty-five one-hundredths of one percent (0.25%) of the outstanding principal balance of the Loan as of the Conversion Date, payable on the Conversion Date as a condition to conversion.
"Extension Fee" means a fee equal to fifty one-hundredths of one percent (0.50%) of the total Commitment (i.e., $225,000.00), payable in connection with any extension of the Construction Period Expiration Date granted by Lender pursuant to Section 2.9.
"FF&E/MEP" means furniture, fixtures, and equipment, and mechanical, electrical, and plumbing equipment to be installed in connection with the Project, budgeted in the Approved Budget at Five Million Eight Hundred Thousand Dollars ($5,800,000.00).
"Final Closing Date" means March 29, 2024, being the date on which the first Advance is eligible to be made hereunder following full funding and application of the Equity Contribution.
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time, consistently applied.
"General Contractor" means Marlowe Asset Management-Pacific Construction, Inc., a Virginia corporation, and any replacement contractor approved by Lender in writing.
"GMP" means the guaranteed maximum price of Thirty-Three Million Seven Hundred Fifty Thousand Dollars ($33,750,000.00) established under the Construction Contract for the hard construction costs of the Project.
"Guarantor" means Cobalt Ridge Capital Partners, LP, a Delaware limited partnership (EIN 82-6504391), together with its successors and permitted assigns.
"Hard Costs" means the construction costs payable under the Construction Contract, in the guaranteed maximum price of Thirty-Three Million Seven Hundred Fifty Thousand Dollars ($33,750,000.00), including all labor, materials, equipment, and subcontractor costs.
"IHDC" means Ironhaven Data Centers LLC, a Virginia limited liability company (VA SCC Entity ID S7842196; EIN 84-3291057), the sole member of Borrower.
"Improvements" means all buildings, structures, site improvements, parking facilities, infrastructure, utility connections, landscaping, and other improvements now existing or hereafter constructed, erected, or placed upon the Property, including the Loudoun Edge Facility.
"Independent Engineer" means Whitmore & Associates, PC (James A. Whitmore, PE, Virginia License No. 0402-046271), or such other independent engineering firm as may be approved by Lender in writing.
"Interest Determination Date" means, with respect to each Interest Period, the date that is two (2) Business Days prior to the first day of such Interest Period.
"Interest Period" means each calendar month during the Construction Period, with each Interest Period commencing on the first day of such calendar month and ending on the last day of such calendar month; provided that the initial Interest Period shall commence on the Closing Date and end on the last day of the calendar month in which the Closing Date occurs.
"Interest Reserve" means the interest reserve in the amount of Two Million Three Hundred Sixty-Two Thousand Five Hundred Dollars ($2,362,500.00), included as a line item in the Approved Budget and available to fund interest payments on the Loan during the Construction Period, subject to Lender's approval of each related Draw Request.
"Land Cost" means Eight Million Two Hundred Fifty Thousand Dollars ($8,250,000.00), representing the acquisition cost of the Property completed in the fourth quarter of 2023 with equity funds.
"Lease(s)" means, collectively, the Sentinel Lease, the Ridgeline Lease, and any future leases of space within the Project entered into by Borrower and approved in writing by Lender.
"Leasing Threshold" means seventy percent (70%) of the total rentable square footage of the Project (i.e., a minimum of 36,400 square feet of the 52,000 total square feet), under executed leases approved by Lender.
"Lender" means Pinnacle Federal Savings Bank, a federally chartered savings bank (RSSD ID 1038742), with its principal office located at 800 Constitution Avenue NW, Suite 550, Washington, DC 20001, and its successors, assigns, and participants.
"Lender's Counsel" means Hargrove, Liddell & Pace LLP, 1750 K Street NW, Suite 900, Washington, DC 20006 (Attention: Jonathan Breckinridge), or such other counsel as Lender may designate from time to time.
"Loan" means the construction-to-permanent loan extended by Lender to Borrower in the maximum aggregate principal amount of Forty-Five Million Dollars ($45,000,000.00), pursuant to the terms and conditions of this Agreement and the other Loan Documents.
