HomeMy WebLinkAbout09.F- Economic Development Agency RESOLUTION(ID# 1376) DOC ID: 1376 G
lanw CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION
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 Mayor and Common Council 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&
Malin-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 2010-1-IUD 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, L.L.C. ("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
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existing tenant lease, for$10,000 and assumed the 1998-HUD-108 Loan payments.
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 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 rate on the 2010-HUD-108 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 Market 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 Mayor and Common Council adopt the attached Resolution.
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City Attorney Review:
Supportin¢Documents:
11-21-11 HUD Section 108 Loan Sub Colltrl MCC Reso (DOC)
I1-21-11 Ex A to MCC Reso 1st Amend HUD Sec 108 Loan (PDF)
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9.P.a
I RESOLUTION NO.
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE
3 CITY OF SAN BERNARDINO APPROVING AND AUTHORIZING THE
FIRST AMENDMENT TO CONTRACT DATED JULY 21, 2010, THE
4 2010-HUD SECTION 108 LOAN REFINANCE CONTRACT
DOCUMENTS FOR IMPLEMENTATION OF SUBSTITUTION OF E
5 COLLATERAL AND AUTHORIZING THE CITY MANAGER TO a
EXECUTE THE FIRST AMENDMENT AND RELATED DOCUMENTS o
6 FOR IMPLEMENTATION OF THE FIRST AMENDMENT 2010-HUD
SECTION 108 • LOAN REFINANCING FOR LOAN GUARANTEE °
ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND
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8 COMMUNITY DEVELOPMENT ACT OF 1974,AS AMENDED,42, U.S.C. o
§5308 FOR SERIES HUD 2010-A CERTIFICATES (CDBG SECTION 108
9 CONTRACT NO. B-96-MC-06-0539) (CENTRAL CITY NORTH
REDEVELOPMENT PROJECT AREA)
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11 WHEREAS, the City of San Bernardino (the "City") has determined that a high priority 2
12 exists to create jobs for the City's low- and moderate income persons and to eliminate blight in
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(� 13 the Downtown Area of the City; and
�✓ 14 WHEREAS, the declining job base and economy within the City's Downtown Area L)
15 necessitated the City to implement certain activities for job creation; and —
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16 WHEREAS, to stimulate the downtown economy and thereby create jobs, the City
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17 entered into a Disposition and Development Agreement (the "1996-DDA") with MDA-San r
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Bernardino, LLC ("MDA"), for the development and financing of a multi-screen cinema
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complex; and o
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WHEREAS, as part of the transaction contemplated under the 1996-DDA, in 1998, the rn
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U.S. Department of Housing and Urban Development("HUD") approved a Section 108 Loan in =
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the amount of$7,000,000 ("1998-HUD-108 Loan"); and N
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WHEREAS, in 2001, following the downturn in the cinema industry, the
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Redevelopment Agency of the City of San Bernardino ("Agency") purchased the multi-screen r
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cinema complex from MDA and assumed the 1998-HUD-108 Loan payments; and a
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WHEREAS, the Agency has continued to make the required semi-annual interest and
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I principle payments to HUD; and
2 WHEREAS, in May 2010, HUD notified the Agency of the opportunity to refinance
3 1998-HUD-108 Loan through HUD's 2010 Public Offering; and
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4 WHEREAS, on June 21, 2010, the Mayor and Common Council of the City of San v
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5 Bernardino (the "Common Council") approved the 2010 refinancing of the 1998-HUD-108 a
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6 Loan(the"Contract); and 0
7 WHEREAS,the existing collateral for the Contract is the Cinema Complex; and
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8 WHEREAS, the Agency desires to replace the Cinema Complex as collateral with the .0
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9 City Hall 5-Level Parking Structure in order to the remove the encumbrance to allow for a
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10 proposed New Market Tax Credit financing; and
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WHEREAS, the Agency has received approval from HUD to replace the Contract r
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collateral; and
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WHEREAS, on September 19, 2011, HUD signed the First Amendment to the Contract
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that approves the collateral substitution; and
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WHEREAS, Agency Staff recommends to the Common Council approval and
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authorization for the City Manager to execute said First Amendment to the Contract dated July 0
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21, 2010, attached hereto as Exhibit"A." N
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NOW, THEREFORE, IT IS HEREBY RESOLVED, DETERMINED AND ORDERED
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18 BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, AS
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FOLLOWS:
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20 Section 1. The information and other facts as set forth in the Recitals of this
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21 Resolution are true and correct.
