HomeMy WebLinkAboutR06-Redevelopment Agency
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DEVBLOPIIB1IT DBPhumn.c OF rBB
CITY OF SAIl R'R1P1Uvnnro
uom:ST FOK COIKISSIOK/CODIICIL ACTIOK
From:
ICElmETH J. HENDBKS01'l
Executive Director
CDrUL CITY PKOIIIlW>B
SCBlJKGIK DEVBLOPIIB1IT
Subject:
Date:
May I, 1991
Synopsis of Previous C~BBiODlCo1JDCil/C~ttee Action:
On December 17, 1984, the Mayor and Common Council adopted Resolution
Number 84-547 providing for the issuance of Industrial Development
Revenue Bonds, Series 1984A, Central City Promenade Project.
On November 30, 1989, the Mayor and Common Council approved Amendment
Number One to the Loan Agreement and Supplement Number One to the
Indenture.
'On February 19, 1990, the Mayor and Common Council approved Amendment
Number Two to the Loan Agreement and Supplement Number Two to the
Indenture.
(Synopsis Continued to Next Page)
Keco_~ed Motion:
Olavor A"" r--on C01Dlcil)
THAT THE MAYOR AND COMMON COUNCIL DBNY THE REQUEST SUBMITTED
BY SCHURGI1'I DBVELOPMENT RELATIVE TO rBB ISSUANCB BY THE
DBVELOPMENT DBJ'ARTMBNT OF A CREDU Bl'IHAl'ICBMBNT FOR THE
CENTRAL CITY PROMENADE BONDS.
Executive Director
t
Contact Person:
Ken Henderson/Barbara Lindseth
Phone:
5065: 5081
Project Area:
Central Citv (CC)
Ward(s) :
One (1)
Supporting Data Attached:
Staff ReDort
FUNDING REQUIREMENTS:
Amount: i
1'I/A
1'I/A
Source:
Budget Authority:
CommiBsiODlCouncil NoteB:
KJH:BL:lab:1428A
COIKISSION IIBBTIKG
Meeting Date: 05/06/1991
Agenda Item No. b
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DBVELOPIIBlIT DBPAa.........c
RBQUEsr lOR COUlICILICOIIIISSIOII/ACTIOII
CD:rJtAL CITY p~.ln1! (Schur.in Develo~t)
IIay 1, 1991
Pqe -2-
On August 23, 1990, the Mayor and Common Council approved Amendment
Number Three to the Loan agreement and Supplement Number Three to the
Indenture.
On April 18, 1991, the Redevelopment Committee recommended denial of
the request of Schurgin Development for a credit enhancement backing.
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KJH:BL:lab:1428A
COIIIISSIOII MBBTIIIG
Meeting Date: 05/06/1991
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DIVBLOPIIBIIT DBPAawuan:
S'lAFF RBPORT
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Central City 1>?........de/Schurain Develo_ent
On December 17, 1984, the Mayor and Common Council approved Resolution
Number 84-547 providing for the issuance of Industrial Development
Revenue Bonds, Series 1984A, Central City Promenade Project, along with
approving the Trust Indenture, Loan Agreement, Bond Purchase Agreement
and other related documents.
In December 1984, the Central City Promenade Bonds were issued in the
amount of $7,200,000, with a maturity date of December 1, 2024 to
assist the BestlMarahall development. Chase Manhattan Bank, the sole
purchaser of the Bonds, exercised its right to cause a mandatory
redemption of the Bonds on December 1, 1989, pursuant to Section 3.01
(d) of the Trust Indenture dated December 15, 1984.
On November 30, 1989, Amendment Number One to the Loan Agreement and
Supplement Number One to the Indenture extending the December 1, 1989
date to February 1, 1990 to provide Central City Promenade the
necessary time to discuss, negotiate and further amend the Loan
Agreement were approved by the Mayor and Common Council.
Subsequently, on February 19, 1990, August 23, 1990 and February 18,
1991, Amendments numbered Two, Three and Four to the Loan Agreement and
Supplements numbered Two, Three and Four to the Indenture were approved
by the Mayor and CODlDon Council. At the time each Amendment was
approved, there was a corresponding extension of the Loan Agreement.
Currently, Schurgin Development Corporation is in default on its notes
payable to the Development Department. The terms on these notes are as
follows:
Amount:
Date of Note:
Interest Rate:
Payments Commenced:
Monthly Payment:
All Due:
$150,000
March 19, 1985
Ten Percent (10%)
April 5, 1990
$1,611. 91
April 5, 1995
$540,000
September 16, 1985
Ten Percent (10%)
September 16, 1990
$5,802.88
September 16, 1995
Additionally, no interest accrued for the first two (2) years and
interest accrued for years three (3) through five (5) at the rate of
ten percent (lOX) to be paid upon the maturity date.
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KJH:BL:lab:1428A
COIIIISSIOI' IIKEl'II'G
Meeting Date: 05/06/1991
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DIVELOPIIBlIr DBPAa.......u: SUIT IIBPORr
Central City Pr_enade/Schurgm DeveloIaent
May 1, 1991
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Now, probably because Chase will not extend the bond aaain unless a
sianificant chan&e is made in the overall credit arranaement, Schurgin
Development is requesting that the Development Department quarantee the
full amount of the bonds by issuing a credi t enhancement, whereby the
project could then obtain a stand by letter of credit from a commercial
bank to facilitate a "low-floater" refinancing of the bonds.