"Loan Documents" means, collectively, this Agreement, the Note, the Deed of Trust, the Completion Guaranty, the Environmental Indemnity, the Assignment of Construction Contract, the Cash Management Agreement, the Pledge Agreement, Borrower's Closing Certificate, the opinion letter of Calderwood & Harkness LLP, and all other agreements, instruments, certificates, and documents executed and/or delivered by Borrower, IHDC, Guarantor, or any other party in connection with the Loan, as each may be amended, restated, supplemented, or otherwise modified from time to time.
"Loan Party" means each of Borrower, IHDC, and Guarantor.
"Loan-to-Cost Ratio" or "LTC" means the ratio of the total Loan amount to the Total Project Cost, expressed as a percentage. As of the Closing Date, the LTC is approximately 78.9% ($45,000,000 ÷ $57,000,000).
"Loan-to-Value Ratio" or "LTV" means the ratio of the outstanding principal balance of the Loan to the appraised value of the Property and the Project, as determined by the most recent Appraisal obtained in accordance with this Agreement. The as-stabilized LTV at the Closing Date is approximately 60.4% ($45,000,000 ÷ $74,500,000).
"Lockbox Account" has the meaning set forth in the Cash Management Agreement.
"Material Adverse Effect" means any event, condition, circumstance, or change that, individually or in the aggregate, is or could reasonably be expected to be materially adverse to (a) the business, financial condition, operations, assets, or prospects of Borrower, IHDC, or Guarantor, (b) the value, condition, or marketability of the Property or the Project, (c) the ability of any Loan Party to perform its obligations under any Loan Document, or (d) the validity, enforceability, or priority of the liens and security interests created by the Loan Documents.
"Maturity Date" means the date that is seven (7) years following the Conversion Date; provided, however, that if such date is not a Business Day, the Maturity Date shall be the immediately preceding Business Day. Based on a projected Conversion Date in the fourth quarter of 2025, the estimated Maturity Date is approximately the fourth quarter of 2032.
"Maximum Loan Amount" means Forty-Five Million Dollars ($45,000,000.00).
"Net Operating Income" or "NOI" means, for any period, the gross revenues of the Project (including base rent, percentage rent, and other tenant charges) for such period, minus all reasonable and customary operating expenses of the Project for such period (including real estate taxes, insurance, management fees, repairs and maintenance, and reserves), but excluding depreciation, amortization, capital expenditures, debt service, and income taxes.
"Note" means the Promissory Note in the principal amount of Forty-Five Million Dollars ($45,000,000.00), dated as of the date hereof, executed by Borrower in favor of Lender, evidencing the obligation of Borrower to repay the Loan.
"Origination Fee" means a fee in the amount of seventy-five one-hundredths of one percent (0.75%) of the Maximum Loan Amount, equal to Three Hundred Thirty-Seven Thousand Five Hundred Dollars ($337,500.00).
"Outside Completion Date" means September 30, 2025, being the date by which Substantial Completion must be achieved, subject to any extension of the Construction Period granted in accordance with Section 2.9.
"Permanent Loan" means the Loan following the Conversion Date, on the terms and conditions set forth in this Agreement as applicable to the period after conversion.
"Permanent Loan Interest Rate" means a fixed rate per annum equal to the yield on the 5-Year U.S. Treasury Note (as published by the U.S. Department of the Treasury) as of the Conversion Date, plus two hundred twenty-five basis points (2.25% or 225 bps), which rate shall be fixed for the remainder of the term of the Permanent Loan.
"Permanent Loan Period" means the period commencing on the Conversion Date and continuing through and including the Maturity Date.
"Permitted Exceptions" means the title exceptions and encumbrances listed on Exhibit D attached hereto.
"Plans and Specifications" means the architectural, structural, mechanical, electrical, plumbing, and civil engineering plans, drawings, and specifications for the Project, as prepared by the project architect and engineers, and as approved by Lender, together with all amendments and revisions thereto approved by Lender in accordance with this Agreement.
"Pledge Agreement" means the Pledge and Security Agreement dated as of the date hereof, executed by IHDC in favor of Lender, pursuant to which IHDC has pledged one hundred percent (100%) of its membership interests in Borrower to Lender as additional collateral for the Loan.
"Project" or "Loudoun Edge Facility" means the approximately 52,000 square foot, 4.5 MW purpose-built edge data center facility to be constructed on the Property in accordance with the Plans and Specifications.
