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Home My WebLink About08- Development Department D . VELOPMENT DEPARTMEi. r OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION FROM: KENNETH J. HENDERSON SUBJECT: INLAND PLAZA REFINANCING: Executive Director - PUBLIC HEARING DATE: March 2, 1994 --------------------------------------------------------------------------------------------------------------------------------------------- Svnopsis of Previous Commission/Council/Committee Action(s): On 02/24/94 the Redevelopment Committee recommended that staff pursue, with the assistance of Miller & Schroeder, an Industrial Development Bond refinancing for Inland Plaza, which would not require a Redevelopment Agency loan guarantee. --------------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion(s): (Mayor and Common Council) OPEN PUBLIC HEARING CLOSE PUBLIC HEARING I MOTION A: That the Mayor and Common Council approve an extension of the Inland Plaza Industrial Development Bond due date from October 15, 1993 to October 15, 1994. (Community Development Commission) MOTION B: That the Community Development Commission direct staff to pursue, with the assistance of Miller & Schroeder, an Industrial Development Bond refinancing for Inland Plaza, which would not require a Redevelopment Agency loan guarantee. Administrator KENNETH J. HgNDERSON Executive Dlrectdr --------------------------------------------------------------------------------------------------------------------------------------------- Contact Person(s): Kenneth J. Henderson/John Wood Phone: 5081 Project Area(s): Central City (CC) Ward(s): _ Three (3) Supporting Data Attached: Staff Report: FUNDING REQUIREMENTS: Amount: $2.2 Million Source: IDB Bond Proceeds Budget Authority: Requested --------------------------------------------------------------------------------------------------------------------------------------------- CommIssion/Council Notes; -------------------------------------------------------------------------------------------------------------------------- KJH:JMW:lag:03-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/07/1994 Agenda Item Number: DE ` LOPMENT DEPARTN. NT STAFF REPORT ------------------------------------------------------------------------------------------------------- Inland Plaza Refinancin - Public Heai•inj! Inland Plaza is a 44,125 square foot retail center located at 955 South "E" Street (immediately across the street from the Inland Center Mall), in the Central City Projects Redevelopment Project Area. It was constructed in 1983, utilizing $2.2 million in Industrial Development Bond (IDB) construction financing. Current major tenants include Chuck E Cheese's Restaurant, The Men's Wearhouse, Candice Cohen Westway and Dr. Bartlett Optometry. Trak Auto was, until recently, another large space user, but it vacated its store when its lease expired in January, 1994. Inland Plaza's owners are working on a replacement for Trak Auto, but at present the center is only 67% leased. The outstanding balance on the IDB was due on October 15, 1993, but the owners were able to negotiate a one (1) year extension from the due date. They thus have until October 15, 1994 to arrange a refinancing of the IDB. Although they have applied to both the Bank of San Bernardino and the Bank of California, neither was able to grant the requested loan. The owners have also enlisted the aid of Tracy Mortgage, Inc., a mortgage broker, to search for a lender willing to refinance the property. The central problem is that, in the aftermath of the Savings and Loan debacle and the resulting huge losses in commercial real estate which many lenders have suffered, Federal bank examiners are severely restricting new loans on property of the type in question. Refinancing Inland Plaza would be difficult under the best of circumstances in today's lending climate, but it is made all the more so by a lack of "credit" tenants (i.e. national chains with substantial financial statements), a 33% vacancy rate and the fact that a number of Inland Plaza's leases expire within the next few years. In spite of this, E.H. Wood & Associates is of the opinion that, if the developers employ aggressive marketing strategies, the center's vacancy rate could successfully be reduced to 15% or less and refinancing by a private lender could be accomplished without Agency assistance or a credit enhancement. Both staff and E.H. Wood are cognizant of the fact that reduction to a 15% vacancy rate may not be possible. Because of this possibility, staff is currently pursuing a two-pronged approach to assisting Inland Plaza with its refinancing dilemma. First, E.H. Wood & Associates, with its many contacts in the lending community, is exploring the possibility of locating a bank, insurance company, pension fund or some other type of institutional lender that would be interested in this project. For example, Bank of America is reputed to have a new program designed for refinancing properties like the subject development. Secondly, Miller & Schroeder is confident that a bond refunding could be effected, if institutional financing either cannot be obtained or would be secured on disadvantageous terms for the borrower. -------------------------------------------------------------------------------------------------------------------------- KJH:JMW:lag:03-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 03107/1994 Agenda Item Number: DEVELOPMENT DEPAR LENT STAFF REPORT Inland Plaza Refinancing - Public Hearing March 2, 1994 Page Number -2- ---------------------------------------------------------------------------------------------------------------------- In both cases, however, (and assuming the developer has been successful in reducing the vacancy rate to at least 15%) a loan guarantee from the Redevelopment Agency will almost certainly be a requirement. If such a guarantee does not find favor with the Redevelopment Committee or the Community Development Commission, Inland Plaza could very well go into foreclosure, which could prove disruptive to both ongoing tenancies and the normal maintenance of the center. This undesirable situation could be expected to continue until a new owner could be located. Inland Plaza's partners all have substantial, seven-figure net worths and would be willing to jointly and severally personally guarantee the Redevelopment Agency's obligation. In addition, the Agency could receive a second trust deed on the property. Staff has been informed that there is a relatively recent appraisal on the property at a value of $3.8 million, although E.H. Wood & Associates feels that the value is probably closer to $3.2 million. Using the lower figure results in a first trust deed loan-to-value ratio of 69%. With a refinancing at $2.2 million, there would be $1 million of equity to secure the Agency's trust deed. At its meeting of February 24, 1994, the Redevelopment Committee recommended that the Community Development Commission direct staff to pursue, with the assistance of Miller & Schroeder, a refinancing of the subject IDB, preferably without the need for a Redevelopment Agency loan guarantee. A Public Hearing must also be held at the Mayor and Common Council meeting of March 7, 1994 to approve the IDB due date extension to October 15, 1994. Staff recommends adoption of the form motion. "OWS4 KENNETH J. ENDERSON, Executive Director Development Department -------------------------------------------------------------------------------------------------------------------------- KJH:JMW:1ag:03-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE: 03/07/1994 Agenda Item Number: