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Home My WebLink AboutR23-Economic Development Agency ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO FROM: Gary Van Osdel Executive Director OR r I'" " , ~ L SUBJECT: J~lllifl REPAYMENT OF EDA LOANS TO SAN BERNARDINO MOBILEHOME PARK CORPORATION, A CALIFORNIA NON- PROFIT CORPORATION AND ORIGINATION OF NEW LOANS DATE: January 4, 2001 .----------------------~-------------------------------------------------------------------------------------------------------------------.-._---------------------____A Svnopsis of Previous Commission/Council/Committee Action(s): ---------------------------------------------------------------------------------------------------------------------------------------------------------------. Recommended Motion(s): (Community Development Commission) MOTION: RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE MODIFICATION OF CERTAIN LOAN DOCUMENTS IN CONNECTION WITH A LOAN TO THE SAN BERNARDINO MOBILE HOME PARK CORPORATION, A NON-PROFIT CORPORATION -----------------------------------------------------------------------------------------_____________________________________U_b______________4____________________________. Contact Person(s): Gary Van Osdel Phone: 663-1044 Project Area(s) Ward(s): Supporting Data Attached: It'! Staff Report It'! Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 LetterlMemo FUNDING REQUIREMENTS Amount: $ Source: SIGNATURE: ._______4___________________4____________________________________________n________________________________________4_______________________________ Commission/Council Notes: -------------------------------------------------------------------------------------------------------------------------------------------- GVO:lag:01-08-01 Repayment MH COMMISSION MEETING AGENDA Meeting Date: 01108/2001 Agenda Item Number: ~ ..' ECONOMIC DEVELOPMENT AGENCY STAFF REPORT ReDavment Of EDA Loans To San Bernardino Mobilehome Park CorDoration, A California Non-Profit CorDoration And Orieination Of New Loans BACKGROUND The EDA has previously advanced funds on behalf of the mobile home park conversion program that began in 1993 for (i) the initial analysis of the 44 mobile home parks located in the City, (ii) due diligence investigations, engineering and financial analysis for the converted mobile home parks, (iii) administrative and consultant expenses to implement the program, and (iv) payment of the mobile home park conversion consultant fees and expenses. As a result of the analysis of the 44 parks, eight mobile home parks were purchased by the EDA. The EDA purchased the parks with funds loaned to the EDA from the proceeds of the San Bernardino Joint Powers Financing Authority's mortgage revenue bonds issued for each park between July 1995 and March 1996. The EDA also applied HOME funds and CDBG funds to pay certain costs associated with the acquisition and the funding of improvements and upgrades determined to be necessary as a result of the pre-acquisition due diligence efforts. In May 1996, the EDA caused the formation of the San Bernardino Mobilehome Park Corporation (the "Parent Non-profit Corporation") and eight subsidiaries thereof representing each park. The EDA then transferred its ownership interest in each park to either the Parent Non-profit Corporation or its subsidiaries. Approximately $4.5M of ED A Low and Moderate-Income Housing Funds were expended by the EDA in the implementation of the mobile home park conversion program. All such funds were recorded on the EDA accounting records as loans by the EDA to each separate single-purpose non-profit subsidiary corporation that was established for each park. The Internal Revenue Service imposed certain limitations on the powers of the 8 subsidiary mobile home park corporations and required that the Parent Non-profit Corporation have full veto power over virtually all of the actions that could be taken by any of the 8 subsidiary non- profit corporations. The final determination letter written by the IRS to grant tax-exempt 501(c)(3) status to each of the 8 subsidiary non-profit corporations and the Parent Non-profit Corporation is based upon the existing structure of the non-profit corporations and the limitations on powers that may be exercised by each of the subsidiary non-profit corporations. -------------------------------------------------------------------------------------------------------------------------------------------- GYO:lag:Ol-08-01 Repayment MH COMMISSION MEETING AGENDA Meeting Date: 01108/2001 Agenda Item Number: K..