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HomeMy WebLinkAbout09.E- Economic Development Agency 9.E CDC RESOLUTION(ID# 1375) DO CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION F`r Agreement/Contract Amendment From: Emil A. Marzullo M/CC Meeting Date: 11/21/2011 Prepared by: Kathleen Robles, (909) 663- 1044 Dept: Economic Development Agency Ward(s): 1 Subject: Resolution of the Community Development Commission of the City of San Bernardino Approving and Authorizing the First Amendment to Contract Dated July 21, 2010, the 2010- HUD Section 108 Loan Refinance Contract Documents for Implementation of Substitution of Collateral and Authorizing the Execution of Said First Amendment for Substitution of Collateral for Loan Guarantee Assistance Under Section 108 of the Housing and Community Development Act of 1974, as Amended,42,U.S.C. §5308 for Series HUD 2010-A Certificates (CDBG Section 108 Contract No. B-96-MC-06-0539). (Central City North Redevelopment Project Area). Financial Impact: There is no impact to the City's General Fund. The outstanding principal amount of the 2010-HUD-108 Loan as of August 2011 is$3,450,000 and the Parking Structure has an estimated fair market value of$9,539,000 (Donahue Hawran & W Mahn-January 7,2011). The Loan to Value ratio is at 63 percent. Motion: Adopt resolution. Synopsis of Previous Council Action: December 1998,the Mayor and Common Council approved the 1998 HUD Section 108 Loan. June 21, 2010,the Mayor and Common Council approved the 2010-HUD Section 108 Loan Refinance Contract for Loan Guarantee Assistance under Section 108 of the Housing and Community Development Act of 1974, as Amended,42, U.S.C. §5308 for Series HUD 2010-A Certificates (CDBG Section 108 Contract No. B-96-MC-06-0539). Background: On October 29, 1996, the Redevelopment Agency of the City of San Bernardino (the "Agency") and MDA-San Bernardino Associates, LLC ("MDA") entered into a Disposition and Development Agreement (1996-DDA) for the development, construction, improvement, and financing of a multi-screen cinema complex and related common area improvements. As part of the transaction contemplated under the 1996-DDA, in 1998,the U.S. Department of Housing and Urban Development ("HUD") approved a Section 108 Loan in the amount of$7,000,000 (the "1998-HUD-108 Loan"). In 2001, with the downturn in the cinema industry, the Agency purchased the theater building (located at 450 North "E" Street) from MDA, together with the existing tenant lease, for$10,000 and assumed the 1998-HUD-108 Loan payments. Updated: 11/17/2011 by Linda Sutherland G Packet Pg. 249 1375 On May 5, 2010, HUD notified the Agency of the opportunity to have the City's 1998-HUD-108 Loan Promissory Note ("Note") amended and refinanced from the proceeds of a new promissory note that would be financed through an up-coming public offering. The new note was intended to refinance the previous Note and be at interest rates determined in June 2010 when the investment banking group that executed the public offering had completed the purchase of the Section 108 obligations for resale to investors. On June 21, 2010 the Mayor and Common Council and the Community Development Commission approved the refinancing of the 1998-HUD-108 Loan and on July 21, 2010, HUD signed its Underwriting Agreement for the July 21,2010 Public Offering and the 1998-HUD-108 Loan was refinanced (the "2010-HUD-108 Loan" or the "Contract"). The refinancing significantly reduced the interest rates on the 2010-HUD Loan from the original 7.25% interest rate. CURRENT ISSUE: Collateral for the 2010-HUD-108 Loan is currently the vacant multi-plex cinema (the"Cinema") located at 450 North"E" Street. With the current potential for tenanting the Cinema, the Agency seeks to remove