"HARD MONEY"

PROPERTY VALUATION PHILOSOPHY

The First Credit Commercial Capital "Hard Money" program relies primarily on asset values and exit strategies to make real estate mortgage investment decisions.  Additional collateral of any type is always accepted but is not considered in the asset valuation except where that additional collateral is required as part of the borrower's exit strategy or is necessary for ongoing maintenance/operations of the asset.  Within that context, however, all aspects of "normal" commercial real estate underwriting and third party reports are reviewed prior to a decision.  A negative review in any of these other underwriting areas could also result in a loan denial.

With regard to valuation of the real estate assets, the procedure is as follows;

1)       A value of the subject real estate asset is determined internally by the First Credit staff, utilizing the extensive experience of the loan origination and processing department.

2)       A third party MAI (Member of the Appraisal Institute) appraiser certified within the state where the property is located, is consulted to give an initial opinion of value and perform a complete, fully documented, MAI Appraisal of the property.

3)       The value determination of the MAI appraiser is reviewed for consistency and conformity to the appraisal standards set by First Credit.  That value (which could be adjusted by the First Credit staff) is then carried forward to a loan review.

4)       The MAI valuation is compared to the internal valuation arrived at by First Credit staff and the lower of the two values is used going forward to loan committee.

As part of the property valuation process, First Credit requires a minimum of two exit strategies for repayment - one determined by the borrower and acceptable to First Credit, and one determined by First Credit.  All exit strategies are fully evaluated by the First Credit management team and documented accordingly.  The focus on an exit strategy cannot be minimized in that it is the first consideration during an initial project review and becomes the final decision point after all aspects of the proposed transaction have been considered.  Not only must First Credit believe in the viability of the borrower's planned repayment strategy, First Credit must also be convinced during the underwriting process that the borrower's have the background and experience to effect the plan or have retained sufficient expertise to assist them in their plan.  First Credit must also be confident that should the borrower not be successful, for whatever reason, that the First Credit team can effect the borrower's exit strategy or an alternative exit strategy, which has been identified prior to loan approval.  As an example, First Credit made a loan in Dallas, Texas, to re-open a hospital and had an alternative strategy to convert the facility to an assisted living facility if the hospital was not successful.  Each exit strategy was reviewed in light of the valuation assessment.