HomeMy WebLinkAbout6/7/2000 - STAFF REPORTS (3) IDATE: JUNE 7, 2000
TO: COMMUNITY REDEVELOPMENT AGENCY
FROM: REDEVELOPMENT DIRECTOR
APPROVAL OF A SUBORDINATION AGREEMENT WITH THE CALIFORNIA
HOUSING FINANCE AGENCY IN CONNECTION WITH A LOAN TO PALOS VERDES
VILLAS,A MULTI-FAMILY HOUSING DEVELOPMENT
RECOMMENDATION:
it is recommended that the Agency approve a Subordination Agreement with the
California Housing Finance Agency C`CHFAJ relative to the financing of a loan to
the owners of Palos Verdes Villas,an apartment complex at 300 East Stevens
Road,in the North Palm Canyon Redevelopment Project Area
BACKGROUND:
On May 8, 2000 staff received correspondence from the attorneys representing
Palos Verdes Villas, a 90-unit apartment complex at 300 East Stevens Road,
stating that they had negotiated a loan modification and refinancing of the
project with the California Housing Finance Agency("CHFA'. The refinancing
will cure a default on the previous CHFA loan, which will benefit the owners as
well as the Agency, which entered into an Owner Participation Agreement with
the developers on February 19, 1992 and a Regulatory Agreement and
Dedaration of Covenants and Restrictions on January 19, 1994.
The developer,Agency, and CHFA had previously also entered into a
Subordination Agreement on January 30, 1995; in it, the Agency agreed to
subordinate its Use Restrictions to the CHFA Deed of Trust and the CHFA
Regulatory Agreement California Health and Safety Code Section 51335 (a)
requires that the CHFA Loan and Regulatory Agreement have priority over the
Use Restrictions.
Since the prior use restrictions were subordinated, the new Subordination
Agreement does not leave the Agency in a worse position regarding its Use
Restrictions. To deny the Subordination Agreement would cause the Loan
Modification and Refinancing to not go forward,which would result in the project
going into foredosure with CHFA. In the event of a foredosure, the Agency's
Use Restrictions would be cancelled altogether.
In his review of the Subordination Agreement, Agency Counsel objected to
Section 9, which reads: `The Agency hereby represents and warrants to CHFA
that at the time of execution of this agreement, the Developer is in substantial
compliance with its obligations to the Agency under the terms of the Use
Restrictions, and that the Agency has read and understands the CHFA
Documents and agrees that in the event of conflict of terms between the CHFA
Documents and Use Restrictions, the CHFA Documents shall prevail." No copy
of the CHFA Documents, with the exception of the original financing documents,
have been provided to the Agency, so attesting that the Agency(staff) has read
and understands the documents puts Counsel in a difficult position. In addition,
staff has not conducted a comprehensive review of the Developers compliance
with the terms of the Use Restrictions,though the Developer has been regular in
1/ rn , f
reporting the income qualifications of the twenty assisted units. Agency
Counsel would recommend approval of the Subordination Agreement, but with
the striking out of Section 9, which remains in the agreement as presented.
Staff will attempt to resolve these issues before the June 7, 2000 Agency
meeting, to provide a clearer commendation on Section 9.
J HN S. AYMON
R ev opment Di ct
APPROVED
Executive Director
ATTACHMENTS:
1. Resolution
2. Subordination Agreement and Cover Letter
BEST BEST & KRIEGER LLP
A CALIFORNIA LIMITED LIADILIT•PARTNERSHIP INCLl1pN0 PROFESSIONAL CORPORAT1p118
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•A PROFESSIONAL CORPORATION
May 9, 2000
Mr. John Raymond
Director of Community Development
Palm Springs Redevelopment Agency
Post Office Box 2743
Palm Springs, CA 92262
Re: Palos Verdes Villas
Dear John:
This office represents Palos Verdes Villas, owner of the Palos Verdes Villas apartment
complex in Palm Springs. My client is in the process of refinancing the existing CHFA permanent
loan which encumbers the apartment complex. In connection with such refinancing CHFA's
attorneys have forwarded to me a draft of the Subordination Agreement which CHFA will be
requiring the Palm Springs Redevelopment Agency to execute in connection with the loan
modification and refinancing. CHFA's attorneys have requested that I forward the enclosed draft
Subordination Agreement to you and Dave Alshire for your review and approval.
As you will note, because the existing CHFA financing is in default,this loan modification,
which will cure the default, should be beneficial to the Redevelopment Agency as well as my client.
I would appreciate receiving any comments you have regarding the enclosed at your earliest
convenience. I believe the refinancing is scheduled to close later this month and therefore your
prompt attention to this matter will be greatly appreciated
e
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R1.BUSMEOU66109
LAW OFFICES OF
BEST BEST & KRIEGER LLP
W. John Raymond
May 8, 2000
Page 2
I look forward to receiving your comments.