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22 Section 2. The Mayor and Common Council hereby authorizes the City Manager to
23 execute the Fast Amendment to the Contract dated July 21, 2010, of the Contract for Loan
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24 Guarantee Assistance under Section 108 of the Housing and Community Development Act of
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25 1974, as Amended,42, U.S.C. §5308, and related documents for the substitution of collateral as
[^ may be required to be executed and delivered to HUD on behalf of the City together with such
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I technical and conforming changes as may be recommended by the City Manager and approved
2 by the City Attorney. The City Manager or such other designated representative of the City is
3 further authorized to do any and all things and take any and all actions as may be deemed c
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4 necessary or advisable to effectuate the purposes of the Agreement, including making non-
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5 substantive modifications to the Agreement. E a
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6 Section 3. This Resolution shall take effect from and after the date in the manner as
7 set forth in the City Charter. °
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1 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE
CITY OF SAN BERNARDINO APPROVING AND AUTHORIZING THE
2 FIRST AMENDMENT TO CONTRACT DATED JULY 21, 2010, THE
3 2010-HUD SECTION 108 LOAN REFINANCE CONTRACT
DOCUMENTS FOR IMPLEMENTATION OF SUBSTITUTION OF d
4 COLLATERAL AND AUTHORIZING THE CITY MANAGER TO E
EXECUTE THE FIRST AMENDMENT AND RELATED DOCUMENTS m
5 FOR IMPLEMENTATION OF THE FIRST AMENDMENT 2010-HUD a
SECTION 108 LOAN REFINANCING FOR LOAN GUARANTEE r
6 ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND
COMMUNITY DEVELOPMENT ACT OF 1974,AS AMENDED, 42, U.S.C. o
7 §5308 FOR SERIES HUD 2010-A CERTIFICATES (CDBG SECTION 108 c
CONTRACT NO. B-96-MC-06-0539) (CENTRAL CITY NORTH °-
8 REDEVELOPMENT PROJECT AREA)
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10 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and N
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Common Council of the City of San Bernardino at a meeting thereof,held on the M
12 day of , 2011,by the following vote to wit: o
13 Council Members: Ayes Nays Abstain Absent
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Rachel G. Clark, City Clerk N
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The foregoing Resolution is hereby approved day of 2011. —
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25 Patrick J. Morris, Mayor a
City of San Bernardino
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1 Approved as to Form:
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By:
3 James F. Pemnan, City Attorney
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U.S.DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 0
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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. §5308
Date of Amendment SEP 19 2011
UNIT OF GENERAL LOCAL GOVERNMENT: City of San Bernardino, CA
BORROWER: Redevelopment Agency of the City of San Bernardino, the
City's designated public agency
COMMITMENT NUMBER: B-96-MC-06-0539
MAXIMUM COMMITMENT AMOUNT: $7,000,000
INTERIM FINANCING CONTRACT AND NOTE: March 3, 1999
Note Amount: $7,000,000
PUBLIC OFFERING CONTRACT AND NOTE: July 21, 2010
Note Amount: $3,860, 000
FORMER OBLIGOR: MDA-San Bernardino Associates, LLC
PROJECT: Cinema Star Multi-Plex Theatre Project
This First Amendment is entered into by the Secretary of
Housing and Urban Development ( "Secretary" ) , the City of San
Bernardino, California (the "Unit of Local General Government") ,
and the Redevelopment Agency of the City of San Bernardino
( "Borrower") .
RECITALS
WHEREAS, the Secretary, the Unit of Local General Government,
and Borrower entered into a certain Contract for Loan Guarantee
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
WHEREAS, the Guaranteed Loan Funds were used by the Borrower
to make a loan to MDA-San Bernardino Associates, LLC (the "Former
Obligor" and "Former Obligor Loan" ) to assist in financing
construction for the Project, pursuant to 24 CFR 570 .703 (i) (1) ,
special economic development activities eligible under
§570 . 203 (b) ; and
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WHEREAS, subsequent to a default by Former Obligor in
November of 2000, the Former Obligor executed a Grant Deed to the a
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
of trust executed by the Former Obligor in favor of the Borrower
and collaterally assigned to the Secretary; and
WHEREAS, the Borrower is requesting a substitution of real
property serving as security for the Borrower's Note, from the
real property that is currently identified in paragraph 15 (a) ,
amending paragraph 5 (c) , as Attachment 3 of the Original Contract
(and subsequently incorporated into the Public Offering
Contract) , to the alternative real property described on the new
Attachment 3, which is attached to this First Amendment; and
WHEREAS, the Secretary, the Borrower, and the Unit of Local
General Government now desire to amend the Public Offering
Contract to further clarify and facilitate the consummation of
the transaction as contemplated therein;
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
agree that the Public Offering Contract be and hereby is amended
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:
15. Special Conditions and Modifications:
(a) Paragraph 5 (c) of the Contract is amended by deleting
the paragraph as written in its entirety and
substituting therefore the following:
" (c) A sole first priority lien in the name of the
Secretary on the real property described in
Attachment 3 hereof (the ' Substitute Property' ) ,
established through an appropriate and properly
recorded Deed of Trust (the `Deed of Trust' ) . The
Deed of Trust shall contain such provisions as the
Secretary deems necessary. "
(b) Guaranteed Loan Funds have been used by the Former
Obligor and Borrower to assist in financing the
construction of a cinema complex, an activity
determined to be eligible under 24 CFR 570.703 (i) (1)
and §570.203 (b) .