the Cinema as collateral on the 2010-HUD-108 Loan in order to remove the encumbrance to allow for a proposed New Markets Tax Credit financing to fund the forthcoming Agency obligations on the Cinema. The Agency received approval from HUD to the replace the Cinema with the City Hall 5-level parking structure (the "Parking Structure") as collateral for the 2010-HUD-108 Loan and on September 19, 2011, HUD signed the First Amendment to the Contract dated July 21, 2010, for execution by the City and the Agency. With approval to substitute the existing collateral with that of the Parking Structure, the Cinema will be released from encumbrances on the property. Both the Cinema and the Parking Structure are currently owned by the San Bernardino Economic Development Corporation. ENVIRONMENTAL IMPACT: The Agency has reviewed the proposed project under the California Environmental Quality Act ("CEQA") and has determined that the First Amendment to the Contract dated July 21, 2010, is exempt pursuant to Chapter 2.6, Section 21080 of the Public Resources Code, CEQA Statutes, and Section 15061(b)(3) of the CEQA statutes. RECOMMENDATION: That the Community Development Commission adopt the attached Resolution. City Attorney Review: Updated: 11/17/2011 by Linda Sutherland G 9.E 1375 Sunnortina Documents: 11-21-11 HUD Section 108 Loan Sub CoIItrl CDC Reso (PDF) 11-21-11 Ex A to CDC Reso 1st Amend HUD Sec 108 Loan (PDF) Updated: 11/17/2011 by Linda Sutherland G Packet Pg. 251 9.E.a 1 RESOLUTION NO. 2 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING AND 3 AUTHORIZING THE FIRST AMENDMENT TO CONTRACT DATED JULY 21, 2010, THE 2010-HUD SECTION 108 LOAN REFINANCE 4 CONTRACT DOCUMENTS FOR IMPLEMENTATION OF SUBSTITUTION OF COLLATERAL AND AUTHORIZING THE a 5 INTERIM EXECUTIVE DIRECTOR OF THE REDEVELOPMENT o 6 AGENCY OF THE CITY OF SAN BERNARDINO ("AGENCY") TO EXECUTE THE FIRST AMENDMENT AND RELATED DOCUMENTS ° 7 FOR IMPLEMENTATION OF THE FIRST AMENDMENT 2010-HUD c SECTION 108 LOAN REFINANCING FOR LOAN GUARANTEE v g ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND rn COMMUNITY DEVELOPMENT ACT OF 1974,AS AMENDED, 42, U.S.C. 9 §5308 FOR SERIES HUD 2010-A CERTIFICATES (CDBG SECTION 108 M CONTRACT NO. B-96-MC-06-0539) (CENTRAL CITY NORTH 10 REDEVELOPMENT PROJECT AREA) r 0 11 Ln WHEREAS, the City of San Bernardino (the "City") has determined that a high priority 12 0 exists to create jobs for the City's low- and moderate income persons and to eliminate blight in '^ 13 �.., the Downtown Area of the City; and o 14 v WHEREAS, the declining job base and economy within the City's Downtown Area b 0 15 necessitated the City to implement certain activities for job creation; and a 16 rn WHEREAS, to stimulate the downtown economy and thereby create jobs, the City m 0 17 —� entered into a Disposition and Development Agreement (the "1996-DDA") with MDA-San o 18 Bernardino, LLC ("MDA"), for the development and financing of a multi-screen cinema o 19 complex (the"Cinema Complex"); and in 20 WHEREAS, as part of the transaction contemplated under the 1996-DDA, in 1998, the z 21 U.S. Department of Housing and Urban Development("HUD") approved a Section 108 Loan in N 22 the amount of$7,000,000 (the"1998-HUD-108 Loan"); and c 23 WHEREAS, in 2001, following the downturn in the cinema industry, the E r v 24 Redevelopment Agency of the City of San Bernardino ("Agency") purchased the Cinema a 25 Complex from MDA and assumed the 1998-HUD-108 Loan payments; and WHEREAS, the Agency has continued to make the required semi-annual interest and -1- c:uxan,.n dSen�o: .ffi i[.dLi . eSedncs\TemWffiutTUn�bemeNi.itv.(aleevba i..it..IQW..\w.,k\Attachments\1567.docX PacketPg. 