Natick Investment Project

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Current Funding Status:

Tranche A: 75k/400k Committed

Tranche B: 0/450k Committed

Funding & Deployment

This page maps the entire flow of your investment capital, every condition, procedure, deadline, and contingency is spelled out in great detail and in sequence, every default scenario clarified, with copious references back to the master Contract, which can be found under the Legal & Structural Framework page of this website.

The details contained herein supplement the Economical Context and Risk Profile components of this project, and together should convey the full capital risk profiles and downside protection mechanisms associated with this investment offering.

For detailed default and unwind procedures, please visit the Default Procedures page of this website.

I. Full Funding and Deployment Structure:

The Parties acknowledge a gated stage structure totaling the Maximum Principal Amount of $850,000.00, consisting of:

Tranche A total principal amount of $400,000.00 consisting of:

  • Tranche A Deposit Principal: $40,000.00 to be released at the issuance of demolition permit as Stage 2 Funding Principal.
  • Stage 1 Funding Principal: $360,000.00, to be released at Closing.

Tranche B total principal amount of $450,000.00, consisting of:

  • Tranche B Deposit Principal: $45,000.00, to be released together with Stage 9 Funding Principal.
  • State 3 Funding Principal: $75,000.00, to be released at the passing of municipal foundation footing inspection.
  • State 4 Funding Principal: $85,000.00, to be released at the passing of the municipal basement slab inspection.
  • State 5 Funding Principal: $85,000.00, to be released at the completion of building envelope dry in.
  • State 6 Funding Principal: $50,000.00, to be released at the passing of all rough trade inspection.
  • State 7 Funding Principal: $50,000.00, to be released at the passing of rough framing and insulation inspection.
  • State 8 Funding Principal: $50,000.00, to be released at the completion of 90% above grade wall and ceiling paint.
  • State 9 Funding Principal: $10,000.00, to be released at the completion of 90% interior floor and tile works.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.0

II. Tranche A Deposit, Funding, Release, and Default:

Tranche A Initial Commitment and Deposit:

Once a prospective investor executes the Loan Commitment and Escrow Agreement (master Contract) and the Collateral Agency Agreement:

  1. A deposit equalling 10% of the total committed amount for that Lender is required to be wired to a dedicated escrow under the control of the Collateral Agent.
  2. An official funding call shall be issued by the Collateral Agent for the designated deposit amount, 12%/annum interest start accruing upon receipt of deposit.
  3. The respective Lender has up to 21 business days to fulfill the deposit funding obligation, the expiration of which results in executed contracts voided.
  4. A Borrower funded, $25,000.00 Collateral Reserve Escrow shall be established upon the receipt of the first Lender Deposit Principal.
  5. Prospective investors may elect to make deposit for Tranche A or Tranche B only, or both, interest shall accrue on any deposit received regardless of Tranche.
  6. Prospective investors may elect to authorize direct draws in lieu of receiving funding calls and wiring instructions, for which, a hard draw cap shall be imposed for each draw.

Reference: Loan Commitment and Escrow Agreement, Article IV, 4.3, 4.4, 4.7; Article VI, 6.2, 6.4.

Funding deadline, Lender Default, Retry Generally:

For all funding calls authorized under the master Contract after the receipt of initial deposit, if a Lender is unable to fulfill his/her post-deposit funding obligations within 21 business days following the official funding call and wire instruction for a given Stage, such Lender shall be deemed as a Defaulting Lender.

At least one (1) retry attempt is mandated by the master Contract within 12 business days following the initial official funding call, in the form of a second issuance of wiring instruction, or a second direct draw attempt.

The Collateral Agent is responsible for validating if a Lender has indeed defaulted under the master Contract terms

A Defaulting Lender agrees to forfeit his/her deposit principal already funded as well as any interest so far accrued to the benefit of the Borrower, acknowledging that the project may experience delays due to failed funding and, the Borrower must secure replacement Lender(s), both of which increase the project cost as well as project default risk.

Reference: Loan Commitment and Escrow Agreement, Article VI, 6.6, 6.7, 6.8, 6.9.

Stage 1 Funding, Release, and Default Conditions:

Once all Tranche A deposit funding are received, signifying that all required Tranche A Lenders have been secured, an official funding call shall be issued by the Collateral Agent for the remaining committed amount (Stage 1 amount) for each Tranche A Lender.

Stage 1 Funding Principal shall be released totaling $360,000.00, this release is governed strictly by the Collateral Agent serving under the capacity of the closing attorney, and disbursed only in the following order and for the following purpose:

  • First, to pay off the existing mortgage attached to the collateral Property, and obtaining full payoff letter and lien release letter.
  • Second, to pay the seller of the Property, the balance of the purchase price required to consummate the acquisition.
  • Third, to pay for any closing related costs not already borne directly by the Borrower (none such cost should exist);
  • Fourth, to pay any third-party, closing related incidentals, but only when agreed to by both the Borrower and the Closing Attorney.
  • Finally, any remaining Stage 1 funds balance disbursed to Borrower to fund the initial preparation stage of the project.