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(c) (Reserved] Y
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(d) Prior to a release by the Secretary of the property LL
currently securing the Section 108 loan (the
"Property" ) , Borrower shall deliver to the Secretary
the following:
(i) The original recorded Deed of Trust for the
Substitute Property, signed by the mortgagor
securing repayment of the indebtedness evidenced
by the Note or, in the alternative, a copy of the
Deed of Trust submitted for recordation, with the
original to follow when received by the Borrower.
(ii) A mortgagee title policy, issued by a company and
in a form acceptable to the Secretary, naming the
Secretary as the insured party.
(iii) A certified survey with a legal description
conforming to the title policy and the Deed of
Trust.
(iv) An appraisal in the Substitute Property specifying
an estimate of the as completed fair market value
of not less than 125 percent (125%) of the
principal balance of the Note. The appraisal
shall be completed by an appraiser who is
certified. by the state and has a professional
designation (such as "SRA" or "MAI" ) , and shall
conform to the standards of the Financial
Institutions Reform, Recovery and Enforcement Act
Of 1989 ( "FIRREA" ) .
(v) An opinion of Borrower' s counsel on its
letterhead, addressed and satisfactory to the
Secretary, that the Deed of Trust is a valid and
legally binding obligation, enforceable in
accordance with its terms .
(e) Paragraph 12 is amended by adding at the end thereof
the following language:
" (g) The Secretary may exercise any appropriate
remedies to enforce the lien on the Substitute
Property referred to in paragraph 15 (a) , amending
paragraph 5 (c) . "
(f) If any one or more of the covenants, agreements,
provisions, or terms of the Contract shall be for any
reason whatsoever held invalid, then such covenants,
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
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provisions of the Contract or of this First Amendment x
or of the Note or the rights of the Holder thereof. a
(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
of the Note is made in reliance upon the availability
of grants pledged pursuant to paragraph 5 (a)
(individually, a "Pledged Grant" and, collectively,
the "Pledged Grants" ) in any Federal fiscal year
subsequent to the Federal fiscal year ending
September 30, 2010 to: (A) pay when due the payments
to become due on the Note, or (B) defease (or, if
permitted, prepay) the full amount outstanding on the
Note. The Borrower and the Unit of General Local
Government further acknowledge and agree that if the
Secretary (in the Secretary' s sole discretion)
determines that Pledged Grants are unlikely to be
available for either of such purposes, such
determination shall be a permissible basis for any of
the actions specified in paragraphs (ii) and (iii)
below (without notice or hearing, which the Borrower
and the Unit of General Local Government expressly
waive) .
(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
the Secretary (in the Secretary's sole discretion)
has determined that Pledged Grants are unlikely to be
available for either of the purposes specified in (A)
and (B) of paragraph (i) above (such notice being
hereinafter referred to as the "Notice of Impaired
Security" ) , the Secretary may limit the availability
of Pledged Grants by withholding amounts at the time
a Pledged Grant is approved or by disapproving
payment requests (drawdowns) submitted with respect
to Pledged Grants.
(iii) If after 60 days from the Notice of Impaired Security
the Secretary (in the Secretary's sole discretion)
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
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
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 .
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(iv) All notices and submissions provided for hereunder m
shall be submitted as directed in paragraph 12 (f) a
above.
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THE UNDERSIGNED, as authorized officials on behalf of the. Y,
Borrower or the Secretary, have executed this First Amendment to the no
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.
The Redevelopment Agency of the
City of San Bernardino
BORROWER
BY:
(Signature)
(Name)
(Title)
Date:
UNIT OF GENERAL LOCAL GOVERNMENT
BY:
(Signature)
(Name)
(Title)
Date:
SECRETARY OF #4VUSIN , URBAN
DEVEL7D
BY:
(Signature)
Yolanda Chavez
(Name)
Deputy Assistant Secretary
for Grant Programs
(Title)
SEP 19 2011
Date:
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ATTACHMENT 3
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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
office of the County Recorded of said County.
APN 0134-311-50