252 9.E.a 1 principle payments to HUD; and 2 WHEREAS, in May 2010, HUD notified the Agency of the opportunity to refinance r 3 1998-HUD-108 Loan through HUD's 2010 Public Offering; and E a 4 WHEREAS, on June 21, 2010, the Community Development Commission of the City of r E 5 San Bernardino (the"Commission") approved the 2010 refinancing of the 1998-HUD-108 Loan c m 0 6 (the"Contract); and J 0 7 WHEREAS,the existing collateral for the Contract is the Cinema Complex; and o WHEREAS, the Agency desires to replace the Cinema Complex as collateral with the U 8 rn City Hall 5-Level Parking Structure in order to the remove the encumbrance to allow for a 9 M proposed New Market Tax Credit financing; and N 10 WHEREAS, the Agency has received approval from HUD to replace the Contract °- 11 collateral; and 12 0 WHEREAS, on September 19, 2011, HUD signed the First Amendment to the Contract v C 13 K that approves the collateral substitution; and o 14 U WHEREAS, Agency Staff recommends to the Commission approval and authorization 0 15 for the Interim Executive Director of the Agency to execute said First Amendment to the s 16 Contract date July 21, 2010, attached hereto as Exhibit"A." 0 17 NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF o 18 THE CITY OF SAN BERNARDINO DOES HEREBY RESOLVE, DETERMINE AND o 19 ORDER,AS FOLLOWS: rn 0 20 Section 1. The information and other facts as set forth in the Recitals of this = 21 Resolution are true and correct. N 22 Section 2. The Commission recognizes that on June 21, 2010, the Mayor and c 23 Common Council approved the 2010 refinancing of the 1998-HUD-108 Loan. E Z U 24 Section 3. The Commission hereby authorizes the Interim Executive Director to a 25 execute the First Amendment to the Contract dated July 21, 2010, of the Contract for Loan CGuarantee Assistance under Section 108 of the Housing and Community Development Act of -2- c:\O m.t dSa Vince .th.1.d Li ..l San m\T.PNN .wT.q�b.rdin«ime(w.bemar .itrca.IOW.wm\wmt\Attachments\1567.docr Packet Pg. 253 `.. 1 1974, as Amended, 42, U.S.C. §5308, and related documents for the substitution of collateral as 2 may be required to be executed and delivered to HUD on behalf of the Agency together with 3 such technical and conforming changes as may be recommended by the Interim Executive v 4 Director and approved by the Agency Counsel and the City Attorney. The Interim Executive 0 E 5 Director of the Agency or such other designated representative of the Agency is further 0 6 authorized to do any and all things and take any and all actions as may be deemed necessary or 0 7 advisable to effectuate the purposes of the Agreement, including making non-substantive o modifications to the Agreement. N 8 Section 4. This Resolution shall take effect from and after its date of adoption by thi M 9 Commission. l0 c 4 11 .h Ir 12 0 13 � 14 U O 15 16 m 0 17 0 18 19 0 20 /// _ 21 N r 22 G 23 E t U 24 /// N Q 25 -3- C:Ommnenu and Sa ime uth Al d Lt . W s� \T. vWi.meT���i,.A.n i..it=.iow...�won\Attachments\1567.docx 9.E.a RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION 1 OF THE CITY OF SAN BERNARDINO APPROVING AND 2 AUTHORIZING THE FIRST AMENDMENT TO CONTRACT DATED JULY 21, 2010, THE 2010-HUD SECTION 108 LOAN REFINANCE 3 CONTRACT DOCUMENTS FOR IMPLEMENTATION OF d SUBSTITUTION OF COLLATERAL AND AUTHORIZING THE a 4 INTERIM EXECUTIVE DIRECTOR OF THE REDEVELOPMENT d AGENCY OF THE CITY OF SAN BERNARDINO ("AGENCY") TO a 5 EXECUTE THE FIRST AMENDMENT AND RELATED DOCUMENTS FOR IMPLEMENTATION OF THE FIRST AMENDMENT 2010-HUD 6 SECTION 108 LOAN REFINANCING FOR LOAN GUARANTEE o ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND c 7 COMMUNITY DEVELOPMENT ACT OF 1974,AS AMENDED,42,U.S.C. 8 §5308 FOR SERIES HUD 2010-A CERTIFICATES (CDBG SECTION 108 y CONTRACT NO. B-96-MC-06-0539) (CENTRAL CITY NORTH 9 REDEVELOPMENT PROJECT AREA) 10 N C O 11 