~_ " Economic Development Agency Staff Report Repayment Of ED A Loans To San Bernardino Mobilehome January 3, 2001 Page Number -2- --------------------------------------------------------------------------------------------------------------------- There is also a requirement under the IRS determination letter that the "Agency Administrator" be continuously on the Board of Directors of the Parent Non-profit Corporation. This requirement assures the IRS that there is some form of government oversight of the operations of the mobile home park program to support the premise that the paren1Jsubsidiary non-profit corporations were formed to "lessen the burden upon government". In this case, to lessen the burden upon the City of San Bernardino through the non-profit corporations. Mr. Van Osdel as the Executive Director of the EDA now sits in this particular board position on the Parent Non- profit Corporation. In March 1999, Santiago Management Company was selected by the prior board of directors of the Parent Non-profit Corporation to act as the management company for the 8 mobile home parks. At the same time each of the City/EDA representatives who sat as the board of directors resigned. An independent board of directors assumed the board positions, except for the required appointment of the "Agency Administrator". Each of these newly appointed directors has established resume of involvement in some aspect of the mobile home industry either as a manufacturer, lender, owner/operator or consultant. In August 1999, the Mayor and Common Council conducted a TEFRA hearing to allow the Housing Authority of the County of San Bernardino ("County Housing Authority") to issue $27,195,000 of short-term notes (the "1999 Notes") to refinance all of the San Bernardino Joint Powers Financing Authority Bonds which were issued in 1995 and 1996 to provide funds to purchase the parks. The Ninth Street Mobile Home Park was not refinanced in 1999 because it was acquired utilizing seller arranged financing rather than publicly sold municipal bonds. The intent of the financing program since its inception in July 1995 was (i) to stabilize the cash flows and rents at each mobile home park by filing vacancies and funding improvements to each mobile park, and then (ii) to seek FHA insured mortgage financing to lower the interest rate on the bonds. Interest rates would be lower with FHA assistance because the credit enhancement provided by the FHA mortgage insurance would allow the refinancing bonds to be issued as "AAA" rated bonds at the lowest possible interest rate for long-term municipal bonds. In November 2000, formal applications were submitted by the Parent Non-profit Corporation to HUD for the FHA mortgage program. At this time, HUD has reviewed the applications for Section 207m financing for the Sequoia and Rancho Meridian mobile home parks. It is expected that the final approvals will be granted by the end of January 200 I. This form of HUD financing allows the subsidiary non-profit corporations to use the bond proceeds for refinancing its share of all existing debt, including the 1999 Notes and the EDA loans, plus to make additional funds available for rehabilitation of the particular mobile home park. --------------------------------------------.----------------------------------------------------------------------------------------------- GVO:lag:Ol-08-01 Repayment MH COMMISSION MEETING AGENDA Meeting Date: 01108/2001 Agenda Item Number: W .' Economic Development Agency Staff Report Repayment Of ED A Loans To San Bernardino Mobilehome January 3, 2001 Page Number -3- --------------------------------------------------------------------------------------------------------------------- CURRENT ISSUE As of January 1,2001, Sequoia owed the EDA $570,042 and Rancho Meridian owed the EDA $558,538. The original loan agreements between the EDA and each of the 8 mobile home parks (the "Original Loan Agreement") required that the loans be repaid in 10 years and the loan agreement was secured by a second deed of trust on each mobile home park property. If the loans were not repaid at such time, the EDA had the right to cause reversion of the ownership of the particular mobile home park back to the EDA. The short-term notes issued by the County Housing Authority in 1999 were structured to be refinanced by long-term FHA insured bonds. One of the criteria for said structure was that no subordinate debt could be recorded against the park properties. Thus, the Original Loan Agreements were modified to provide that the EDA return the deeds of trust recorded in 1995 and 1996, and that the Parent Non-profit Corporation execute new deeds of trust which would not be recorded until the 1999 Notes and any refunding bonds have been repaid. The EDA also agreed to forbear payment on the EDA promissory notes until the 1999 Notes and any bonds refunding said 1999 Notes have been paid; provided that if there is surplus revenue from the mobile home parks prior to that time, the EDA would be entitled to be paid from surplus. It is necessary at this time for the Commission to authorize the restructuring of the existing loan agreements, (i) to eliminate the deeds of trust, (ii) to have loan agreements be secured only by a regulatory agreement upon each mobile home park and (iii) to have the repayment obligation be that of the Parent Non-profit Corporation rather than that of each subsidiary non-profit