HomeMy WebLinkAboutR11-Redevelopment Agency
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ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
REOUEST FOR COMMISSION/COUNCIL ACTION
FROM: BARBARA J. LINDSETH
Acting Director
SUBJECT: STEWARD LOAN AMENDMENT
GAS COMPANY BUILDING
DATE: February 15,1995
SynQPsis of Previous Commission/Council/Committee Action(~):
On November 21, 1994, the Community Development Commission continued the attached matter
for ninety (90) days.
Recommended Motionls):
(Community Development Commission)
MOTION:
That the Community Development Commission direct staff to work with
Mr. Steward to restructure the financing for the building; that staff proceed
with the Commission's adopted policy regarding delinquency letters and
notices of default; and that staff keep the Commission advised as to the
status of events in this matter until restructured financing is brought
forward for consideration.
Adf~tor
(;{GaA:v~~1ti
BARBARA J. LINDSETH
Acting Director
Contact Person(s): Barbara J. Lindseth/John B Hoeger
Phone:
5081
Project Area(s): Central City North (CCN)
Ward(s):
One (J)
Supporting Data Attached: StaffR~ort.
FUNDING REQUIREMENTS:
Amount: $ N/ A
Source:
N/A
Budget Authority: N/ A
Commission/Council Notes:
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BJL:JBH:lag:02-20-03.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 02/20/1995
Agenda Item NumberR / (
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ECONOMIC DEVELOPMENT AGENCY
STAFF REPORT
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Steward Loan Amendment (Gas Company Building)
On November 21,1994, the Community Development Commission continued the attac ed
matter. In the meantime, policies exist regarding the treatment of delinquencies and noti es of
default.
Payment on the bridge loan was due on November 29,1994. Payment was not made an the loan
is in default. The required delinquency letters have been sent to Mr. Steward but no res onse has
been received. The Commission's adopted policies direct that a technical notice of defa It now be
filed which will start a 120 period during which Mr. Steward can perform under the loa, avoiding
foreclosure. If the notice is sent now, the Commission can take any final action on the atter
during early June 1995. The Commission can, however, extend the notification period a any time
during the 120 days. The Commission can also drop all foreclosure proceedings if it is s tisfied
with Mr. Steward's performance. If the Commission takes no action, the staffwill conti ue to
follow prior Commission direction.
Mr. Steward indicates that he may bring forth additional information prior to the Commi sion
meeting. Staff will forward any material that is received.
Based upon the prior information, staff recommends adoption of the form motion.
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BARBARA J. LINDSETH, Acting Director
Economic Development Agency
BJL:JBH:lag:02-20-03.cdc
COMMISSION MEETING A ENDA
MEETING DATE: 02/20/1995
Agenda Item Number:
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February 15, 1995
STEIIVARD
.so .ASSOCI.A TES
COMMERCIAL REAL ESTATE
Mr Tim Steinhaus
Agency Director
Economic Development Department
City of San Bernardino
201 N "E" Street Street, 3rd Floor
San Bernardino, CA 92401
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Re: 570 W Fourth Street
San Bernardino
Dear Mr, Steinhaus:
As of today, February 14, 1995, we are still waiting for the green light from the FDIC for
the amount they are going to discount the loan on the old gas company building on 4th
Street. They have completed the appraisals, they have done their environmentals on the
building and I am waiting patiently for them to take this project through their process.
The pace at which they work amazes me as we have been in negotiations for nearly a year
now.
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We have secured preliminary financing approval on the building, awaiting a response from
the FDIC. I am requesting a sixty day extension on the loan and agree to pay 8% interest
only for the next sixty days In have not secured financing in order to pay the RDA the
money owed, I will either pay you the balance or work out a payment plan with you I
have been stymied by the FDIC. Even though I have a verbal agreement that they will
discount the loan to somewhere in the area of $900,000, I must have the agreement in
writing before the bank will go forward.
I am in the process now ofleasing the balance of the building (approximately 3,000 feet)
to Concorde College, which will make the building 100% leased. This is quite a feat for
downtown San Bernardino.
I 11 keep
~ncerelY,
ou posted on a weekly basis as to the progress being made.
I
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Steward
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ABS/ks
4th2.U.lC
1887 Business Center Drive. Suite 3
San Bernardino, California 92408
Tel. (909) 381-9922 FAX (909) 381-2481
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DEVELOPMENT DEPARTMENT
OF THE CITY OF SAN BERNARDINO
ECONOMIC DEVELOPMENT AGENCY
REOUEST FOR COMMISSION/COUNCIL ACTION
FROM: BARBARA 1. LINDSETH
Acting Executive Director
SUBJECT: STEWARD LOAN AMENDMENT
- GAS COMPANY BUILDING
DATE: November 17,1994
SvnoDsis of Previous CommisslonlCounciVCommittce Action(s):
On February 15, 1993, the Commission approval a $1.3 million loan guarantee plus a subordinate loan of$350,OOO.
