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Home My WebLink About07- Development Department DEVELOPMENT DEPARTMENT OF THE CITY OF SAN BERNARDINO REQUEST FOR COMM I IONIC OUNCTI, ACTION FROM: KENNETH J. HENDERSON SUBJECT: ALLAN STEWARD LOAN Executive Director AMENDMENT REQUEST DATE: November 10, 1993 --------------------------------------------------------------------------------------------------------------------------------------------- Svnopsis of Previous Commission/Council/Committee Action(s): On February 15, 1993, the Community Development Commission authorized a loan guarantee of$1,300,000 for the benefit of Mr. Steward plus an additional loan of$350,000 secured by a second trust deed. On May 13, 1993, the Commission authorized a further loan of$139,746 secured by a third deed of trust. On November 4, 1993, the Redevelopment Committee recommended that the Commission grant a one year extension for the third deed of trust loan. --------------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion( )• (Community Development Commission) MOTION: That the Community Development Commission grant an extension of one year for an existing Third Trust Deed loan to Mr. Allan Steward subject to the terms described in the attached staff report. Administrator KENNE H J. HE DERSON Executive Director ------------------------------------------------------------------------------------- Contact Person(s): Kenneth J Henderson/John Hoeger Phone: 5081 Project Area(s): Central City North Ward(s): One (1) Supporting Data Attached: Staff Report: Letter to Mr teinhau FUNDING REQUIREMENTS: Amount: $ N/A Source: N/A Budget Authority: N/A - ------------------------------------------------------------------------------------------------------------ Commission/Council Not= ---------------------------------------------------------------------------------------- KJH:JBH:lag:gasc.cdc COMMISSION MEETING AGENDA .. MEETING DATE: 11/15/1993 Agenda Item Number: _� EVIL- DEVELOPMENT DEPARTMENT STAFF REPORT 0 --------------------------------------------------------------------------------------------------------------------- Allan Steward Loan Amendment Request Mr. Allan Steward is the owner of the former Gas Company building located at 570 West Fourth Street which has been renovated for mixed use including retail, office and vocational training space. On May 13, 1993, the Commission authorized a short-term gap loan totaling $139,746 to finance completion of improvements which were left unfinished in the wake of the Federal Deposit Insurance Corporation seizure of American National Commerce Bank (who had sold the property to Mr. Steward). This gap loan was in addition to Agency financing assistance of $1,650,000 which was already in place and for which the Agency has an equity interest in the project. The $139,746 gap loan was to be repaid in full 90 days after its execution. The staff report for this loan indicated that "during that time, the FDIC will be able to make its evaluation and either the bank will provide the funds for Mr. Steward to repay the loan or, in the alternative, Mr. Steward will repay the loan from his own personal sources." Toward that end, Mr. Steward's personal guarantee was required and obtained. On August 19, 1993, the gap loan became all due and payable. Mr. Steward failed to pay and the Agency provided written notice that payment was past due. Payment is now more than 70 days in arrears and the loan is in a state of default. The total amount now due on this loan, both principal and interest, increases each day as the interest due increases but is now approximately $144,000. Rather than pay the gap loan, Mr. Steward has requested in the attached letter that the Agency amend its loan to provide for a one (1) year extension to the term. He indicates that the FDIC has made some progress toward processing his claim but has established no precise time table for repayment. ---------------------------------------------------------------------------------------------------------- KJH:JBH:lag:gasc.cdc COMMISSION MEETING AGENDA MEETING DATE: 11/15/1993 Agenda Item Number: �_ DEVELOPMENT DEPARTMENT STAFF REPORT Allan Steward Loan Amendment Request November 15, 1993 Page Number -2- ----------------------------------------------------------------------------------------------------- APPROPRIATE AGENCY SUBSIDIES Due to the redevelopment nature of this project, it is appropriate to offer terms that are below that offered in the market as an inducement and as assistance. Given the extension of time, the failure of Mr. Steward to make full payment of the loan from his personal sources, and the third deed of trust position of this loan, a commercial source would charge a very high rate of interest plus a considerable loan fee. Staff contacted a local conventional lender regarding a transaction of this type and was quoted a loan fee (points) of 15% plus expenses and an interest rate of 12% per annum. A conventional lender would also require fully amortized regular payments of principal and interest. As this loan amendment would be a developer requested amendment, the Agency's $7,500 amendment