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Community .y w Development Commission of the City of San Bernardino at a meeting thereof,held 0 12 0 N 13 on the day of , 2011,by the following vote to wit: U 14 Commission Members: Ayes Nays Abstain Absent o MARQUEZ - 15 U JENKINS a 16 U BRINKER 0 17 SHORETT 18 KELLEY o 19 JOHNSON 0 20 MC CAMMACK _ 21 N 22 Secretary 23 The foregoing Resolution is hereby approved this day of 2011. L U 24 r a 25 Patrick J. Morris, Chairperson Community Development Commission of the City of San Bernardino -4- C:� u...d se .u\SuthMmd tiv,ocu 5nri.e T.oM.I.T.u� � it wal.n .e i.it,..IOmt ,.\W.,i�Attachments\1567.docx F Packet Pg. 255 9,E.a Approved as to Form: 1 2 By: Agency Counsel c 3 d E 4 (D E Q 5 0 J 6 0 7 0 t5 v 0 8 U) LO 9 M 10 N 0 O 11 N d 12 O W d 13 U D 14 U 15 (j a 16 w c 0 0 17 J ao O r 18 C O 19 ; to O 20 D x 21 N r 22 C 23 E r U 24 A a 25 -5- C9 mO en,smdSmin&SuNe,hnd LI\Loca[Se,r.\T�vWic.teT.a�.n.=m; it wa6i4smne,,,am;na;,,�..,oM2.com\wo,k\Attachments\1567.docx Packet Pg. 256 U.S.DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FIRST AMENDMENT TO CONTRACT DATED JULY 21 2010 CONTRACT FOR LOAN GUARANTEE ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974, AS AMENDED, 42 U.S.C. 55308 Date of Amendment SEP 19 2011 E c d E a UNIT OF GENERAL LOCAL GOVERNMENT: City of San Bernardino, CA R 0 J BORROWER: Redevelopment Agency of the City of San Bernardino, the o City's designated public agency 0 O COMMITMENT NUMBER: B-96-MC-06-0539 m y MAXIMUM COMMITMENT AMOUNT: $7,000, 000 N n M INTERIM FINANCING CONTRACT AND NOTE: March 3, 1999 Note Amount: $7,000,000 0 PUBLIC OFFERING CONTRACT AND NOTE: July 21, 2010 aJo Note Amount: $3,860,000 ° U d FORMER OBLIGOR: NDA-San Bernardino Associates, LLC O PROJECT: Cinema Star Multi-Plex Theatre Project = r c m E This First Amendment is entered into by the Secretary of a Housing and Urban Development ( "Secretary" ) , the City of San N Bernardino, California (the "Unit of Local General Government") , 0 and the Redevelopment Agency of the City of San Bernardino m ( "Borrower") . U RECITALS U 0 WHEREAS, the Secretary, the Unit of Local General Government, x and Borrower entered into a certain Contract for Loan Guarantee W Assistance dated as of March 17, 1999 (the "Original Contract") , pursuant to a Commitment made on December 9, 1997, to assist in financing construction for the Cinema Star Multi-Flex Project (the "Project") ; and c Q WHEREAS, the Guaranteed Loan Funds were used by the Borrower s to make a loan to MDA-San Bernardino Associates, LLC (the "Former m Obligor" and "Former Obligor Loan" ) to assist in financing a construction for the Project, pursuant to 24 CFR 570 .703 (i) (1) , special economic development activities eligible under §570 . 203 (b) ; and Packet Pg.257 2 WHEREAS, subsequent to a default by Former Obligor in November of 2000, the Former Obligor executed a Grant Deed to the Borrower on March 21, 2001 granting certain real property to the Borrower. The Borrower accepted such real property for public purposes and, pursuant to that grant of certain real property, the Former Obligor had no further obligations under the Former Obligor Loan. The real property was to remain subject to a deed c of trust executed by the Former Obligor in favor of the Borrower d E and collaterally assigned to the Secretary; and v d WHEREAS, the Borrower is requesting a substitution of real a property serving as security for the Borrower's Note, from the real property that is currently identified in paragraph 15 (a) , 0 amending paragraph 5 (c) , as Attachment 3 of the Original Contract c [and subsequently incorporated into the Public Offering Contract] , to the alternative real property described on the new o Attachment 3, which is attached to