"Property" means the real property consisting of approximately 3.2 acres located at 44350 Prentice Drive, Ashburn, Loudoun County, Virginia 20147, identified as Tax Map Parcel No. 087-23-5571, and more particularly described in Exhibit E attached hereto.
"Retainage" means ten percent (10%) of each Advance attributable to Hard Costs, which amount shall be withheld by Lender and held in a Retainage subaccount pending satisfaction of the release conditions set forth in Section 3.3.
"Ridgeline Lease" means that certain Lease Agreement dated February 5, 2024, by and between Borrower, as landlord, and Ridgeline Federal Solutions LLC, a Virginia limited liability company, as tenant, for approximately 16,000 rentable square feet (1.4 MW critical IT load) within the Project, for a term of seven (7) years on a triple net (NNN) basis, at an initial annual base rent of Two Hundred Ten Dollars ($210.00) per rentable square foot (Three Million Three Hundred Sixty Thousand Dollars ($3,360,000.00) per annum), as the same may be amended, supplemented, or modified from time to time with the prior written consent of Lender.
"Sentinel Lease" means that certain Lease Agreement dated January 15, 2024, by and between Borrower, as landlord, and Sentinel Cloud Services, Inc., a Delaware corporation, as tenant, for approximately 22,000 rentable square feet (1.9 MW critical IT load) within the Project, for a term of ten (10) years on a triple net (NNN) basis, at an initial annual base rent of Two Hundred Twenty-Five Dollars ($225.00) per rentable square foot (Four Million Nine Hundred Fifty Thousand Dollars ($4,950,000.00) per annum), as the same may be amended, supplemented, or modified from time to time with the prior written consent of Lender.
"SOFR" means the Secured Overnight Financing Rate as administered and published by the Federal Reserve Bank of New York (or a successor administrator) on the Federal Reserve Bank of New York's website (or any successor source), for the applicable Business Day. If SOFR is not published on any given day, SOFR for such day shall be SOFR as published on the immediately preceding Business Day for which SOFR was published. If the Federal Reserve Bank of New York (or its successor) ceases to publish SOFR, Lender shall select a comparable replacement benchmark in its reasonable discretion, which replacement shall be effective without the consent of Borrower.
"SOFR Floor" means three percent (3.00%) per annum. In no event shall SOFR, for purposes of calculating the Construction Loan Interest Rate or any other interest rate determined by reference to SOFR under this Agreement, be deemed to be less than the SOFR Floor.
"Soft Costs" means the architectural, engineering, permitting, legal, insurance, inspection, and other non-construction costs of the Project, budgeted in the Approved Budget at Four Million Two Hundred Thousand Dollars ($4,200,000.00).
"Substantial Completion" means the completion of the Project in all material respects in accordance with the Plans and Specifications (subject only to minor punch list items that do not materially impair the use, occupancy, or operation of the Project), as evidenced by (a) the issuance of a Certificate of Occupancy by Loudoun County, (b) the delivery of a certificate of substantial completion by the Independent Engineer, and (c) the delivery of the architect's certificate of substantial completion.
"Surety Bond" means the performance and payment bond issued by Allegiance Bond & Casualty Co. in connection with the Construction Contract, in a penal sum not less than the GMP, naming Lender as an additional obligee.
"Title Company" means Meridian Surety & Title Company, acting through Karen Pavelka, Title Officer, or such other nationally recognized title insurance company as may be approved by Lender.
"Title Policy" means the ALTA lender's title insurance policy (2021 form) in the amount of Forty-Five Million Dollars ($45,000,000.00), issued by the Title Company, insuring the lien of the Deed of Trust as a valid first-priority lien on the Property, subject only to Permitted Exceptions, together with all endorsements required by Lender.
"Total Project Cost" means Fifty-Seven Million Dollars ($57,000,000.00), as itemized in the Approved Budget.
"Unmatured Default" means any event or condition that, with the giving of notice, the passage of time, or both, would constitute an Event of Default.
"Unused Line Fee" means a fee equal to twenty-five one-hundredths of one percent (0.25%) per annum, calculated on the average daily undrawn portion of the Commitment during the Construction Period, payable quarterly in arrears.