corporation. It is still expected that surplus cash flows from the mobile home park operations should be sufficient prior to the maturity date of the new bond financing to fully repay the EDA loans, plus interest at the rate of 7% per annum. The financing documents for the 1999 Notes require that certain tests be met before a mobile home park may be refinanced and removed from the cross-collateralized security for the 1999 Notes. For this reason, excess funds generated by the refinancing of the two best performing mobile home parks, Sequoia and Rancho Meridian, will require that approximately $ 1.9M be set aside with the 1999 Note Trustee to assure that the weaker mobile home parks can in fact be refinance either with the 207m program or with another financing program. The 207m program will allow the subsidiary non-profit corporations to repay the EDA' the $570,042 and the $558,538 figures from the proceeds of the bond issue; however, the EDA will be required to re-10an the exact amount of funds back to the Parent Non-profit Corporation until such time as at least 4 or 5 of the mobile home park financings have been completed. At that time, it is intended that the Parent Non-profit Corporation repay the EDA approximately $3.0M of the $4.5M owed based upon current projections of cash flows and debt service coverage. --------------------...------------------------------.-------------------------------------------------------------------------------------- GVO:lag:Ol-08-01 Repayment MH COMMISSION MEETING AGENDA Meeting Date: 01108/2001 Agenda Item Number: fl..~ 1 '. .' Economic Development Agency Staff Report Repayment Of ED A Loans To San Bernardino Mobilehome January 3, 2001 Page Number -4- --------------------------------------------------------------------------------------------------------------------- RECOMMENDA TIONI ACTION: That the Commission (i) acknowledge that the EDA Loan on the Sequoia and Rancho Meridian Mobile Home Parks will be repaid and the deed of trust will be reconveyed, (ii) authorize the execution of a loan agreement and the origination of a loan to the Parent Non-profit Corporation in an amount not to exceed the repayment amount and on terms and conditions outlined in the staff report, and (iii) authorize the Loan Agreement to be secured solely by a Regulatory 4. ili, mOb;!;' """, , t/'? ary v, n Osdel Exec tive Director GVO:lag:Ol-08-01 Repayment MH -------------------------------------------------------------------------------------------------------------------------------------------- COMMISSION MEETING AGENDA Meeting Date: 01/08/2001 Agenda Item Number: ~~ 3 1 C 2 3 4 5 6 7 8 9 10 11 12 13 c - ~(Q)~W RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE MODIFICATION OF CERTAIN LOAN DOCUMENTS IN CONNECTION WITH A LOAN TO THE SAN BERNARDINO MOBILE HOME PARK CORPORATION, A NON-PROFIT CORPORATION WHEREAS, the Redevelopment Agency of the City of San Bernardino (the "Agency")is a public body corporate and politic duly organized and validly existing under the laws of the State of California and is authorized under the Community Redevelopment Law (Health and Safety Code Sections 33000, et. ~ to make loans for redevelopment purposes; and WHEREAS, the Agency purchased eight mobile home parks (the "Parks") with the assistance of the San Bernardino Joint Powers Financing Authority (the "Authority") through the issuance of eight issues of bonds in 1995 and 1996; and WHEREAS, the Agency also applied CDBO funds and HOME funds to assist in financing 14 the purchase of the Parks; and 15 WHEREAS, the Agency caused the formation of the San Bernardino Mobile Home Park 16 Corporation (the "Non-Profit Corporation") and eight subsidiaries thereto in May, 1996 in order to 17 cause the transfer of each Park to the Corporation or its subsidiaries; and 18 WHEREAS, upon the transfer of the Parks to the Non-Profit Corporation, the Non-Profit 19 Corporation executed notes and deeds of trust evidencing the amounts to be repaid to the Agency 20 (the "Agency Loans") for HOME funds and CDBO funds expended to purchase the Parks; and 21 WHEREAS, in 1999, in order to refinance the Parks and take advantage of more favorable 22 interest rates, the Housing Authority of the County of San Bernardino (the "County Housing 23 Authority") issued its $27,195,000 mortgage revenue notes (the "1999 Notes") which come due in 24 September, 2002; and 25 WHEREAS, the Non-Profit Corporation desires to refinance the Rancho Meridian Mobile 26 Home Park and Sequoia Mobile Home Park at this time and has submitted an application to HUD 27 for FHA mortgage insurance which will allow for a Triple A rating on the bonds thereby lowering 28 the rate of interest on the bonds; and HASB/0004/DOC/8 f2 :13 11f? 101 1 I WHEREAS, the FHA mortgage program does not permit any subordinate debt to be I"'"' '-- 2 recorded against the property, and thus the Non-Profit Corporation has requested that the Agency 3 agree to modifY its loan agreement with the Non-Profit Corporation