On May 13, 1993, the Community Development Commission approval a bridge loan of$139,746 for 90 days.
On November 15, 1993, the ConuIll.mity Development Commission retroactively approved a 12 month extension of the
bridge loan from August 19, 1993 to August 31,1994.
On September 6, 1994, the Community Development Commission again retroactively extended the bridge loan from
Soptember 1,1994 to November 29,1994.
Recommended Motlon{s):
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(Communltv Deve.DDmen. Commission)
MOTION: That the Community Development Commission direet sta1Ito work with Mr. Steward to restructure the
frnancing for the building; that sta1I proceed with the Commission's adopted policy regarding delinquency
letters and notices of default; and that staffkeep the Commission sdvised as to the status of events in this
matter until restructured financing is brought forward for consideration.
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BARBARA J. LINDSETII
Acting Executive Director
Contact Person(s): Stafford W. Parker/John B. HoelZer
Phone:
5081
Project Area(s):
Central City North ICCNl
Wardes):
Onem
Supporting Data Attached: StaffReoort- Letter:from Mr. Steward- Mans
FUNDING REQUIREMENTS: Amount: ~
Source:
N/A
Budget Authority: N/A
Commission/Council Notes:
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BJL:lag: 11-21-05.edc COMJl1lS~ION MEETING AGENDA
MEETING DATE: 11121/1994
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DEVELOPMENT DEPARTMENT
ECONONUCDEVELOPMENTAGENCY
STAFF REPORT
Steward Loan Amendment - Gas Company Bnildin!!
The Agency has four financial instruments that result from its relationships with Mr. Steward in
the former Gas Company Building located at 570 West Fourth Street. The first is a guarantee of
a $1,300,000 first trust deed, the second is a subordinate loan of$350,000 not yet due and the
third is a bridge loan in the original amount of$138,000 which has been in default twice, extended
twice, and is now due in full on November 29,1994. As a result of the Agency taking on
$1,788,000 of the risk in the project, it has received a 25% share of the project's equity under the
terms of an executed Owner Participation Agreement.
Staff has been informed in the attached letter of November 16, 1994, that Mr. Steward does not
intend to make payment on the bridge loan and is requesting another extension. He indicates that
he would like to extend the loan for approximately 120 days to April 1, 1995. The full amount of
principal and interest due on November 29, 1994, is $161,542.48.
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Mr. Steward indicates that he is negotiating a restructuring ofthe senior loan held by the FDIC
and guaranteed by the Agency. If obtained, a reduced payoff of the senior loan would facilitate
refinancing of the project which could then pay off at least a portion of the Agency's bridge and
subordinate loans. The FDIC staff person handling this matter was not in the office for the
remainder of this week. However, the attached letter of August 4, 1994, indicates the willingness
of FDIC to consider a discounted payoff. Moreover, another staff member at FDIC looked at
computer notes on the case which indicated that a decision was pending and expected by month's
end.
The Commission must effectively decide between granting the 120 day extension or, in the
alternative, beginning a 210 day process required before foreclosure can take place. Unless
otherwise waived, the policy adopted by the Commission on June 20, 1988, provides that
notification letters be sent for a 90 day period after a loan becomes due. After that 90 day period
a technical notice of default is filed and an additional 120 day time period is started. This second
120 day period may be extended by the Commission at any time during the process. The
proceedings may also be dropped in their entirety if the Commission is satisfied with other
arrangements approved during the 210 day period. The costs are small and cover title company
costs to record the proper notices and take the required steps as trustor.
On the other hand, if an extension is granted then the such proceedings will not be commenced.
In that case, no foreclosure could not take place until 210 days after the new due date. (With an
extension to April 1, 1995, foreclosure could not take. place until approximately November 1,
1995.)
BJL:lag: 11-21-0S.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 11121/1994
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Agenda Item Number:
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DEVELOPMENT DEPARTMENT STAFF REPORT
November 16, 1994
Page Number -2-
Agency staff confirmed with banking sources that the initiation of technical foreclosure
proceedings would not produce problems in obtaining refinancing so long as the Agency and City
remain in a posture of supporting Mr. Steward's efforts to refinance the building. The refinancing
bank will understand that the proceedings are technical steps which are necessary to start the
waiting periods that are required before any action Can eventually take place. This is appropriate
so that the Agency has a backup position in the event refinancing eventually does not succeed.