this First Amendment; and w WHEREAS, the Secretary, the Borrower, and the Unit of Local General Government now desire to amend the Public Offering M Contract to further clarify and facilitate the consummation of the transaction as contemplated therein; c 0 0 NOW, THEREFORE, .in consideration of the premises and the J mutual covenants and agreement set forth herein, the Secretary, ° the Unit of Local General Government, and the Borrower mutually d agree that the Public Offering Contract be and hereby is amended N as follows: ° Paragraph 15 of the Public Offering Contract is amended by deleting the paragraph as written in its entirety and substituting therefor the following: a N 15. Special Conditions and Modifications: o N d (a) Paragraph 5 (c) of the Contract is amended by deleting m the paragraph as written in its entirety and o substituting therefore the following: 0 " (c) A sole first priority lien in the name of the x Secretary on the real property described in w Attachment 3 hereof (the 'Substitute Property' ) , established through an appropriate and properly N recorded Deed of Trust (the `Deed of Trust' ) . The Deed of Trust shall contain such provisions as the Secretary deems necessary. " d E (b) Guaranteed Loan Funds have been used by the Former Obligor and Borrower to assist in financing the a construction of a cinema complex, an activity determined to be eligible under 24 CFR 570.703 (i) (1) and §570.203 (b) . Packet Pg. 258 3 (c) (Reserved] ' (d) Prior to a release by the Secretary of the property currently securing the Section 108 loan (the "Property" ) , Borrower shall deliver to the Secretary the following: c (i) The original recorded Deed of Trust for the Substitute Property, signed by the mortgagor a securing repayment of the indebtedness evidenced by the Note or, in the alternative, a copy of the a Deed of Trust submitted for recordation, with the c original to follow when received by the Borrower. 0 J (ii) A mortgagee title policy, issued by a company and ° in a form acceptable to the Secretary, naming the o Secretary as the insured party. U N (iii) A certified survey with a legal description N conforming to the title policy and the Deed of Trust. " c (iv) An appraisal in the Substitute Property specifying o an estimate of the as completed fair market value J of not less than 125 percent (125%) of the o principal balance of the Note. The appraisal shall be completed by an appraiser who is certified. by the state and has a professional o a designation (such as "SRA" or "MAI" ) , and shall i conform to the standards of the Financial Institutions Reform, Recovery and Enforcement Act Of 1989 ( "FIRREA" ) , a (v) An opinion of Borrower's counsel on its o letterhead, addressed and satisfactory to the Secretary, that the Deed of Trust is a valid and legally binding obligation, enforceable in L) accordance with its terms . v 0 (e) Paragraph 12 is amended by adding at the end thereof a the following language: X ° (g) The Secretary may exercise any appropriate N remedies to enforce the lien on the Substitute Property referred to in paragraph 15 (a) , amending paragraph 5 (c) . " c m E (f) If any one or more of the covenants, agreements, provisions, or terms of the Contract shall be for any m reason whatsoever held invalid, then such covenants, a agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of the Contract and shall in no way affect the validity or enforceability of the other Packet Pg. 259 4 provisions of the Contract or of this First Amendment or of the Note or the rights of the Holder thereof. (g) Additional Grounds for Default. Notice of Default. Restriction of Pledged Grants . Availability of Other Remedial Actions . (i) The Borrower and the Unit of General Local Government acknowledge and agree