HomeMy WebLinkAboutRS01-Economic Development Agency
r-
~
c
c
QVELOPMENT DEPARTMENQ
OF THE CITY OF SAN BERNARDINO
ECONONUC DEVELOPMENT AGENCY
REOUEST FOR COMNUSSION/COUNCIL ACTION
FROM: BARBARA J. LINDSElH
Acting Executive Director
SUBJECT: STEWARD LOAN AMENDMENT
- GAS COMPANY BUILDING
DATE: November 17,1994
------------_._~.~._----------------------------------------------------------------------------------------------------------
SvnoD.i. ofPreviou. Comml..ioolCouncWCommittee Actlon(.):
On February 15, 1993, the Commission approval a $1.3 million loan guarantee plus a subordinate loan of $350,000.
On May 13, 1993, the Community Development Commission approval a bridge loan of $139,746 for 90 days.
On November IS, 1993, the Community 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
September I, 1994 to November 29, 1994.
------------------------------------------------------------------------------------------------------------------------
Recommended Motion(.):
(Communltv DeveloDment Commi..lon)
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 staffkeep the Commission advised as to the status of events in this
matter until restrnctured financing is brought forward for consideration.
,,\D
Admillistrator
./' 1
I /, .,/ /
) i r l,/ "i,'
/ t;:', G\!'i..l4 /'>::'\.:' II?,.."\'-' /....
BARBARAJ. LINDSETH
Acting Executive Director
----------------------------------------.-----------------------------------------------------------------.-----------------
Contact Person(s): Stafford W. Parker/Jobo B. Hoeeer
Phone:
5081
Project Area(s):
Central Citv North (CCM
Ward(s):
Ouem
Supporting Data Attached: StaJfReoort: Letter from Mr. Steward: Maps
FUNDING REQUIREMENTS: Amount: $ N/A
Source:
N/A
Budget Authority: N/A
------------------------------------------------------------------------------------------------------------------.------------
Commission/Council Notes:
------------------------------------------------------------------------------------------------------------------
BJL:lag:II-21-05.cdc
COMNUSSION MEETING AGENDA
MEETING DATE: 11/21/1994
Agenda Item Number:
c
c
c
DKlELOPMENT DEPARTMnT
E1!'ONOMIC DEVELOPMENT AGEN~
STAFF REPORT
------------------------------------------------------------------------------------------------------------------
Steward Loan Amendment - Gas Comnanv Buildin!!
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 $13 8, 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 I, 1995. The full amount of
principal and interest due on November 29, 1994, is $161,542.48.
Mr. Steward indicates that he is negotiating a restructuring of the 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:II-21-05.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 11/21/1994
Agenda item Number:
r-
DEVELOPMENT DEP AIQrnNT STAFF REPORT
November 16, 1994
Page Number -2-
o
------------------------------------------------------------------------------------------------------------------
.......... 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.
c
c
The following analysis may be helpful to the Commission in considering Mr. Steward's request for
this third extension.
!
i EFFECT IF ! EFFECT IF
FACTOR i EXTENSION GRANTED i EXTENSION DENIED
-------------------------------r-------------------------------+-------------------------------
I I
Immediate payment I No payment required now. I No payment required now, if
requirement i i technical default is allowed to
I I
: : proceed
-------------------------------T-------------------------------+-------------------------------
Payment required in 120/210 i $161,542 plus fees and 120 i $161,542 plus fees and 210
days i days add'l interest if paid i days add'l interest if paid to
I I
: when due : cure
-------------------------------T-------------------------------+-------------------------------
I I
Position of Agency in I Unable to foreclose I Able to foreclose, it cannot
I I
120/210 days: : cure.
-------------------------------T-------------------------------+-------------------------------
I I
Ability to refinance I Able to refinance with : Able to refinance with
i Agency's cooperation ! Agency's cooperation
-------------------------------T-------------------------------+-------------------------------
I I
Agency's equity share during : Twenty Five Percent : Twenty Five Percent
I I
120/210 days I I
"-------------------------------T-------------------------------+-------------------------------
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 !
I I
120/210 days: :
------------------------------------------------------------------------------------------------------------------
BJL:lag:11-21-05.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 11/21/1994
Agenda Item Number: I
,...