Meanwhile, the Agency and City's cooperation are both necessary and appropriate to produce a
successful refinancing for the property.
The following analysis may be helpful to the Commission in considering Mr. Steward's request for
this third extension.
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! EFFECT IF ! EFFECT IF
FACTOR ! EXTENSION GRANTED ! EXTENSION DENIED
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Immediate payment ! No payment required now. ! No payment required now, if
requirement! ! technical default is allowed to
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I I proceed
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Payment reqUIred In 120/210 I $161,542 plus fees and 120 : $161,542 plus fees and 210
days ! days add'l interest if paid ! days add'l interest if paid to
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I when due I cure
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Position of Agency in I Unable to foreclose I Able to foreclose, it cannot
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120/210 days: I cure.
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Ability to refinance ! Able to refinance with ! Able to refinance with
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I Agency's cooperatIOn I Agency's cooperation
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Agency's equity share during I Twenty Five Percent 1 Twenty Five Percent
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120/21 0 days I I
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Effect on tenants and leases If I No effect on leases, Mr. I No effect on leases, Agency IS
refinancing does not succeed ! Steward is landlord ! landlord until buyer is found
and debts remain unpaid at I !
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120/21 0 days I :
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BJL:lag:II-21-0S.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 11/21/1994
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Agenda Item Number:
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DEVELOPMENT DEPARTMENT STAFF REPORT
November 16, 1994
Page Number -3-
Because Mr. Steward has been unable or unwilling on three consecutive occasions to make
payment when due, it is prudent for the Commission to allow notification letters to be sent and, at
the appropriate time, a technical notice of default to be filed. This will start the time periods but
not require actual foreclosure. Staff will keep the Commission advised as to the status of the
proceedings. Meanwhile, Mr. Steward will have a minimum of210 days in which to obtain new
financing or, alternately, to make payment on the bridge loan. Additionally, the Commission
would have the ability to extend the 2 I 0 day period ifit should wish to grant additional time
during this period.
If the Commission were to grant Mr. Steward's request for an extension then the following terms
and conditions would be appropriate for such an extension.
1. Extension until April I, 1995.
2. The Agency's amendment fee of$7,500 to be paid in cash prior to granting the extension.
Loan origination/extension fee to be waived.
3. Accumulated interest and fees of approximately $21,800 be paid in cash prior to granting
the extension.
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4.
Interest at 10-1/2%.
It is not necessary, however, to grant a formal extension in order to give Mr. Steward time in
which to finish his proposed refinancing. If the extension is not granted, staff will simply send
notification letters for the next 90 days or about March I, 1995. At that time a notice will be filed
if the refinancing has not succeeded which will still allow an additional four months in which to
complete the financing (approximately July I, 1995). Alternately, Mr. Steward could pay the
$138,000 plus interest.
STAFF RECOMMENDATION
In order to protect the Commission's interests and still provide flexibility, staff recommends that
the Commission direct staff to work with Mr. Steward to restructure the financing for the
building; that staff proceed with the Commission's adopted policy regarding delinquency letters
and notices of default; and that staff keep the Commission advised as to the status of events in this
matter until restructured financing is prought forward for consideration.
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BARBARA J. LINDSETH, Acting Executive Director
Development Department
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B.lL:lag:II.21-0S.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 1lI21/1994
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Agenda Item Number:
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November 16, 1994
STEIIVARD
& ASSDCIA TES
COMME~CIAL t:iEAi.. ESTATE
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CITY' OF SAN SfIWARC:r;o
ECONOMIC DEVfl0i'M(NT AGEr~cy
Tim Steinhaus
Economic Development Agency
City of San Bernardino
201 N. E. Street - 3rd Floor
San Bernardino, CA 92401
RE: 570 W. Fourth Street
San Bernardino, CA
Former Southern California Gas Company Building
Dear Mr. Steinhaus:
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We have been working with the FDIC for five months in order to have them discount the
loan we presently have with them in the amount of $1.3 million to approximately
$900,000.00. They have been amenable to this proposition. Our only problem is that the
FDIC requires considerable work to accomplish this and they must have two appraisals on
the property. The latest appraisal by the FDIC was completed only last week.
My intention is to get a loan and completely payoff the RDA. Not just the note that is due
but approximately $350,000.00 that is owed but not currently due to the RDA. At present
we have everything ready to submit to an interested bank but, until the FDIC gives us the
green light in writing, we have to hold off pursuing the loan. I feel we can have everything
accomplished that we need accomplished by April I, 1995. Currently the city is adding
interest to the loan and obviously that will be paid also.
