 your host attorney in a line. Welcome everybody and we have today joining us our guest speaker, Mr. John Tarim Zumi from Central Pacific Bank. He is the senior vice president and senior commercial banking manager and who just celebrated his 24 year work anniversary with CPP. Welcome John. And a little bit more background on him. He graduated from University of Hawaii, Shidler College of Business and also Pacific Coast Banking School. He was born in Japan, raised in Hulu and Oahu. He majored in finance at UH Manoa and joined the Central Pacific Bank as a part-time teller when he was only 20 years old and he's been with the bank ever since. He is the immediate past president of the Moe Liedi Community Center where programs serve about 400 kiki and 650 kupuna. Aloha John, thank you so much for taking the time to join us today. No, thank you now. Thanks for that introduction. I'm happy to be here and to cover AOL financing and some tips and factors we'll make going to the approval process. I guess just to start, there's several ways AOL funds improvements. You know, one, if they have strong reserves they'll be through their reserves. You know, if they're not adequately reserved they may do special assessments to owners for the respected share of costs. But you know, a lot of times the owners are on fixed income, they're retired. And so it's really hard for them to come up with that money. So many times the most economical option is for the AOL to take out a loan for the improvements that can be paid over a longer period of time. So at CPV here, we do provide loan options for AOLs and funding improvements. When an AOL comes in for a loan request there is information that we need to collect to help with our approval process. So just wanted to go over that with you. And also some factors that we review gauge risk so that they navigate through the process a little smoother. So if I can please get the first slide. Well, first go over the financial statement and information that is typically requested. And then later go over the factors that we review for approval. So the financial information that we typically request are first the last two years of financial statements from the AOL. So those are the profit and loss statements and most recent interim statements. So if it were today, it would be the 2021 and the 2022 fiscal year in statements and maybe an interim 2023 statement. This is to give the current cash flow of the AOL and process that is generating that income that could be used to cover the potential loan payments. The second would be the delinquency report, a current one. The assessors owners are on time with payments or if there are any payment issues. The third would be the current owner occupancy percentage. So this is the gauge and make up of the property if the majority owners are owner occupants, investors or if there's any ownership concentration in the property. The fourth would be a reserve study budget and maintenance fee schedule. So the reserve study covers improvements that are scheduled for the next 20 years. So we're looking to see that there's adequate reserves for teacher improvements that are coming up for that property. The fifth would be if there are any special assessments in the past, a scheduling explanation of any assessments for the last two years. The sixth would be approval from owners and board adhering to AOL's governing documents or approval financing. This is typically good to get ahead of time so that there are no delays in getting the financing in place. I know there's a lot of times where we are waiting for this and for the bank, we typically can fix rates, typically up to 60 days. So if we get that earlier, we would be able to move a little bit quicker. A seven would be copies of proposals, contracts and bonding requirements for the proposed improvements. The eighth would be the written statement from the board that there's no ongoing litigation that adversely affect the property. Evidence of adequate property insurance, insurance coverage will be required based on a replacement costs or full insurable value. And the timeline of when improvements will commence. So this is so we can structure the loan, a drop period appropriately. So those are the items, if we could get those, we typically ask those when a loan request comes in. So if we can get those up front, that would really help in the process of getting a proposal out to the AOL. So once we get the financial information, just wanted to go over what factors we look at to gauge risk for approval. So first would be make sure the properties adequately reserved for future improvement. If the properties adequately reserved, we would consider that a lower risk which is the property that's behind on funding replacement reserves which may lead to multiple borrowings to catch up. Well, a lower risk property would be one that's proactively dedicating a good portion of their maintenance fees and contributing to research for future improvement. A second thing we'll look at is to make sure the proposed loan will not lead to large increases in maintenance fees. Typically, the loan payments would increase maintenance fees by more than 25% with being higher risk as it may create financial difficulties for some households. Another thing we'd look at is we get the delinquency report. We'll look at delinquencies. So if there's a high amount of owners with delinquents payment, typically our gauge is 5% of owners that are more than 68 delinquents. We would look at that as a typically higher risk. The next would be owner concentration. Typically, the more owner occupants in the project, we see there's a greater possibility of collection and proactive upkeep of the property and reserves. The higher risk is if there's concentration where one owner or developer owns more than 10% of the unit. We could also consider a property high risk if the property's a conditel or some kind of conditel arrangement where a large portion of the property is reliant on short-term vacation rentals. For the loan term and amortization, it's