CNSREIT-AR-2024 Final - Flipbook - Page 69
Many of these same issues also apply to credit facilities which are expected to be in place at various times as well. For
example, the loan documents for such facilities may include various coverage ratios, the continued compliance with which
may not be completely within our control. If such coverage ratios are not met, the lenders under such credit facilities may
declare any unfunded commitments to be terminated and declare any amounts outstanding to be due and payable. We may
also rely on short-term financing that would be especially exposed to changes in availability.
Although borrowings by us have the potential to enhance overall returns that exceed our cost of funds, they will further
diminish returns (or increase losses on capital) to the extent overall returns are less than our cost of funds. As a result, the
possibilities of profit and loss are increased. Borrowing money to purchase properties provides us with the advantages of
leverage, but exposes us to greater market risks and higher current expenses.
In certain cases, financings for our properties may be recourse to us.
Generally, commercial real estate financings are structured as non-recourse to the borrower, which limits a lender9s
recourse to the property pledged as collateral for the loan, and not the other assets of the borrower or to any parent of
borrower, in the event of a loan default. However, lenders customarily will require that a creditworthy parent entity enter
into so-called