that the Secretary's guarantee c of the Note is made in reliance upon the availability v of grants pledged pursuant to paragraph 5 (a) E (individually, a "Pledged Grant" and, collectively, c the "Pledged Grants" ) in any Federal fiscal year o subsequent to the Federal fiscal year ending CO September 30, 2010 to: (A) pay when due the payments ° to become due on the Note, or (B) defease (or, if o permitted, prepay) the full amount outstanding on the .0 Note. The Borrower and the Unit of General Local Government further acknowledge and agree that if the Secretary (in the Secretary' s sole discretion) U) determines that Pledged Grants are unlikely to be available for either of such purposes, such determination shall be a permissible basis for any of o the actions specified in paragraphs (ii) and (iii) below (without notice or hearing, which the Borrower o and the Unit of General Local Government expressly m waive) . y 0 (ii) Upon written notice from the Secretary to the = Borrower and the Unit of General Local Government at the address specified in paragraph 12 (f) above that E the Secretary (in the Secretary's sole discretion) has determined that Pledged Grants are unlikely to be y available for either of the purposes specified in (A) o and (B) of paragraph (i) above (such notice being hereinafter referred to as the "Notice of Impaired W Security" ) , the Secretary may limit the availability of Pledged Grants by withholding amounts at the time U a Pledged Grant is approved or by disapproving 3 payment requests (drawdowns) submitted with respect a to Pledged Grants. w (iii) If after 60 days from the Notice of Impaired Security the Secretary (in the Secretary's sole discretion) N determines that Pledged Grants are still unlikely to be available for either of the purposes specified in = (A) and (B) of paragraph (i) above, the Secretary may E declare the Note in Default and exercise any and all remedies available under paragraph 12 . This paragraph (iii) shall not affect the right of the a Secretary to declare the Note and/or this Contract in Default pursuant to paragraph 11 and to exercise in connection therewith any and all remedies available © under paragraph 12 . Packet Pg. 260 5 (iv) All notices and submissions provided for hereunder shall be submitted as directed in paragraph 12 (f) above. [Remainder of Page Intentionally Left Blank] m E a c d E Q c 10 O J CO O r C O U d N H r M C R O J O O r V d N O B c m E Q N O N d d' U U O Q x w N r r r C d E s v m Q PacketPg. 261 6 THE UNDERSIGNED, as authorized officials on behalf of the Borrower or the Secretary, have executed this First Amendment to the Public Offering Contract, it being understood and agreed that no provisions of the Public Offering Contract, other than those in paragraph 15 as set forth above, have been changed, and that the Public Offering Contract as amended continues in full force and effect. c M The Redevelopment Agency of the v City of San Bernardino d BORROWER E c BY: 0 0 (Signature) J m _o c (Name) 0- U d N (Title) M r Date: c 0 0 J UNIT OF GENERAL LOCAL GOVERNMENT o v BY: N (Signature) o x v (Name) a N (Title) 0 N Date: U U SECRETARY OF SIN URBAN DEVEL0 1 D X � x w BY: (Signature)- N r Yola da Chavez (Name) c m E Deputy Assistant Secretary for Grant Programs ( ) SEP 19 2011 a Date: Packet Pg.j262 ATTACHMENT 3 Legal Description of Substitute Real Property Parcel 28 of Parcel Map No. 688, in the City of San Bernardino, County of San Bernardino, State of California, as per plat recorded in Book 25, Pages 47 through 58, inclusive, of Parcel Maps in the E office of the County Recorded of said County. a c v APN 0134-311-50 E c m O J O O r c O *6 U d y LO I'. M C N O J O O r V d N O 2 c m E Q a 0 W d U O U 0 Q x w N r r i-7 C d E r U m z Q Packet ft.263