Sincerely yours,
z4o�w
Daniel E. Olivier
of BEST BEST&KRIEGER UP
DEO/dme
Enclosure
CC. W. Tom Tomlinson
(w/enclosure)
W. David Alshire
(w/enclosure)
MaLWDEO466I09
DRAFT: DO NOT EXECUTE
FREE RECORDING REQUESTED )
PURSUANT TO GOVERNMENT )
CODE SECTION 27383 )
Recording requested by and )
when recorded return to: )
CALIFORNIA HOUSING FINANCE )
AGENCY )
Office of General Counsel )
1121 L Street, 3rd Floof )
Sacramento, CA 95814 )
(Space above this line for Recorder's use)
CALIFORNIA HOUSING FINANCE AGENCY
SUBORDINATION AGREEMENT
CHFA Development No. 93-00"
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN
THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE
LIEN(S) OF SOME OTHER OR LATER SECURITY INTEREST(S).
THIS AGREEMENT is entered into by and between The Community Redevelopment Agency of The
City of Palm Springs, California, a public agency, corporate and politic ("the Agency"), Palos Verdes Villas,
a California corporation ("Developer"), and the California Housing Finance Agency, a public instrumentality
and a political subdivision of the State of California ("CHFA") in connection with a loan to finance a
multifamily residential rental housing project on real property located in Palm Springs, California and more
particularly described on Exhibit "A" attached hereto and incorporated berein by this reference(the "Project").
$&.Cly- ALs
A. WHEREAS, CHFA has previously made a permanent first mortgage loan to Borrower in the
amount of Five Million and no/100 Dollars (S5,000,000.00) (the "CHFA Loan") evidenced by a promissory
note and secured by a deed of trust recorded on the Project on May 30, 1995, as Insnvment No. 97134 of the
Official Records of Riverside County, California (the "Official "Records")( said deed of trust shall hereafter
be referred to as the "CHFA Deed of Trust"); and
B. WHEREAS, CHFA is restricting the Project pursuant to a regulatory agreement recorded March
30, 1995, as Instrument No. 97133 of the Official Records ("CHFA Regulatory Agreement"); and
CHFA.71.SURA
3113MO.00C -1-
DRAFT: DO NOT EXECUTE
C. WHEREAS, Developer and the Agency have entered into a certain Owner Participation
Agreement, dated for references purposes February 19, 1992. and a certain Regulatory Agreement and
Declaration of Covenants and Restrictions, dated January 19, 1994. and recorded in the Official Records on
Match 9. 1994 as Instrument No. 099782 (collectively. the "Use Restrictions"); and
D. WHEREAS, Developer, the Agency and CHFA have previously entered into a Subordination
Agreement, dated January 30, 1995, and recorded in the Official Records as Instrument No. 97135 (the "Prior
Subordination Agreement") whereby the Use Restrictions were subordinated to the CHFA Deed of Trust and
the CHFA Regulatory Agreement; and
E. WHEREAS, Developer is currently in default of its obligations to CHFA, which obligations are
secured by the CHFA Deed of Trust; and
F. WHEREAS, Developer and CHFA have agreed to modify the terms of the loan from CFHA to
Developer which modification shall cure Developer's default and avoid a foreclosure of the CHFA Deed of
Trust; and
G. WHEREAS, in conjunction with the modification of the loan from CHFA to Developer,
evidenced by two promissory notes, Developer and CHFA have executed a document entitled "California
Housing Finance Agency Modification of Deed of Trust, CHFA Development No. 934106-S (the
"Modification")which modifies the CHFA Deed of Trust, and a document entitled "California Housing Finance
Agency Amendment to Regulatory Agreement, CHFA Development No. 93-M&S" (the "Amendment")whiich
amends the CHFA Regulatory Agreement, which documents are recorded contemporaneously herewith in the
Official Records (the CHFA Deed of Trust, the CHFA Regulatory Agreement, the Modification and the
Amendment shall hereinafter collectively be referred to as the "CHFA Documents"); and
H. WHEREAS, it is a legal requirement pursuant to California Health and Safety Code Section
51335(e) and a condition precedent to CHFA modifing the CHFA Loan that the CHFA Documents have
priority over the Use Restrictions; and
I. WHEREAS, it is beneficial to all the parties to this tlgteeneent that CHFA agree to modify the
CHFA Loan, and the parties are willing to subordinate the Use Restrictions in order that the CHFA loan be
modified.
NOW THEREFORE, in consideration of the mutual benefits amuting to the parties hereto and other
valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, it is hereby declared,
understood and agreed as follows:
1. The above recitations are incorporated herein.
2.. The Use restrictions are hereby subordinated to the CHFA Documents including all extensions,
modifications or additional advances made hereunder. Hereafter. the CHFA Documents shall unconditionally
be, and remain at all times, liens and encumbrances on the Project prior and superior to the liens and
encumbrances of the Use Restrictions, and to all rights and privileges of the patties thereunder, and the liens
and encumbrances of the Use restrictions, together with all rights and privileges of the parties thereunder shall
hereby be subjected and made subordinate to the liens and encumbrances of the CHFA Documents. Jn any
CHFAJI.SUBA
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evens of wgdl= betweau the Agency obligations and dw CHFA obligations, the CHFA obligations Shall
prevail. A judicial or norgmdicial foreclosure of the CHFA Dad of'host shall result in the Use Rwrictions
being be extinguished.
