HomeMy WebLinkAbout12/16/2009 - STAFF REPORTS - 00 MEMO
Date: December i5,2009
Re: The Spanish Inn
On December 3, 2009, Mayor pro tern Hutcheson, Councilmember Mills, Staff
and I met with members of The Spanish Inn development team lead by Nejat Kohau,
General Manager of The Spanish Inn,Inc-
At the meeting Nejat Kohan set forth the difficult economic circumstances which
face the project's developers, see Kohan's December 14, 2009 letter attached. Kohau's
letters details the situation and requests the City Council to consider assistance in the
amount of $500,000. Also attached is a December 14th letter from Nara Bank, the
construction lender.
In addition,the project is presently facing the expiration of the City's CUP which
was approved on December 19, 2007 and conditioned the completion of construction no
later than February 13,2010.
In summary:
• $3.8 million is estimated to be necessary to complete the project
• $2.266 million remains available in the original construction loan from
Nara Bank
• $1.538 million is the total funding GAP
• $770,000 additional funding could be provided by Nara Bank
• $250,000 additional funding could be provided by the developers
•• $500,000 in City funding is being requested by the developers as a grant,not a loan
• If the developers do not receive City help then Nara Bank will stop all
funding and initiate foreclosure
I�
k, o OFleNAMBiNK 1122 5.Wall St,Los Agveles,U 90015 Tel(Z13)7634122 Fax(213)763-I IZ6
Re: Spanish hmn,Inc.
Address: 640 Indiaa Canyon Dr.
Palm Springs,CA 92262
Date: December 14,2009
To whom it may concern,
Spanish Tan, Inc, has been utilizing Nara Bank's $6,000,000 Construction Loan (loan number
70532343) and the loan will be matured on December 18,2009. However,the current stage 0
the construction project requires additional finds and time. Spanish Inn Inc.has claimed a total
shortfall of$1,538,000.
This letter is to inform you that Nam Bank would consider increasing your construction loan
amount by up to an additional $770,000 as well as extending the maturity date, if Spanish Inn,
Inc. is able to raise the rest of the consi uctloa cost shortfall, approximately $768,000 by
12/31/09.
Final approval is,subject to completion of due diligence and formal credit approval, satisfactary
completion and execution of definitive Ioan documents,and such other terms and conditions mole
frilly set fortb herein and as may be determined by the Bank in its sole and absolute discretion.
If you have any questions,please contact me at(213)235-2215
Sincerely,
Ili Item,VP 8a Loan Officer
SPANISH INN, INC.
P.O. Box 2804
Palm Springs, CA 92263
Phone (760) 325-3700, Fax (760) 325-3702
December 14, 2009
Honorable Mayor
Council Members & City Manager
City of Palm Springs
3200 E_ Tahquitz Canyon Way
Palm Springs, CA 92262
Re: Financial Assistance to Spanish Inn
Dear Mayor, Counci[Members and City Manager
It was a pleasure meeting with your staff on December 3, 2009_ Your constructive
comments were appreciated. This letter is intended to respond to those comments and
provide a more detailed explanation of Spanish Inn's situation.
Included with this letter is the Business Plan Presentation for your review. Considering
past conditions that existed for the previous ten years, or more, it is undeniable that the
developers have made a good deal of progress and the photos included in the plan
attest to this fact. With your help, the hotel will again become a focal point of pride for
the City,
Here, I would like to ask you to take a special note of Section 5 of the plan, containing
the Cost Breakdown Update for completion. As you can see, the budget to finish the
project is estimated at $3.8 million. There is almost $2.266 million remaining in
construction funds from Nara Bank, which leaves a current shortfall of approximately
$1.538 million. The bank has agreed to provide 50% or $770,000 in additional funding
(the original construction loan will be increased from 6 million to $6,770,000), leaving us
still short by that amount(see attached letter from Lender, Nara Bank).
Developers have already invested more than 3 million of their own personal resources
and can only afford to contribute a maximum additional $250,000 toward completion.
We seek assistance from City to bridge that gap. The gap is about$500,000.
We understand with the current struggling economy, this is not the best time to make
this request. However, our needs did not become apparent earlier than now and, as
you know, it is our position that one unforeseen expense related to the project, the
Movie Colony Traffic Calming Program, cut significantly into the funds available to the
project.
t
In response to the request of a number of the participants at the meeting, we want to
introduce Mr. Homayon Moaven, a licensed -general contactor to supervise completion
of the project. As you know he recently was involved in construction of the Sun Center
project. Mr. Moaven has indicated his assurance that the project can be completed by
October of 2010,just in time for the 'high season."
We hope you will see the merits of our request. Without the agreement of the City to
help, Nara Bank will stop further distributions of the current loan after December 18,
2009. The reason is, the lender indicated that with the existing balance on loan,
Spanish Inn will be unable to complete the project and apply for a permanent loan.
Unfortunately, the result will be the likely institution of foreclosure proceedings. But how
long will that take? And, in the interim, what will become of the property? It is very
likely that the property will be overrun again by transients (homelessness is now a far
greater problem than it was when we began in 2002) and the problems for the police as
well as other City Departments will only increase. On the other hand, if the project is
completed, new takes will increase City revenues, thereby actually helping City's
financial circumstances.
As always, I remain available to meet or speak with you at any time.
Very truly yours,
Nejat Kohan, General Manager
Spanish Inn, Inc.
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