HomeMy WebLinkAboutR25- Economic Development Agency ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
FROM: Ronald E. Winkler,Director SUBJECT: STATE OFFICE BUILDING
Development Department DEVELOPMENT SECTION 108 LOAN
DATE: January 6,2000
ORIGINAL
Synopsis of Previous Commission/Council/Committee Action(s):
On July 27, 1999,this need for Section 108 loan funding for the subject project was reviewed with the Redevelopment
Committee which recommended staff prepare the necessary application.
Recommended Motion(s):
(Mayor and Common Council)
MOTION: RESOLUTION OF THE MAYOR AND COMMON COUNCIL APPROVING AND AUTHORIZING
AN APPLICATION FOR A SECTION 108 LOAN GUARANTEE FUNDING IN THE AMOUNT OF
$1,840,000 FROM THE U.S.DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
(HUD)
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Contact Person(s): Gary Van Osdel/Ronald E.Winkler Phone: 663-1044
Project Area(s) Central City Ward(s): One(1)
Supporting Data Attached: D Staff Report WResolution(s)❑Agreement(s)/Contract(s)O Map(s)❑Letter/Memo
FUNDING REQUIREMENTS Amount: $ 1,840,000 Source: Section 108 Loan
Budget Authority: N/A
SIGNATURE: 4 < ��
4ECOic el,Executive hector E inkier,Director
elopme nt gency Developfnent Department
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Comm ission/Council Notes:
GVO:REW:ssj:00-01-10 State Office Bldg COMMISSION MEETING AGENDA
Meeting Date: 1/10/2000
Agenda Item Number:
ECONOMICDEVELOPMENTAGENCY
STAFF REPORT
State Office Building Development
DEVELOPMENT OVERVIEW
The proposed development involves the acquisition and renovation of the State Office building
at 303 West 3td Street. Proponents of the development include Messrs. J. Kevin Brunk, Martin
Matich and Bill Lemann.
A purchase agreement for building acquisition has been negotiated with the State, together with
an option to acquire an additional parcel for needed parking. Respective purchase prices are
$1,200,000 and$300,000. The State will accept a down payment of$500,000 and secure the
remaining funds with a note and deed of trust. The State has also agreed to subordinate to other
financing if necessary.
The building requires seismic treatment;removal of asbestos and soil contaminants together with
tenant improvements before it can be placed into productive use. Condition of the adjacent
parcel is unknown at this time however a Phase I assessment is underway. Extensive
environmental and engineering studies have been complete together with firm bids for asbestos
abatement and seismic work. Total estimated project costs are placed at$10,000,000 including
acquisition,remediation,tenant improvements and site work. The Gas Company is responsible
for removal of soil contaminants at no cost to the project.
DEVELOPMENT PROPOSAL
Agency assistance is requested in the form of a Section 108 loan from the U.S. Department of
Housing and Urban Development(HUD) in the amount of$1,840,000. To mitigate against risk
it is proposed the monies be released under two separate loan agreements. First loan proceeds
would be used to purchase the building,parking parcel and initial remediation work. The second
loan would be used to complete remediation work and fund interest reserves. To complete the
development a$8,160,000 AFL-CIO pension fund loan would be sought. However,the loan
would be contingent upon acceptable leases from State and County agencies. Also, the AFL-
CIO would expect subordination of the 108 loan to their financing.
COMMISION MEETING AGENDA
Meeting Date: 1110/2000
Agenda Item Number:
Economic Development Agency Staff Report
State Office Building Development
December 21, 1999
Page Number—2-
HUD SECTION 108 LOAN TERMS
Pursuant to prior Commission direction an application for Section 108 Loan Assistance has been prepared
for submission to HUD. Specific terms are as follows:
Lender: City of San Bernardino
Loan Amount and Use: $1,840,000 to be used as follows: Loan#1 building acquisition
$500,000,parking land acquisition$330,000 and remediation$510,000;
Loan#2 remediation$230,000 and interest reserves
$270,000.
Term: Interest only on both loans for the first two years followed by an 18-year
amortization schedule for a total of 20 years. Both loans shall be due and
payable upon sale of more than 30% interest in the project or any
refinancing of the proposed private construction loan.
Rate: Treasury rate plus %%
Security: Loan#I first deed of trust on both the office building and parking lot
site. Loan#2 second deed of trust on both the office building and
parking lot site. Borrower shall also provide an"A"rated irrevocable
letter of credit in the amount of$500,000 naming the City as beneficiary
until construction is complete, a certificate of occupancy is issued, 95%
of the net rentable space is leased and tenants have commenced full
payment of monthly rent.
Further security is provided by an unlimited personal guaranty of: Kevin
Brunk, Wilfred C.Lemann and Martin A. Matich. These Guarantees
shall be released upon completion of construction, issuance of a
certificate of occupancy and 6 months payment of full rent.
Subordination: Both section 108 loans may be subordinated to a construction loan in an
amount not to exceed $8,500,000 upon satisfactory review by the City of
an MAI appraisal supporting a loan to value ratio of less than 80%for
City 108 loans and construction financing combined.
COMMISSION MEETING AGENDA
Meeting Date: 1/10/2000
Agenda Item Number:
Economic Development Agency Staff Report
State Office Building Development
December 21, 1999
Page Number-3-
Subordination shall also be subject to City review of: 1)construction
loan documents, 2)take out loan commitments,and 3)executed leases
representing 95%of net rentable floor area.
Developer Fee: Total developer fee is limited to$450,000 from the proceeds of all
Project financing,until completion of construction and issuance of a
certificate of occupancy. In no event will the developer fee exceed
$800,000.
The above summarizes content of the Section 108 Loan Application as prepared for submittal to HUD.
RECOMMENDATION
That the Community Development Commission adopt the attached resolution authorizing submission of
the application to HUD.
l�liGt
Ronald E. inkler,Director
Development Department
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COMMISION MEETING AGENDA
Meeting Date: 1/10/2000
Agenda Item Number:
COPY
® 1 RESOLUTION NO.
2
3 RESOLUTION OF THE MAYOR AND COMMON COUNCIL
APPROVING AND AUTHORIZING AN APPLICATION FOR A
4 SECTION 108 LOAN GUARANTEE FUNDING IN THE AMOUNT OF
5 $1,840,000 FROM THE U.S. DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT(HUD).
6
7 WHEREAS, under Section 108 of the Housing and Community Development Act of
8 1974, future Community Development Black Grant(CDBG) funds may be pledged as security
9 for loans to eliminate slums or blight and promote economic development; and
10 WHEREAS,the U.S. Department of Housing and Urban Development has authorized
11 Section 108 Loan Guarantee funding; and
12 WHEREAS, loan application procedures established by HUD require the applicant to
13 certify by resolution the approval of the application.
1014 NOW,THEREFORE,BE IT RESOLVED BY THE MAYOR AND COMMON
15 COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, THAT:
16 SECTION 1. That the mayor and Common Council hereby approve and authorize an
17 application for Section 108 Loan funds in the amount of$1,840,000.
18 SECTION 2. That said loan funds are to be used for the acquisition and restoration of
19 the State Office Building at 303 West 3rd Street as follows: 1) Loan #1 building acquisition
20 $500,000, parking land acquisition $330,000 and asbestos remediation$510,000 and 2)Loan#2
21 remediation$230,000 and interest reserves $270,000.
22 SECTION 3. That the Mayor is hereby authorized to execute said application and
23 related documents as maybe required by HUD.
24
25
-t-
I RESOLUTION OF THE MAYOR AND COMMON COUNCIL APPROVING
AND AUTHORIZING AN APPLICATION FOR A SECTION 108 LOAN
2 GUARANTEE FUNDING IN THE AMOUNT OF$1,840,000 FROM THE U.S.
3 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT MUD).
4 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and
5 Common Council of the City of San Bernardino at a meeting thereof, held
6 on day of , 2000, by the following vote,to wit:
7 Council Members: AYES NAYS ABSTAIN A SENT
ESTRADA
8 —
LIEN
9 —
MCGINNIS
10 —
SCHNETZ
I1 —
SUAREZ
12 —
ANDERSON
13 —
MILLER
14 —
15
16 City Clerk
17 2000. day
.of
foregoing resolution is hereby approved this da .of
18
19
20 Judith Valles, Mayor
City of San Bernardino
21
22 Approved as to form and Legal Content:
23 5 fR60 e ) (�-cq-zECC I C.L. c-
24 By: (.)
25 "� f Sy`'"
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