Immediately following completion of the Stage 1 Funds disbursements, the Collateral Agent, acting in its capacity as closing and recording attorney shall cause:

  • Borrower’s deed to be delivered for recordation; and
  • The Mortgage securing Tranche A obligations to be recorded immediately thereafter (Senior lien priority).

All released funds start accruing interest of 12% per annum at the time of release.

If Stage 1 is fully funded but Closing cannot occur within thirty (30) days thereafter, The project shall be deemed terminated.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.2.1 through 7.2.5., 7.2.6.

Stage 2 Funding, Release, and Default Conditions:

Stage 2 does not require a funding call, and consists only of the Tranche A Deposit Principal of $40,000.00, said Deposit Principal shall be released as Stage 2 Funding Principal only upon:

  • Administrative Review by the Collateral Agent of evidence reasonably evidencing demolition permit has been issued by the Town of Natick for the Property.

Project shall be deemed as Defaulted and shall unwind if required Stage 2 release evidence is not obtained within 6 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.2.7 through 7.2.8.

III. Tranche B Deposit, Funding, Release, and Default

Tranche B Initial Commitment and Deposit

The funding for Stage 3-9 of this project are allocated to Tranche B, with separate Tranche B commitment and deposit requirements.

Once a prospective investor executes the Loan Commitment and Escrow Agreement (master Contract) and the Collateral Agency Agreement designating Tranche B commitment and amount:

  1. An official funding call shall be issued by the Collateral Agent for the Tranche B deposit amount, 12%/annum interest start accruing upon receipt of deposit.
  2. The respective Lender has up to 21 business days to fulfill the deposit funding obligation, the expiration of which results in executed contracts voided.
  3. Tranche B investment commitment may be made prior to or after Closing, any Deposit Principal received shall accrue interest regardless of timing.

Reference: Loan Commitment and Escrow Agreement, Article IV, 4.3, 4.4; Article VI, 6.2.

Tranche B Release Standards Generally

For Stage 3-9 of this project under Tranche B funding, there are two types of release evidences required under the master Contract:

  • Borrower submitted evidence directly demonstrating the passing of a required inspection as signed off by a municipal inspector on the official building permit.
  • A professional report produced by an Independent construction site inspector engaged by the Collateral Agent, describing satisfaction or lack thereof of certain progress having been completed as corresponding to specific stage release conditions.

Stage 5, 8 and 9 of this project shall require the satisfactory report from the Independent Inspector in order to effect release, while Stage 3,4,6 and 7 require only official inspection sign off.

Tranche B Early Funding Escrow

Tranche B Lenders may elect to fund entire Tranche B amount into dedicated Early Funding Escrow under the control of the Collateral Agent:

  • The funding of this Escrow account does not negate the funding requirement for Deposit Principal.
  • Only one (1) funding call shall be issued for such Lenders after initial deposit as the Stage 3 funding call, with the full remaining committed amount as funding obligation.
  • The entire amount funded into said Early Funding Escrow shall accrue interest at 12% per annum from the date of receipt, and shall be subject to the same release conditions as other Tranche B funds.
  • The Lender(s) who makes such an election agrees to forfeit the 10% Tranche B success bonus, but retain the 3% Majority Lender bonus if applicable.
  • Election of such Early Funding shall not affect payment and recovery priority as dictated by Lien recording priority.

Reference: Loan Commitment and Escrow Agreement, Article IV, 4.9; Article VII, 7.9.

Stage 3 Funding, Release, and Default Conditions:

Stage 3 funding call shall not occur unless (Stage 3 funding conditions):

  • All Tranche B Deposit Principal are received, indicating that all required Tranche B Lenders are secured.
  • The Loan Schedule Rider has been properly updated to reflect all economic and funding obligations of Tranche B Lender(s)

Stage 3 Funding Principal shall not be released unless (Stage 3 release conditions):

  1. Stage 3 Funding Principal amount is fully funded in Tranche B Funding Escrow Account ; and
  2. Tranche B Deposit Principal amount is fully funded in Tranche B Desposit Escrow Account; and
  3. completion of Administrative Review of the evidence submitted by Borrower reasonably demonstrating the municipal foundation footing inspection by Town of Natick has been passed for the Property; and
  4. all Tranche B lender-side Loan Documents are executed and are in recordable or enforceable form.

Immediately following the release of Stage 3 Funding Principal from escrow to the Borrower, the Collateral Agent, acting in its capacity as closing and recording attorney, shall cause the Tranche B Mortgage to be delivered for recordation.

Direct draw mechanics, funding deadline, retry procedures, and Lender Default conditions shall remain the same.

