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Title 3 . Commerce, Community, and Economic Development
Chapter 99 . Commercial and Industrial Financing
Section 330. Terms of real property loans

3 AAC 99.330. Terms of real property loans

(a) The authority may participate in a loan made by an originator to acquire land, or to acquire or construct buildings, improvements, and structures on land, if the loan satisfies the conditions prescribed in this section.

(b) The authority may participate in a loan made by an originator to refinance an outstanding loan described in subsection (a) if, in addition to other requirements of this section, the authority is satisfied that (1) the loan to be refinanced was not made with proceeds of outstanding general obligation indebtedness of the authority nor relates to a project that was originally financed with outstanding general obligation indebtedness of the authority, and (2) the borrower will receive economic benefit from the refinancing. The economic benefit to the borrower may be in the form of an interest rate reduction, a reduction of debt service payments, an extension of the maturity of the loan, the elimination of call or balloon payment provisions, or other economic benefits.

(c) The amount of the authority's participation in a real property loan will not exceed $20,000,000, except that the authority will, in its discretion, participate in a real property loan in an amount greater than $20,000,000 if the loan is for the financing of a power transmission intertie and if the Alaska State Legislature has approved the authority's participation. The principal amount of a real property loan may not exceed 75 percent of the appraised value of the collateral offered as security for the loan unless the amount of the real property loan in excess of this limit is federally insured or guaranteed or is insured by a qualified mortgage insurance company, except that in no event may the real property loan to be purchased under this section exceed the total of loan proceeds used to refinance an existing debt plus the cost of new construction, expansion, or acquisition, unless the additional amounts of the loan to be purchased are restricted to uses approved by the authority to finance commercial activity in Alaska by a business enterprise.

(d) A real property loan must be secured by a mortgage which is a first lien on real property in fee simple or on a leasehold estate except as provided in (j) of this section. The authority will, in its discretion, review and approve other encumbrances against the real property that do not affect the authority's security for the loan.

(e) The loan terms for any real property loan must require complete amortization provisions and require periodic payments by the borrower. The term for a real property loan shall not exceed the following calculated from the date the loan is made:

(1) a loan to finance a power transmission intertie may not exceed 50 years;

(2) a loan to finance a tourism destination facility may not exceed 40 years or 75 percent of the estimated economic life of the collateral offered as security for the loan, whichever is less, as determined by the authority; and

(3) a loan to finance real property other than described in (1) and (2) of this subsection, may not exceed 25 years or 75 percent of the estimated economic life of the collateral offered as security for the loan, whichever is less, as determined by the authority.

(f) The authority may allow the loan originator to amortize its portion of the loan using a shorter amortization schedule than the amortization schedule for the authority's portion provided:

(1) in the authority's opinion, the project financed can support the increased debt service;

(2) the accelerated amortization schedule is required to induce the originator to make the loan; and

(3) the originator's terms is at least one-half of the amortization term of the authority's participation or ten years, whichever is less.

(g) Before closing a real property loan where construction of the improvements in part or whole has taken place, an originator shall obtain a statement in writing from

(1) the author of the original appraisal, or other appraiser acceptable to the authority, that construction was substantially completed according to the plans and specifications included in the original appraisal required by 3 AAC 99.320(b) (12) and that the completed value is at least equal to an amount which would meet the requirements of (c) of this section;

(2) an authorized official that the buildings and structures may be occupied and that the occupancy, buildings, and structures conform to all requirements of federal, state and municipal law; or if there is no authorized official or if requested by the authority, a registered architect or professional engineer that the property offered as security for the real property loan is structurally sound and that buildings or structures conform to applicable building standards.

(h) The terms and conditions of a land lease that secures a real property loan for a project are subject to approval by the authority. The term of the lease must exceed the effective term of the loan by at least 10 years. However, the authority may approve a land lease for a shorter term if there is an irrevocable option to renew the lease that is acceptable in the sole discretion of the authority.

(i) Unless waived by the authority, the applicant shall obtain insurance coverage for the improvements on the real property from responsible companies in such amounts and against such risks as is satisfactory to the authority. An American Land Title Association title insurance loan policy is required if real property is involved.

(j) The authority will, in its discretion, allow and participate in secondary financing on a project if the

(1) project is currently financed by the authority;

(2) loan is secured by real property;

(3) loan is for expansion and improvements of the project; and

(4) applicant demonstrates to the satisfaction of the authority that the additional debt can be repaid from the revenue earned by the real property offered as security for the loan.

(k) If required by the authority, the originator must obtain a guarantee for repayment of an applicant from the following persons:

(1) a partner or member of the applicant;

(2) a joint venturer with the applicant;

(3) any stockholder of the capital stock of the applicant; or

(4) the parent corporation if the applicant is a subsidiary corporation.

History: In effect before 1988; am 1/11/88, Register 106; am 11/30/90, Register 118; am 7/19/91, Register 119; am 9/25/92, Register 124; am 12/2/94, Register 134; am 2/11/99, Register 150; am 2/8/2001, Register 158; am 8/8/2003, Register 168

Authority: AS 44.88.080

AS 44.88.085

AS 44.88.155

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Last modified 7/05/2006