"U.S. Government Securities Business Day" means any day except for a Saturday, Sunday, or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
"Zoning" means the PD-IP (Planned Development — Industrial Park) zoning classification applicable to the Property under the Loudoun County Revised 1993 Zoning Ordinance, as amended.
Section 1.2 — Rules of Interpretation
For purposes of this Agreement and the other Loan Documents, unless the context otherwise requires:
(a) The terms "herein," "hereof," "hereto," "hereunder," and similar terms refer to this Agreement as a whole and not to any particular section or provision hereof. The term "including" means "including, without limitation."
(b) References to the singular include the plural, and references to the plural include the singular. References to any gender include all genders.
(c) References to any "Section," "Article," "Exhibit," or "Schedule" are to sections, articles, exhibits, or schedules of this Agreement, unless otherwise specified.
(d) All accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with GAAP, consistently applied.
(e) All references to times of day shall refer to Eastern Time (or Eastern Daylight Time, as applicable), unless otherwise specified.
(f) If any date specified herein for the giving of notice or the taking of any action falls on a day that is not a Business Day, such date shall be deemed to refer to the next succeeding Business Day.
(g) References to any statute, regulation, or other law include all statutory and regulatory provisions consolidating, amending, replacing, or interpreting such statute, regulation, or law, and any reference to any statute, regulation, or law shall also refer to all rules and regulations promulgated thereunder, unless the context otherwise requires.
(h) The headings and captions in this Agreement are for convenience of reference only and shall not be considered a part of or affect the construction or interpretation of any provision hereof.
(i) The words "will" and "shall" are used interchangeably and have the same meaning. Each shall be interpreted as mandatory and not permissive.
Section 1.3 — Exhibits and Schedules
The following Exhibits and Schedules are attached hereto and incorporated herein by reference and made a part of this Agreement as though fully set forth at length:
• Exhibit A — Approved Project Budget
• Exhibit B — Form of Draw Request
• Exhibit C — Form of Compliance Certificate
• Exhibit D — Permitted Exceptions
• Exhibit E — Description of the Property (Legal Description)
• Exhibit F — List of Loan Documents
ARTICLE II — THE LOAN
Section 2.1 — Commitment; Maximum Loan Amount
Subject to and upon the terms and conditions set forth in this Agreement, Lender hereby agrees to make the Loan to Borrower in a maximum aggregate principal amount not to exceed Forty-Five Million Dollars ($45,000,000.00) (the "Maximum Loan Amount" or "Commitment"). The Loan shall be evidenced by the Note. The proceeds of the Loan shall be advanced to Borrower during the Construction Period in multiple Advances in accordance with the disbursement procedures set forth in Article III for the sole purpose of financing the development and construction of the Project.
Lender shall have no obligation to make any Advance in excess of the Maximum Loan Amount or to the extent that the sum of (a) all Advances previously made plus (b) the amount of the requested Advance would exceed the Maximum Loan Amount. The Loan-to-Cost Ratio shall not exceed seventy-eight and nine-tenths percent (78.9%) of the Total Project Cost of Fifty-Seven Million Dollars ($57,000,000.00). The Loan-to-Value Ratio (calculated on an as-stabilized basis using the As-Stabilized Value of $74,500,000 per the Appraisal) shall not exceed sixty and four-tenths percent (60.4%) at the Closing Date.
Amounts repaid or prepaid under the Loan may not be re-borrowed. The Commitment shall terminate on the earlier of (a) the Conversion Date, (b) the Construction Period Expiration Date (as the same may be extended), and (c) the date on which the Commitment is terminated in accordance with the terms of this Agreement.
Section 2.2 — Equity Contribution; Equity-First Requirement
(a) Equity Contribution. Prior to the submission by Borrower of the first Draw Request hereunder, Cobalt Ridge Capital Partners, LP shall have contributed the full Equity Contribution of Twelve Million Dollars ($12,000,000.00) (representing approximately 21.1% of the Total Project Cost) in immediately available funds into an escrow account established with and maintained by Meridian Surety & Title Company (the "Equity Escrow Account"). Evidence of such funding shall be provided to Lender in the form of a wire transfer confirmation and acknowledgment from the Escrow Agent, dated no later than March 22, 2024.