"-
c
c
DEVELOPMENT DEPAQrnNT STAFF REPORT
November 16, 1994
Page Number -3-
o
------------------------------------------------------------------------------------------------------------------
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 of2l 0 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 210 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 1, 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.
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 1, 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 1, 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 i>rought forward for consideration.
o c;(
. )'/ '-n .
Is', G,,,<, ~! C'./ ''7,/-, .
BARBARA J. LINDSETH, Acting Execntive Director
Development Department
-------------------------.---------.------------------------------------------------------------------------------
BJL:lag: 11-21-05.cdc
COMMISSION MEETING AGENDA
MEETING DATE: 1112111994
Agenda Item Number:
\
,
c
c
c
o
o
>",',::;.it<::,<FJ..~0 _'
November 16, 1994
STEIIVARD
& A SSaCIA TES
COMMERCIAL REAL ESTATE
~~~~~TI
.=
CITY OF SAN BER1JAfWJ:-W
ECONOMIC DEVElOPMENf AGENCY
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:
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 ofT pursuing the loan. I feel we can have everything
accomplished that we need accomplished by April 1, 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.
1887 Business Center Drive, Suite 3 \
San Bernardino. California 92408
Tel. (909) 381-9922 FAX (909) 381-2481
c
c
c
o
o
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.
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.
Tha mg you in advance, I remain
\
......- ...~
FDIC
o
o
c
Federal Deposit Insurance Corporation
p.o. Bo. 7549 N.wporl BOlch. CA 92B5B.7&49
17141263.7100 . FAX 17141263-7242
IIugust 4. 1994.'
FILE
Mr. Allan Steward
Allan Steward, Inc. ';.
c/o Steward and Associates
1887 Business Center Drive
San Bernardino, CA 92408
SUBJECT:
AMERICAN COMMERCE NATIONAL BANK, 4576
Anaheim, CA - In Receivership
LAMIS No. 501121231 .
ALLAN STEWARD. INC.
Subject
Dolo Sent to 1110
J~~
r to--f:'
IA...JS(!t, i-
t
. .........,
Dear Mr. Steward:
j
......:!"" . NqUeIlI*f 7'M7
As discussed today, the terms of the above-referenced note called for an interest rate of
4\ for the first year. and an interest rate of Bank Prime plus 1\ for the remainder of the
note term, with interest payable monthly. ~dditionally, monthly principal payments of
$10,250 were to commence on April 2. 1994. The FDIC agreed to allow you to cure the
interest arrearage bl' paying $10,000 cash in December 1993 plus $2,000 over and above your
regularly scheduled monthly 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.
~he FDIC will consider a discounted payoff <>r loan workout/restructure offer to resolve
~e above-referenced asset. The basic crit..ria for a discounted payoff or workout is
financial distress, i.e. an inability on the part of the debtor or guarantor to honor the
terms of the obligation. The fOllOWing infc1rmation must be submitted to support any offer
other than full payoff:
1. Current personal financial statement 'for Allan and Kathleen
Steward (FDIC form enclosed) - nc'tarh.ed signatures
2. Current financial statement for Allan Steward, Inc.
3. Current financial statement for the guarantor, Redevelopment
Agency of the City of San Berna~dino
4. Copies of federal tax returns for the debtor and guarantors
for 1992 and 1993
5. Income and expense information for the collateral property
7he information and of.fer must be received in thts office no later than 5 p.m. on
September IS, 1994. In the event your offer requires takeout 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.
7he 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
~nancial situation, the value of the collat..ral property and the financial ability of the
o
o
C Page Two
AugU8t 4, 1994
guarantors will all be considered in analyzing the fea8ibility of your offer. It is
assumed that the nedevelopment Agency of the City of San Bernardino executed the guaranty
in good faith and is prepared to honor its obligation if_necessary.
Please contact thE' under'~i9ned at (714) 263-7192 to discU8S this matter further if you
have any question~ or comments.
Very truly your8.
,
!:'-
!hotsf4.,
fableia Bolster
Credit Specialist
...'
c
CC: Guarantors:
Allan and Rathleen Steward
Redevelopment Agency of the City of San Bernardino
"'.';~'-
.
'.
',>;'
c
1
: \