Project shall be deemed as Defaulted and shall unwind if required Stage 3 release evidence is not obtained within 10 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.3.1 through 7.3.3, 7.5, 7.6;

Stage 4 Funding, Release, and Default Conditions:

Stage 4 funding call shall not occur unless Borrower provides written notice to the Collateral Agent that basement walls have been completed.

Stage 4 Funding Principal shall be released only upon:

  • full funding of Stage 4 Funding Principal into the Tranche B Funding Escrow Account, and
  • Administrative Review by the Collateral Agent of evidence reasonably evidencing that the municipal basement slab inspection for the Property has been passed

Project shall be deemed as Defaulted and shall unwind if required Stage 4 release evidence is not obtained within 14 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.4.1, 7.4.2, 7.5, 7.6;

Stage 5 Funding, Release, and Default Conditions:

Stage 5 funding call shall not occur unless Borrower provides written notice to the Collateral Agent that all exterior framing has been completed.

Stage 5 Funding Principal shall be released only upon:

  • full funding of Stage 5 Funding Principal into the Tranche B Funding Escrow Account, and
  • Administrative Review by the Collateral Agent of the Stage Progress Inspection Report reasonably evidencing that all load bearing framing has been completed and that exterior sheathing, roofing, windows, and doors are installed.

Project shall be deemed as Defaulted and shall unwind if required Stage 5 release evidence is not obtained within 18 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.4.1, 7.4.3, 7.5, 7.6;

Stage 6 Funding, Release, and Default conditions:

Stage 6 funding call shall not occur unless Borrower provides written notice to the Collateral Agent that all rough plumbing and electrical inspections have been passed.

Stage 6 Funding Principal shall be released only upon:

  • full funding of Stage 5 Funding Principal into the Tranche B Funding Escrow Account, and
  • Administrative Review by the Collateral Agent of evidence reasonably evidencing that all applicable plumbing, electrical, gas, and mechanical rough inspections have been passed for the Property.

Project shall be deemed as Defaulted and shall unwind if required Stage 6 release evidence is not obtained within 22 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.4.1, 7.4.4, 7.5, 7.6;

Stage 7 Funding, Release, and Default conditions:

Stage 7 funding call shall not occur unless Borrower provides written notice to the Collateral Agent that rough framing inspection has been passed.

Stage 7 Funding Principal and Tranche B Deposit Principal shall be released only upon:

  • full funding of Stage 7 Funding Principal into the Tranche B Funding Escrow Account, and
  • Administrative Review by the Collateral Agent of evidence reasonably evidencing that rough framing inspection as well as the insulation inspection for the Property have been passed.

Project shall be deemed as Defaulted and shall unwind if required Stage 7 release evidence is not obtained within 25 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.4.1, 7.4.5, 7.5, 7.6;

Stage 8 Funding, Release, and Default conditions:

Stage 8 funding call shall not occur unless Borrower provides written notice to the Collateral Agent that rough framing inspection has been passed.

Stage 8 Funding Principal and Tranche B Deposit Principal shall be released only upon:

  • full funding of Stage 8 Funding Principal into the Tranche B Funding Escrow Account, and
  • Administrative Review by the Collateral Agent of the Stage Progress Inspection Report reasonably evidencing that at least 90% of all interior walls and ceiling above grade are painted.

Project shall be deemed as Defaulted and shall unwind if required Stage 8 release evidence is not obtained within 28 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.4.1, 7.4.6, 7.5, 7.6;

Stage 9 Funding, Release, and Default conditions:

Stage 9 funding call shall not occur unless Borrower provides written notice to the Collateral Agent that rough framing inspection has been passed.

Stage 9 Funding Principal and Tranche B Deposit Principal shall be released only upon:

  • full funding of Stage 9 Funding Principal into the Tranche B Funding Escrow Account, and
  • Administrative Review by the Collateral Agent of the Stage Progress Inspection Report reasonably evidencing that at least 90% of the interior floor works and tile works are completed.

Project shall be deemed as Defaulted and shall unwind if required Stage 9 release evidence is not obtained within 32 months following Closing.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.4.1, 7.4.7, 7.5, 7.6;

IV. Miscellaneous

In Stages 3 through 9, if a Lender Default causes a stage to be incompletely funded, the Collateral Agent shall still release the stage if at least seventy percent (70%) of the stage amount is funded (or such lower threshold as otherwise agreed in writing by all remaining Lenders and Borrower). If any partial stage funding is released under this Clause, all future stage releases must halt until the missing portion has been restored and released properly.

The Collateral Agent may rely conclusively on evidence of official sign off or site inspector report in support of funding calls or Stage Funds releases following Administrative Review, and shall have no duty to conduct site inspections, or independently verify factual accuracy, except upon Lender initiated Default Assertion. Please visit Default Procedures page for further details.

Reference: Loan Commitment and Escrow Agreement, Article VII, 7.5, 7.8;