3. This agreement is for the benefit of the patsies hem and is erdorcaable by any party against
any atccessots in interest or assigns of any parry ham.
4. If any parry shall take any legal action to enforce dte tams and candiMM of this Agrwmera.
the prevailing party or patties shall be untitled to recover legal costs and reasonable attorney's fees from the
other party or parties.
S. Amendments to this Agri must be in writing and signed by all patties berets.
b. Tbh Agreement shall be construed 90 accordance with and be governed by the laws of California.
7. This Agreement stay be examted im several caruratpatte. each of which shall be au odd mal and
all of which shall eomstimm toe and the saute iasnummL
g. In the event any provision of this Agreement shall be held invalid or mouforceable by any court
of campetemt jurisdiction, it will nor invalidate of reader uttenfmt cable any other part of this Agteen ew-
9. The Agency hereby represents and warrants to CHFA tbat at the time of ezwwion of this
a,gteetoettt,the Developa is in adutautial compliance with its obligators to the Agency under the tenets of the
Use Restrictions, and that the Agency has read and tmtdstaods the CHFA Doctmteass mud agrees that in the
event of conflict of tams between the CHFA Documents and Use Restrictions, The CHFA Documents shall
prevail.
10. no Agency, Developer and CHFA hereby agrec to be bound by all the tams, conditions and
covenants of this Agreement.
11. Except to the extent inconsistent with dais Agreement. the Fda Subordination Artemea
remaim in full farce and effect.
IN VrtfNM W6TWM, dte parties ham have exec ited dtis Aueement which shall become
eflbcdve upon recordation.
PALOS VER M VILLAS. a Cadfemia CALIYORNIA HOUSING FINANCE
calvar4dan AGENCY
by:
Thomas W. Tomlinson By:
President Theresa A. Parkes
&xcoxive Director
n.st:an SAW0 C
s�niso.oac -3-
DRAFT: DO NOT EXECUTE
THE COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF PALM SPRINGS
By:
Name:
Executive Dirca"
ACKNOWLEDGMENTS
CHBA.7l.SMA
3/13/w.oac
RESOLUTION NO.
OF THE COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF PALM SPRINGS, CALIFORNIA,
APPROVING A SUBORDINATION AGREEMENT WITH
PALOS VERDES VILLAS, A CALIFORNIA
CORPORATION,AND THE CALIFORNIA HOUSING
FINANCE AGENCY TO FACILITATE A LOAN
MODIFICATION AND REFINANCE OF PALOS VERDES
VILLAS, IN THE NORTH PALM CANYON
REDEVELOPMENT PROJECT AREA(AREA#6)
WHEREAS,the Community Redevelopment Agency of the City of Palm Springs (the
"Agency") has established an affordable housing setaside fund in accordance with
Section 33000 at. seq. of the Calffomia Health and Safety Code; and
WHEREAS, the Agency entered an Owner Participation Agreement with Palos Verdes
Villas (the"Developer")on February 19, 1992 and a Regulatory Agreement and
Declaration of Covenants and Restrictions on January 19, 1994; and
WHEREAS, the Developer, Agency, and the California Housing Finance Agency
("CHFA') entered a Subordination Agreement on January 30, 1995, whereby the
Agency agreed to subordinate its Use Restrictions to the CHFA Deed of Trust and the
CHFA Regulatory Agreement; and
WHEREAS,the Developer is currently in default if its obligations to CHFA, which
obligations are secured by the Deed of Trust, but have negotiated a Loan Modification
and Refinancing of the project with CHFA; and
WHEREAS, California Health and Safety Code Section 51335 (a) requires that the
CHFA Loan and Regulatory Agreement have priority over the Agency's Use
Restrictions.
NOW THEREFORE BE IT RESOLVED by the Community Redevelopment Agency of
the City of Palm Springs, as follows:
SECTION 1. A Subordination Agreement between the Community Redevelopment
Agency of the City of Palm Springs, Palos Verdes Villas, a California
Corporation, and the California Housing Finance Agency, is approved.
SECTION 2. The Executive Director, or his designee, Is hereby authorized to execute
on behalf of the Agency the Subordination Agreement and other
documents necessary to the Agreement, and make minor changes as
may be deemed necessary, in a form approved by Agency Counsel.
C CC&
ADOPTED this day of , 2000.
AYES:
NOES:
ABSENT:
ATTEST: COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF PALM
SPRINGS, CALIFORNIA
By
Assistant Secretary Executive Director
REVIEWED&APPROVED AS TO FORM
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