Mark Schurgin has stated that his only alternative will be to declare
Chapter 11 Bankruptcy if the bonds are not renewed, although it appears
that sufficient dollars could be raised by the bankruptcy trustee to
repay all of the creditors.
The Redevelopment Committee reviewed this matter at its April 18, 1991
meeting and voted unanimously to recommend to the Mayor and Common
Council denial of the request for a credit enhancement for the bonds
submitted by Schurgin Development.
I recommend adoption of the form motion.
~~~I" becutive Director
Develo.-ent Departaent
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KJH:BL:lab:1428A
COIBISSIOI' MBlTIIIG
Meeting Date: 05/06/1991
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Central City Promenade is financed with a tax-exempt bond in the ,~!,'
outstanding principal amount $7,200,000. The bonds are held by :.'.'111,..1,'
Chase Manhattan Bank, N.A. The bonds have matured and a temporary
extension to 6/1/91 has been granted by Chase. Chase no longer
has need of tax-exempt income and has indicated that the bonds need ~
to b~ refinanced or otherwise placed elsewhere and that no long- i~t,
term 'extension or renewal beyond 7/1/91 will be forthcoming. Chase~; ...t
has indicated that they may grant a short-t~rm extension to I.",~
facilitate a refinancing by 5/15/91 (45 daY'notice date). i~:~!J~'
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The Redevelopment Agency of San Bernardino ("Agency") also holds ~'~j
a subordinate mortgage in the original principal amount of $540,000 :r.liil
plus accrued interest behind the Bonds. Additionally, The Agency !l~i~
holds a sUbordinate mortgage in the original principal amount of It;~ :'
$150,000 plus accrued interest behind a conventional first mortgage I!:l;.'l:~
in the approximate principal amount of $49~.;.758 on the Central U...!l'ji~
City West~ parcel of the project. j J~:lil
The contr~ctual debt service on both the BO~ds and on the Central '~t;;,:
City West. first mortgage is current. The debt service on the ;,.:l.~
Agency Notes has not been paid pending a resolution of the renewal I;: .1;i
and exteqsion or refinancing issues with respect to the Bonds. ,.'J,"
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Given the\' state of the credit markets and particularly the current'fi:ijif
"credit crunch" in real estate finance, it does not seem likely 1"',; ~
that a refinancing can be accomplished without some form of !'j'"
addi t10na~ credi t enhancement. .,. - "i'i:~
CURRER'1' R1lQUBST OF SCBURGJ:R DBVBLOPMBRT . :l1N
We met w1'th Mr. Schurg1n, Mike J:ssa (finanC~al consultant) and:il!~~f
Nick Bush (Investor) on March 8, 1991 and were presented With!I'!...A'
a "Financing proposal" on the overall project. Schurgin suggested I k":
that a guarantee from the Redevelopment Agency would substantially \:;ii;!~
faciU,tate a "low-floater" refinancing of the Bonds. "\.i:~
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,'Of I;HOPMENT OEPARTME
To:
Kenneth J. Henderson
San Bernardino Redevelopment Agency
From:
Eugene H. Wood
E. H. Wood & Associates
Date:
March 27, 1991
SUbject:
Update Analysis on Schurg1n Development Compan1es
BACltGROURD
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They proposed the Agency issue a credit e~ancement/guara~~ee 11tl)
in the full amount of the Bonds ($7,200,000) and then the project ;:I~~:I.I'
could obtain a stand by letter of credit from a commercial bank. ,'./'f :.,{
to facilitate a "low-floater" refinancing of the Bond~., ; Ii.:li~
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It should be noted that based on current financial atatements 'V,if
presented (in-house prepared) there appears to be aufficient Ill'll;
cash flow currently in the project to pay both Cba.. and aonies ('f.li
owed to the Redevelopment Agency. ..1.1'1.11
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Chase has extended the Bonds to June 1, 1991. In talking with .; ~:j.r;
Chase they do not intend to renew the Bonds again unless a ~. i!:d~
significantchiiiige is made in the overall Credit, Arrangement. :Ili~!il'l
.~. IC.i,
Chase continues to be cooperative and ahar.s credit information "'lii1il
.hO. it .. '.a"abl.. ;" rfll
SUMMARY ';.~ ; I. ~iflf
Mark Schurgin has stated, at our recent ..eting, that his only!' ill!}
alternative will to be declare Chapter 11 Bankruptcy if the (l:,'~,'
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bonds are not renewed. : 'l.'~r.!lit,
J-' "if
I strongly feel Chase, for lack of other alternatives, will ,+"11.,
either file default or let Schurgin go forward with hi~ bankruPtcy.~~H~
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In reviewing these options with Dennis Barlow of the City Attorney~!iU
Office it appears sufficient dollars could be raised by the bankrupthy
trustee to repay all of the creditors. As we have 'stated before,:i;:~"
their appears to be sufficient cash flow to continue to pay Ji~ ~..'
the bondholders interest and the RDA interest. i:'(~,'
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Schurgin has stated that he int.nds to, pay the interest arrears : \"i'l{ "
to the RDA by March 29, 1991. .tWljiHt
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