(b) Equity-First Requirement. The Equity Contribution shall be applied to Project costs in advance of any Loan proceeds. Lender shall have no obligation to fund any Advance under this Agreement until the entire Equity Contribution has been fully disbursed and applied to eligible Project costs. Borrower shall provide Lender with evidence satisfactory to Lender in its reasonable discretion of the disbursement and application of the Equity Contribution, including copies of paid invoices, receipts, and canceled checks or wire transfer confirmations. The equity-first requirement is intended to ensure that Borrower has committed its own capital to the Project before any exposure is assumed by Lender, thereby aligning the interests of Borrower and its equity sponsors with those of Lender.
(c) First Advance. Subject to satisfaction of all conditions precedent set forth in Article IV and the equity-first requirement of this Section 2.2, the first Advance shall be eligible for funding on or after March 29, 2024 (the "Final Closing Date").
(d) Confirmation. At the time of each Draw Request, Borrower shall certify to Lender that the equity-first requirement has been fully satisfied and that the Equity Contribution has been fully applied to Project costs.
Section 2.3 — Interest Rate — Construction Period
(a) Construction Loan Interest Rate. During the Construction Period, the outstanding principal balance of the Loan shall bear interest at a variable rate per annum equal to SOFR (as determined on each Interest Determination Date) plus two hundred seventy-five basis points (2.75%) (the "Construction Loan Interest Rate").
(b) SOFR Floor. In no event shall SOFR be deemed to be less than three percent (3.00%) per annum for purposes of calculating the Construction Loan Interest Rate. If the applicable SOFR on any Interest Determination Date is less than 3.00%, SOFR shall be deemed to be 3.00% for such Interest Period.
(c) Interest Determination. SOFR shall be determined on each Interest Determination Date, which shall be the date that is two (2) Business Days prior to the first day of each Interest Period. The Construction Loan Interest Rate as so determined shall apply for the entirety of such Interest Period. Lender shall provide written or electronic notice to Borrower of the applicable Construction Loan Interest Rate for each Interest Period within two (2) Business Days following each Interest Determination Date. Lender's determination of SOFR and the Construction Loan Interest Rate shall be conclusive and binding absent manifest error.
(d) Calculation. Interest shall be calculated on the basis of a 360-day year and actual number of days elapsed (actual/360).
(e) Interest-Only Payments. During the Construction Period, Borrower shall make interest-only payments on the outstanding principal balance of the Loan, payable monthly in arrears on the first Business Day of each calendar month. The first interest payment shall be due and payable on the first Business Day of the first full calendar month following the date of the initial Advance.
(f) Interest Reserve. Interest due during the Construction Period may be funded from the Interest Reserve of Two Million Three Hundred Sixty-Two Thousand Five Hundred Dollars ($2,362,500.00) included in the Approved Budget, subject to Lender's prior approval of each Draw Request submitted for that purpose. In the event the Interest Reserve is exhausted prior to the end of the Construction Period, Borrower shall be responsible for the payment of interest from other sources.
(g) Default Rate. Upon the occurrence and during the continuance of an Event of Default, the outstanding principal balance of the Loan shall bear interest at the Default Rate, which during the Construction Period shall be equal to the Construction Loan Interest Rate then in effect plus four percent (4.00%) per annum. Interest at the Default Rate shall accrue from the date of such Event of Default until such Event of Default is cured or waived (or, if earlier, until the Loan is repaid in full), and shall be payable on demand.
Section 2.4 — Interest Rate — Permanent Loan Period
(a) Permanent Loan Interest Rate. From and after the Conversion Date, the outstanding principal balance of the Loan shall bear interest at a fixed rate per annum equal to the yield on the 5-Year U.S. Treasury Note (as published by the U.S. Department of the Treasury) as of the Conversion Date, plus two hundred twenty-five basis points (2.25%) (the "Permanent Loan Interest Rate"). The Permanent Loan Interest Rate shall be fixed for the entire remaining term of the Permanent Loan from and after the Conversion Date through and including the Maturity Date.
