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COMMERCIAL MORTGAGE LOAN AGREEMENT - PILOT-003
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Loan Number: PILOT-003
Property: Commerce Hub, Denver CO
Borrower: Commerce Properties LLC
Lender: Mountain View Capital Partners
Origination Date: September 10, 2019
Original Amount: $16,500,000
Current Balance (7/10/2025): $12,781,200
Interest Rate: 5.75% fixed
Maturity Date: September 10, 2026 (14 months remaining) ⚠️ URGENT
Amortization: 30 years
Monthly Payment (P+I): $9,620
Annual Debt Service: $526,400

FINANCIAL COVENANTS
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Minimum DSCR: 1.25x
Actual DSCR (2025): 0.5185x 🔴 SEVERE BREACH (-61.5%)
Actual DSCR (2024): 1.2151x (was compliant; now failed)
Minimum Occupancy: 80%
Actual Occupancy (2025): 70.9% 🔴 BREACH (-9.1%)
Actual Occupancy (2024): 91% (sharp decline)
Maximum LTV: 80%
Current LTV: 78.9% ⚠️ APPROACHING BREACH

PROPERTY DETAILS
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Units: 110 residential
Type: Multifamily
Year Built: 1988
Appraised Value: ~$16.21M

SPECIAL PROVISIONS
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Status: IN DEFAULT (dual covenant breach)
Violation Notice: Issued April 15, 2025
Cure Period: 12 months (expires April 15, 2026)
Recommendation: ESCALATE - Special Servicing Required
Last Reported: July 2025
Borrower: Under cure plan
Payment Status: Current (but NOI insufficient)

DEFAULT SUMMARY
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PRIMARY BREACHES:
  ✗ DSCR Covenant Breach
    Required: 1.25x
    Actual: 0.5185x
    Shortfall: $332,000 annual NOI needed
    
  ✗ Occupancy Covenant Breach
    Required: 80%
    Actual: 70.9%
    Shortfall: 10 units

SECONDARY RISKS:
  ⚠️ LTV approaching 80% maximum (78.9%)
  ⚠️ NOI declined 25% YoY ($639K → $273K)
  ⚠️ OpEx ratio at 83.4% (unsustainable)
  ⚠️ Negative cash flow post-debt service
  ⚠️ Maturity 14 months away (refinance unlikely in distress)

CASH FLOW IMPACT
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2025 NOI: $273,000 (after debt service: -$253,400 NEGATIVE)
Annual shortfall: Owner must fund property operations
Unsustainable beyond 12-18 months

BORROWER CURE PLAN (Submitted May 1, 2025)
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Proposed Actions:
  1. Reduce operating expenses by 15% (~$207K annually)
  2. Increase rents 5-7% on lease-ups (~$95K annually)
  3. Achieve 80% occupancy within 12 months (lease up 11 units)
  4. Projected remediation: $300K NOI improvement
  5. Target DSCR: 0.57x (still below 1.25x; not viable)

Lender Assessment: CURE PLAN INSUFFICIENT
  - Targets do not achieve covenant compliance
  - Property fundamentals deteriorating (market-driven vacancy)
  - Refinance appears unlikely given distress

NEXT STEPS
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- Special Servicer assigned (weekly monitoring)
- Updated 13-week cash flow forecast required
- Q2 2025 financials with audit trail
- Loan servicer to schedule lender-borrower workout call
- Evaluate options: forbearance, restructure, or orderly liquidation
- Potential sale or asset repositioning if lease-up fails

LIEN POSITION
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Loan Position: First lien
Secondary Liens: None noted
Property Equity: ~$3.4M (eroding with market conditions)

Executed: September 10, 2019
Modified: September 1, 2024 (rate unchanged, short-term forbearance 6-month)
Current Status: IN SPECIAL SERVICING (Active covenant breach)
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