fee (paid, for example, by Maruko) would be appropriate. In recognition of this fee, however, no further points or refinancing fees are suggested, so the commercial fee, which would exceed $20,000, would be waived. Also in recognition of the redevelopment purpose of this project, a subsidized interest rate would be appropriate. Providing a subsidy of 150 basis points would produce an interest rate of 10.5%. Finally, to reduce monthly payments, the Agency could waive principal payments for the term of the loan. A comparison between conventional terms and the suggested Agency terms is: Item: Conventional Proposed i Loan Fees: $21,600 $7,500 Monthly Payment: $12,794 $1,326 Interest Rate: 12% 10.5% These terms would provide an assistance subsidy to the project and help prevent Mr. Steward from having to invest additional personal funds into the project. -------------------------------------------------------------------------------- 1 KJH:JBH:1ag:gasc.cdc COMMISSION MEETING AGENDA MEETING DATE: 11/15/1993 Agenda Item Number: �_ DEVELOPMENT DEPARTMENT STAFF REPORT Allan Steward Loan Amendment Request November 15, 1993 Page Number -3- ----------------------------------------------------------------------------------------------------- PROPOSED AGENCY LOAN EXTENSION The new loan would be all due and payable at the end of one year. The loan would continue to be secured by a Third Deed of Trust and Mr. Steward's continuing guarantee. The new principal amount would be $151,500 (which combines current principal, interest currently due, and the amendment fee). The payments would be interest only with the principal due and payable at the end of one year. In summary, the new proposed term with attendant conditions are as follows: Principal Amount: $151,500 (approximately) with the actual amount to be adjusted at the time of execution based upon interest then due. Amendment Fee: $7,500 (included in the principal above). Interest Rate: 10.5% per annum. Payments: Interest only, monthly. All due and payable at the end of one year. Security: Third Deed of Trust plus Mr. Steward's personal guarantee. i Staff recommends adoption of the form motion. i KENNETH J. AENDERSON, Executive Director Development Department ---------------------------------------------------------------------------------------- 'i KJH:JBH:1ag:gasc.cdc COMMISSION MEETING AGENDA MEETING DATE: 11/15/1993 Agenda Item Number: ALLAN 6TEWAM, INS:. 110 GARDEN HILL QEDLAND6. CA 92373 '714) 793-5209 1,4 a v October 7, 1993 Timothy Steinhaus, Agency Admin. City of San Bernardino E.D.A. 201 North "E" Street San Bernardino, CA 92401 Re: INTERIM LOAN ($139,746.00) Dear Mr. Steinhaus: Please find enclosed the most recent letter from the office of Mr. Mike Trout, your agency Contract Administrator. After careful review, and in light of the fact that our major tenant, Concord Career College just recently took possession of the 17,000± square feet of space we ask that you review and consider our request for a one (1) year loan extension. As of September 1993, we were successful in negotiating an agreement with Concord to modify it's original agreement to read: "half rent for the first year" instead of "six months rent free"; Inland Counties Legal Services has agreed to follow suit and our Cross Colors tenant was substituted in party by Avon Products which is currently paying full rent. These efforts were necessary to generate a cash flow to debt service all expenses incurred by the operation of this property. The combination of tenants in place leaves a residual of approximately eight percent prime leasable space. (basement space less than prime to be considered). Our total scheduled gross rent will be effective September, 1994. In light of the failure of American National Commerce Bank, I petitioned your agency for an interim loan with certain assurances from representatives of the Federal Insurance Deposit Corporation that adequate consideration would be given to my claim for immediate payment. While there has been some progress, as of this date, a precise time table for repayment has not been established. I have also invested $73,000 of my personal funds as the bank left many items not agreed to in writing. This money was necessary to keep Concord's lease in tact. 0 Mr. Gene Wood has been commissioned by me to initiate the process necessary to refinance all liens on 570 West 4th Street. This would repay the agency in full. Attachment 1 Mr. Steinhaus October 7, 1993 Page 2 We believe that the income stream in September, 1994, will be sufficient to debt service a new loan and provide the desired results regarding all loans made by the Redevelopment Agency. A three prong approach has been launched to address the Contract Administrator's current request, we believe that all efforts will be effective within the requested extension. We continue to believe that this project is a viable venture and we remain willing to work to that end. Should you need to contact me regarding this matter I may be reached at (909) 381-9922. Thank you! Since, ly, A AN S I ARD, INC. 11 St ward, President cc: Hon. Mayor Tom Minor Valarie Pope Ludlum E i i Attachment