(b) Determination. The applicable 5-Year U.S. Treasury rate shall be determined by Lender as of the Conversion Date based on the yield published by the U.S. Department of the Treasury for the most recent auction of 5-Year Treasury Notes occurring on or prior to the Conversion Date. Lender's determination shall be conclusive and binding absent manifest error.
(c) Calculation. Interest during the Permanent Loan Period shall be calculated on the basis of a 360-day year and the actual number of days elapsed (actual/360).
(d) Default Rate. Upon the occurrence and during the continuance of an Event of Default during the Permanent Loan Period, the outstanding principal balance of the Loan shall bear interest at the Default Rate, which shall be equal to the Permanent Loan Interest Rate plus four percent (4.00%) per annum, payable on demand.
Section 2.5 — Repayment and Amortization
(a) Construction Period. During the Construction Period, the Loan shall be interest-only. No scheduled principal payments shall be required during the Construction Period, except as otherwise provided in connection with a prepayment under Section 2.6 or an acceleration under Article IX.
(b) Permanent Loan Period. From and after the Conversion Date, the outstanding principal balance of the Loan shall be repaid in equal monthly installments of principal and interest based on a twenty-five (25) year amortization schedule, with the first such installment due and payable on the first Business Day of the first full calendar month following the Conversion Date, and subsequent installments due and payable on the first Business Day of each calendar month thereafter.
(c) Balloon Payment. All outstanding principal, together with all accrued and unpaid interest, fees, costs, expenses, and other amounts due and payable under the Loan Documents, shall be due and payable in full on the Maturity Date. The Maturity Date is the date that is seven (7) years following the Conversion Date. Based on a projected Conversion Date in approximately the fourth quarter of 2025, the estimated Maturity Date would be approximately the fourth quarter of 2032. Borrower acknowledges that the amortization schedule described in subsection (b) above will not fully amortize the Loan by the Maturity Date, and that a substantial balloon payment will be required on the Maturity Date.
(d) Application of Payments. All payments received by Lender shall be applied first to accrued and unpaid fees, costs, and expenses; second to accrued and unpaid interest; and third to outstanding principal, unless otherwise specified in this Agreement or directed by Lender during the continuance of an Event of Default.
Section 2.6 — Prepayment
(a) Construction Period Prepayments. During the Construction Period, Borrower may prepay the outstanding principal balance of the Loan, in whole or in part, at any time, without premium, penalty, or other charge, upon not less than five (5) Business Days' prior written notice to Lender.
(b) Permanent Loan Period Prepayments. During the Permanent Loan Period, the Loan may be prepaid, in whole or in part, subject to the following:
(i) Years 1 through 3 Post-Conversion. During the period commencing on the Conversion Date and ending on the third (3rd) anniversary of the Conversion Date, any prepayment (whether voluntary or involuntary, other than in connection with a casualty or condemnation) shall be accompanied by a yield maintenance premium. The yield maintenance premium shall be equal to the greater of (A) zero and (B) the present value (Discounted at the applicable U.S. Treasury rate for the remaining scheduled term of the Loan plus fifty (50) basis points) of the excess of (1) the Permanent Loan Interest Rate over (2) such U.S. Treasury rate, applied to the principal amount being prepaid for the remaining period through the third anniversary of the Conversion Date.
(ii) Year 4 Post-Conversion. During the period commencing on the third (3rd) anniversary of the Conversion Date and ending on the fourth (4th) anniversary of the Conversion Date, any prepayment shall be accompanied by a prepayment premium equal to one percent (1%) of the principal amount being prepaid.
(iii) Year 5 Through Maturity. From and after the fourth (4th) anniversary of the Conversion Date through the Maturity Date, the Loan may be prepaid, in whole or in part, without premium, penalty, or other charge (the "open period").
(c) Partial Prepayments. Partial prepayments shall be applied in inverse order of maturity (i.e., to the last maturing installments of principal first). The minimum amount of any partial prepayment shall be One Million Dollars ($1,000,000.00), or the entire outstanding principal balance if less than One Million Dollars.
(d) Notice. Any prepayment under this Section 2.6 shall require not less than thirty (30) days' prior written notice to Lender (which notice shall be irrevocable once delivered), specifying the proposed prepayment date and the principal amount to be prepaid. Interest shall be payable on the amount prepaid through and including the prepayment date.