I would like to reiterate some of the problems we have had with this building. As you know
soon after purchasing the building from American Commerce Bank, the FDIC seized the
institution. We were promised by American Commerce Bank to finish the tenant
improvements and what work was left on the building. The FDIC completely refused to do
anything after American Commerce Bank was seized. That is when we borrowed
approximately $145,000.00 from the RDA and at present I have in excess of $400,000.00
myself in the project.
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1887 Business Center Drive, Suite 3
San Bernardino, California 92408
Tel. (909) 381.9922 FAX (909) 381-2481
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Mr. Tim Steinhaus
November 16, 1994
Page 2
I will need the extension in order to wrap everything up on this building and I am presently
negotiating With tenants for the balance of the space. Consequently, in order to get the
space ready for tenants, I will need to put up another $75,000.00 of my personal money for
the tenant improvements for these tenants. This building has been a very problematic
building, although we feel the building is on its way to being a break even building in the
next six months.
The city has two options. They can foreclose on the building and deal with the FDIC, the
tenants themselves and problems that come up daily on the building or your can give me the
extension that I need. I have never lost a building due to foreclosure and my credit report
reflects that I have always covered by obligations in a very timely manner. I have no
intention of not going forward with whatever this building needs in order to make the
building successful. I have not failed on a building yet and do not intend to start now.
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I am hopeful that the RDA and City Council will approve my extension as this is not a
problem brought on by me or any kind of gift by the city. This is a project that, due to no
fault of my own, developed into a very difficult situation.
ThankGg you in advance, I remain
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Aui . Steward
President, CEO
Steward & Associates
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t7141263-7100 . FAX 17141263.7242
Jlugust 4. 1994..
FILE
Hr. Allan Steward
Allan Steward, Inc.
c/o Steward and 1\esoclates
leS7 Business Center Drlve
San Bernardino, CA 92408
SUBJECT:
AMERICAN COMMERCE NATIONAL BANK,
Anaheim, CA - In Receivership
LAIUS 110. 501121231
ALLAN STEWARD. INC.
4576
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PMI..;rllle/9qWtlP'd7llD'
Dear Mr. Steward:
As discussed today, the terms of the above-referenced note called for an interest rate of
4\ for the first yea~ and 8n interest rate of Bank Prime plus l' for the remainder of the
note term, with interest payable monthly. ~dditionally, monthly principal payments of
$10,250 W~re to commonce on April 2, 1994. The FDIC agreed to allow you to cure the
interest arrearage b)' paying $10,000 cash in December 1993 plus $2,000 over and above your
regularly scheduled nlonthly payment until the arrearage was brought current. It is
unfortunate that there was a misunderstanding over those terms and that the loan is still
in arrears.
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he FDIC will consider a discounted payoff or loan workout/restructure offer to resolve
.he above-referenced asset. The basic criteria for a diScounted payoff or workout i.
financial distress, i.e. an inability on the part of the debtor or guarantor to honor the
terms of the oblJgation. The following infclrmation must be submitted to support any offer
other than full payoff:
1. Current personal financial statement 'for Allan and Kathleen
Steward (FDIC form enclosed) - notari~ed signatures
2. Current financial statement for 1\,llan Steward, Inc.
3. Current financial statement for the guarantor, Redevelopment
Agency of the City of San Bernardino
~. Copies ot federal tax returns for the debtor and guarantors
for 1992 and 1993
S. Income and expense information for the collateral property
~he information and offer must be received in thIs office no later than 5 p.m. on
September 15, 1994. In the event your offer requires takeou~ refinancing, A commitment
letter from the financial institution must be included in the information. If the
obligation is still delinquent as of that date and an offer Supported by the required
information is not being considered by the FDIC~ then collection action will recommence.
The FDIC will arrange for an appraisal on the collateral property and will provide Spencer
Brown's name as the contact person. As discussed tOday, the appraisal information will be
confidential to the FDIC. The data will be used in our financial analysis of your offer.
The City of San Bernardino Redevelopment Agency will be sent a copy of this letter. Your
financial Situation, the value of the collateral property and the financial ability of the
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Page Two
August 4, 1994
guarantors will all be .considered in analyzing the feasibility of your offer. It 1s
assumed that the Hedevelopment Agency of the City of San Bernardino executed the guaranty
in good faith and 1s prepared to honor its obligation if~necessary.
Please contact thE: under.iqned at (7.14) 263-7192 to discus. this matter further if you
have any questiont or comments.
Very truly yours,
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{l~OCt...-
Pat~lcia Bolster
Credit Specialist
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CC: Guarantors:
Allan and Kathleen Steward
Redevelop~en~ Agency of the City of San Bernardino
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