basically useful life of the improvements as we would want the loan to be paid off and the main image feeds could be used to help other future projects. Well, you know, having said that, you know, if there are challenges to some of the above, we definitely work with our customers to try to mitigate some of those risks. However, you know, if we could not overcome some of that, it could potentially lead to a denial. So I guess everybody reading the news, the Fed is gonna probably cut the rate in June or after. So there's still time to plan ahead and get these factors under control, be better prepared for that process, right? Right, yes. So, you know, if you feel like, even one, two, three years down the road, if you feel like there's gonna be something large coming up, I mean, I think the responsible thing to do is to incrementally increase maintenance fees so that one, it's not gonna be a huge hit to owners. They'll be more gradual. And, you know, you may not be having to take out a huge loan, you know, at the end or even do special assessment. I mean, it's annual election season for associations. There's always, we always say, you know, the quicker way to lose your votes is really you have a huge hike on your maintenance fee or all of a sudden there's special assessment for the condo projects. And obviously that also makes existing owners super hard to try to resale their unit or try to refinance. So it's really everybody's best interest to really, you know, getting the financials of your association under control, you know, work better on the reserves, right? And then also remember, you know, there are statute requirements and also requirements set for your declaration bylaws for condo projects. You wanna borrow money as a whole. You would have to meet certain ownership approval requirements. I would imagine the bank would want to see these required approvals already in place when association submits this kind of loan application, right? Correct. You know, so I think we've had certain situations where, you know, we have a really attractive rate, but, you know, we're waiting for the ownership approval. And so, you know, if we can get that earlier or if we can get the owners on board earlier, one, you know, we can, you know, pick to our commitment on the rate and two, you know, I think we can get the project and process move along a lot quicker. Yeah, that's really helpful. And as we have a lot of new directors who, you know, got voted, become win their election, become board directors, and they're doing trainings. And we also have a lot of new property managers who join the industry, serve condominium associations. So I feel today's, you know, information is really helpful to our audience. And if they want, they do wanna work with the Central Pacific Bank to get help, AOL Finacy, who would be the good people to contact in your team? You know, our team in general, we help with AOLs as well as, you know, other business owners. So I have the contact there, you know, if anyone is, you know, has a request, needs a proposal, anyone on that list would be happy to assist. Awesome. There comes this most important question always for me. You know, a lot of clients are very anxious. They always want to know how long this process is gonna take. So can you help us answer this million dollar question here? Sure. You know, we like to move as quickly as possible. Ideally, if you could give us two weeks, that would be, you know, an ideal scenario, our timeline, I guess of, because internally we would, you know, have to go in, look at the numbers to get approval and then, you know, we would have to work internally also to get the best rates possible. So, you know, if you could give us at least a two week timeline, I could tell you that would be enough time to get a track, the most attractive proposal in place from us. But of course, you know, if it's shorter, you know, we definitely try to do our best to meet our client's needs. So there's also something maybe as a director or property manager, they may not be familiar. It's typically lender is gonna require borrower's counsel's opinion before loan closing. What is that? So when we get the loan approved, when the loan documentation sent out to, I guess the AOL for review, we do need an opinion letter from the AOL legal counsel certify that, you know, all of the loan documents are binding, they're enforceable, you know, to say that the AOL is in good standing, has the ability to borrow and to pledge its assets and it's been approved by the board. So that's one of the documents that we need from a letter that we need from the AOL attorney to attest to that. Okay, I guess we are about to wrap up today's session. And if you, you know, you can summarize the takeaways for our audience, it would be super helpful as we know the attention span these days are getting shorter and shorter. Everybody loves this, you know, takeaways. Yeah, so, you know, one would be happy to help with any needs that we have, you know, if we could get, I guess, go with the financial statements that we talked about, you know, if we could be prepared, getting all that in place and planning ahead, that would really help with the process. Definitely, if you have any questions, you know, please call any of us and we'd be happy to assist in the process with the beginning, the middle, or the end. We'd be happy to answer any questions that anyone may have. And are there any special programs down the road? Do you think Central Pacific Bank may consider rolling out given the rate of, you know, upcoming rate adjustment? I wouldn't say we have any special loan programs, but, you know, we do see AOLs as a good source of, it's a good loan for us. You know, we typically see AOL loans as really low risk. So, you know, we're really happy to look at, you know, any options and to provide, it's the best package possible. Thank you so much, John. Thank you. Well, thank you now. Thank you for having me. If you liked this show, why don't you give us a like or subscribe to our channel? Thanks so much.