Section 2.7 — Fees
(a) Origination Fee. Borrower shall pay to Lender an origination fee in the amount of seventy-five one-hundredths of one percent (0.75%) of the Maximum Loan Amount, equal to Three Hundred Thirty-Seven Thousand Five Hundred Dollars ($337,500.00) (the "Origination Fee"). The Origination Fee shall be fully earned as of the Closing Date and shall be due and payable on the Final Closing Date (March 29, 2024). The Origination Fee is non-refundable and shall not be subject to rebate or credit under any circumstances.
(b) Unused Line Fee. Borrower shall pay to Lender an unused line fee equal to twenty-five one-hundredths of one percent (0.25%) per annum, calculated on the average daily undrawn portion of the Commitment (the "Unused Line Fee"). The Unused Line Fee shall accrue from the Closing Date and shall be payable quarterly in arrears on the last Business Day of each calendar quarter, commencing on the first quarterly payment date following the Closing Date. The Unused Line Fee shall cease to accrue upon the earlier of (i) the date on which the Commitment is fully funded, (ii) the Conversion Date, and (iii) the date on which the Commitment terminates.
(c) Exit Fee. Borrower shall pay to Lender an exit fee equal to twenty-five one-hundredths of one percent (0.25%) of the outstanding principal balance of the Loan as of the Conversion Date (the "Exit Fee"). The Exit Fee shall be due and payable on the Conversion Date as a condition precedent to conversion of the Loan to the Permanent Loan.
(d) Extension Fee. If Borrower requests, and Lender in its sole discretion grants, an extension of the Construction Period Expiration Date pursuant to Section 2.9, Borrower shall pay to Lender an extension fee equal to fifty one-hundredths of one percent (0.50%) of the total Commitment, which amount equals Two Hundred Twenty-Five Thousand Dollars ($225,000.00) (the "Extension Fee"). The Extension Fee shall be due and payable on the date of Lender's written approval of such extension.
(e) Independent Engineer Fee. Borrower shall pay an inspection fee of Three Thousand Five Hundred Dollars ($3,500.00) per draw inspection directly to Whitmore & Associates, PC (or such other Independent Engineer as may be approved by Lender) in connection with each Draw Request requiring an Independent Engineer certification pursuant to Section 3.2. Such fees shall not be deducted from Loan proceeds.
(f) Lender's Counsel Fees. Borrower shall reimburse Lender for all reasonable fees and out-of-pocket expenses incurred by Hargrove, Liddell & Pace LLP in connection with the negotiation, documentation, due diligence, and closing of the Loan, subject to a cap of One Hundred Seventy-Five Thousand Dollars ($175,000.00) for pre-closing fees and expenses. Such amount shall be payable at closing. Post-closing fees of Lender's counsel incurred in connection with Draw Request reviews, amendments, waivers, consents, enforcement, and administration of the Loan shall be for the account of Borrower and payable upon demand, without regard to the cap.
(g) Late Charge. If any payment of principal, interest, or any other amount due hereunder is not received by Lender within ten (10) calendar days after its due date, Borrower shall pay to Lender a late charge equal to five percent (5%) of the amount of such delinquent payment. The late charge is intended to compensate Lender for the administrative costs of processing delinquent payments and is not intended as a penalty. The imposition of a late charge shall not constitute a waiver of any Event of Default arising from such late payment or of any remedy available to Lender on account thereof.
Section 2.8 — Conversion to Permanent Loan; Conversion Conditions
(a) Conversion. Upon written request by Borrower delivered to Lender not less than thirty (30) days prior to the requested Conversion Date, and subject to the satisfaction (or written waiver by Lender in its sole discretion) of all Conversion Conditions set forth in subsection (b) below, the Loan shall convert from a construction loan to a permanent amortizing term loan (the "Permanent Loan") on the Conversion Date. Upon conversion, the outstanding principal balance of the Loan as of the Conversion Date (the "Converted Principal") shall constitute the initial principal balance of the Permanent Loan, and the Permanent Loan Interest Rate shall be determined in accordance with Section 2.4.
(b) Conversion Conditions. The following conditions must be satisfied (or waived in writing by Lender) on or before the Conversion Date:
(i) Certificate of Occupancy. Issuance of a Certificate of Occupancy by the Loudoun County Department of Building and Development for the completed Project, confirming that the Project may be lawfully occupied for its intended use as a data center facility.