for the repayment of the Agency 4 Loans to (i) eliminate the deed of trust, (ii) secure the Agency Loans with a regulatory agreement 5 recorded against the Sequoia Mobile Home Park and Rancho Meridian Mobile Home Park; and (iii) 6 make the obligation to repay the Agency Loans that of the parent Non-Profit Corporation and not 7 the subsidiaries; and WHEREAS, the proposed financing will result in sufficient funds to allow for the repayment of the 1999 Note debt secured by the Rancho Meridian Mobile Home Park and Sequoia Mobile Home Park and provide funds to repay the Agency the full amount of the Agency Loan, however, the Agency will be required to re-Ioan said funds to the parent Non-Profit Corporation to provide a reserve fund until additional Parks are refinanced; and WHEREAS, the Agency desires to modify the loan agreement at this time to reconvey the deed of trust on the Parks and instead record a Regulatory Agreement against the Parks and execute a loan agreement with the parent Non-Profit Corporation. 8 9 10 II 12 13 14 ,-. 15 ~ 16 17 18 19 20 21 22 23 24 25 ,.- '-' NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO, CALIFORNIA, ON BEHALF OF THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO DOES HEREBY FIND, RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals. The Recitals contained herein are true and correct and are incorporated herein by this reference. Section 2. Determinations. The Agency hereby approves the amendments to the Agency Loan documents described above and finds and determines that said amendments will result in significant public benefits to the Agency and its residents by assisting in maintaining low and moderate income housing within the City of San Bernardino and structuring a financing plan which 26 will allow repayment of the Agency Loans. 27 Section 3. Aooroval. The Agency hereby approves the modification of the loan 28 agreement with the Corporation for the repayment of the Agency Loans in order to (i) eliminate the deeds of trust, (ii) secure the Agency Loans with a regulatory agreement recorded against the HASB/OOO4/DOC/8 2 I 1""'" '- 2 3 4 5 6 r'" '- ,-,-""., - Sequoia and Rancho Meridian Parks; and (iii)make the obligation to repay the Agency Loans that of the parent Non-Profit Corporation and not the subsidiary Non-Profit corporations. Section 4. Official Action. The officers of the Agency are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this Resolution and the financing transaction approved hereby. 7 1111 8 IIII 9 1111 10 1111 11 1111 12 1111 13 1111 14 1111 15 1111 16 1111 17 1111 18 1111 19 1111 20 1111 21 1111 22 1111 23 1111 24 1111 25 1111 26 1111 27 1111 28 1111 1111 HASB/OO04/DOC/8 3 ,.-" '- I 2 3 4 5 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE MODIFICATION OF CERTAIN LOAN DOCUMENTS IN CONNECTION WITH A LOAN TO THE SAN BERNARDINO MOBILE HOME PARK CORPORATION, A NON-PROFIT CORPORATION Section 5. Effective Date. This Resolution shaIl take effect from and after the 7 6 date of its passage and adoption. 8 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Community 9 Development Commission of the City of San Bernardino at a 10 on the day of II Commission Members: 12 ESTRADA LIEN 13 McGINNIS SCHNETZ 14 SUAREZ ANDERSON C 15 McCAMMACK 16 17 18 19 20 21 meeting thereof, held ,2001, by the foIlowing vote, to wit: AYES NAYS ABSTAIN ABSENT Secretary The foregoing resolution is hereby approved this _ day of .2001. JudIth VaIles, ChaIrperson Community Development Commission of the City of San Bernardino 22 Approved as 0 form and legal content: 23 24 By: 25 26 27 28 ~:...~ - HASB/OOO4/DOC/8 4 .' . , ** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT ** RESOLUTION AGENDA ITEM TRACKING FORM Meeting Date (Date Adopted): I - SI' -0 \ Item # Vote: Ayes 1-(., Nays .g Change to motion to amend original documents: - ~'2?, Abstain Resolution # c: ex:: Izoo i - \ , 'I Absent -e Reso. # On Attachments: ~ Contract term: NullNoid After: .- Note on Resolution of Attachment stored separately: .::::::....- Direct City Clerk to (circle I): PUBLISH, POST, RECORD W/COUNTY Date: See Attached: .:= Date Sent to Mayor: 1-'1-D \ Date of Mayor's Signature: ,-\ O' 0 \ Date ofClerk/CDC Signature: I. I L -0 \ Reso. Log Updated: / Seal Impressed: - Date Memo/Letter Sent for Signature:- 60 Day Reminder Letter Sent on 30th day: 90 Day Reminder Letter Sent on 45th day: See Attached: See Attached: Date Returned: Request for Council Action & Staff Report Attached: Yes ,/ No By Updated Prior Resolutions (Other Than Below): Yes No -.-.L By Updated CITY Personnel Folders (6413, 6429, 6433,10584,10585,12634): Yes No ,/ By Updated CDC Personnel Folders (5557): Yes No V By Updated Traffic Folders (3985, 8234, 655, 92-389): Yes No 7 By Copies Distributed to: City Attorney Parks & Rec. Code Compliance Dev. Services EDA ,/ Finance MIS Police Public Services Water Others: Notes: BEFORE FILING. REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term. etc.l Ready to File: .in:l::...- Date: \- \ b -() \