(ii) Leasing Threshold. Achievement of the Leasing Threshold: a minimum of seventy percent (70%) of the total rentable square footage of the Project (i.e., 36,400 square feet of 52,000 total square feet) shall be pre-leased pursuant to executed leases approved by Lender. As of the Closing Date, this condition is currently satisfied, with 38,000 square feet (approximately 73.1%) pre-leased under the Sentinel Lease (22,000 SF) and the Ridgeline Lease (16,000 SF), with total committed annual base rent of Eight Million Three Hundred Ten Thousand Dollars ($8,310,000.00).
(iii) Final Lien Waivers. Delivery to Lender of final, unconditional lien waivers from the General Contractor and all subcontractors, sub-subcontractors, materialmen, and suppliers in form and substance satisfactory to Lender, evidencing payment in full of all amounts due under the Construction Contract and all subcontracts.
(iv) As-Built Survey. Delivery to Lender of a final as-built ALTA/NSPS survey of the Property and the Improvements, prepared by a licensed surveyor, certified to Lender and the Title Company, showing all Improvements as constructed and confirming no encroachments or violations of setback requirements, easements, or other restrictions.
(v) Updated Appraisal. Confirmation by Graystone Appraisal Group LLC (or another MAI-designated appraiser approved by Lender) that the as-stabilized appraised value of the completed Project supports a Loan-to-Value Ratio not in excess of seventy percent (70%). If the appraised value does not support such LTV, Borrower shall prepay the Loan in the amount necessary to achieve compliance, or provide additional collateral acceptable to Lender.
(vi) No Default. No Event of Default or Unmatured Default shall have occurred and be continuing as of the Conversion Date.
(vii) Final Cost Certification. Delivery to Lender of a final cost certification from Borrower and the Independent Engineer, certifying the total cost of the Project, confirming that all Project costs have been paid in full (or adequate reserves have been established for remaining obligations), and that the Project has been completed within the Approved Budget.
(viii) Title Date-Down. Delivery to Lender of a date-down endorsement to the Title Policy issued by Meridian Surety & Title Company, confirming the continued first-priority lien status of the Deed of Trust with no intervening liens, encumbrances, or exceptions other than Permitted Exceptions.
(ix) Exit Fee. Receipt by Lender of the Exit Fee in immediately available funds.
(x) Release of Retainage. Release of all Retainage to the General Contractor, less any amounts withheld by agreement of the parties for uncompleted punch list items (which punch list holdback shall not exceed $250,000).
(xi) Updated Insurance Certificates. Delivery to Lender of updated insurance certificates and policies evidencing permanent commercial property insurance (replacement cost coverage), commercial general liability insurance, and such other insurance as required under Section 6.5, each naming Lender as loss payee and additional insured with thirty (30) days' prior written notice of cancellation or material change.
(c) Failure to Convert. If the Conversion Conditions are not satisfied (or waived by Lender) on or before the Construction Period Expiration Date (as the same may be extended pursuant to Section 2.9), all outstanding principal, accrued interest, fees, and other obligations under the Loan shall become immediately due and payable, unless Lender, in its sole discretion, agrees to extend the Construction Period.
Section 2.9 — Extension of Construction Period
(a) If Substantial Completion has not occurred by the Construction Period Expiration Date, Borrower may request a one-time extension of the Construction Period for an additional period of up to six (6) months (extending the Construction Period Expiration Date to March 29, 2026), by delivering written notice to Lender not less than thirty (30) days prior to the then-current Construction Period Expiration Date.
(b) Lender's grant of any such extension shall be in Lender's sole discretion and shall be conditioned upon the satisfaction of each of the following:
(i) Payment of the Extension Fee of Two Hundred Twenty-Five Thousand Dollars ($225,000.00) in immediately available funds.
(ii) No Event of Default or Unmatured Default shall have occurred and be continuing.
(iii) Delivery to Lender of a written certification from the Independent Engineer (Whitmore & Associates, PC) confirming that, based on the then-current state of construction and a revised construction schedule, completion of the Project is reasonably achievable within the extended Construction Period.