Loading...
HomeMy WebLinkAbout09/27/84 MINUTES RA MINUTES BAKERSFIELD REDEVELOPMENT AGENCY Continued Meeting-September 27, 1984 The continued meeting from the September 12, 1984 Redevelopment Agency Meeting was called to order by Chairman Rockoff on Thursday, September 27, 1984, at 8:00 p.m. in the City Hall Council Chambers. The Secretary called the roll as follows: MEMBERS PRESENT James Barton James Childs Chris Christensen Rollie Moore Art Rockoff MEMBERS ABSENT: Donald Ratty Thomas Payne REPORTS 1) Status report on the Galleria project. Executive Director Caravalho read the following memorandum that was submitted to the Redevelopment Agency Members from the Executive Director dated September 27, 1984 regarding the Truxtun Galleria Evidence of Financing. "After careful review of all input and recommendations from the Agency's consultants, and after several discussions between the Agency staff and Mr. Moreland and the President of Harbour Financial Corporation, I recommend to the Agency that the correspondence received from Harbour Financial Corporation does not represent an irrevocable commitment to finance the Truxtun Galleria project. The letter dated September 7, 1984 from Harbour Financial Corpora- tion contains forty-three conditions which must be met before financing is, in fact, assured. Most of these conditions are beyond the control of the Agency. In addition, those conditions that are the responsibility of the developer have not been met by the developer. The most significant of these conditions are as follows: 27) This commitment is subject to receipt and approval of final and complete plans and specifications by Lender. Any changes in plans and specifications must be approved in writing by Lender. 33) Borrower shall furnish Lender copies of the architect's contract, the construction manager's contract, the general contractor's contract and all subcontractor's contracts, as required by Lender, which contracts shall be subject to Lender's approval and shall be assigned to Lender. Borrower shall furnish written agreements of the architect, construction manager, general contractor, and subcontractors to continue performance of Lender's behalf under their respective contracts without additional cost in the event of a default by borrower, unless this requirement is waived by Lender. 34) Borrower shall furnish, for Lender's approval prior to closing, an itemized cost breakdown on AIA Document G702A, showing both direct and indirect costs, with an anticipated monthly draw schedule, together with names and addresses of all subcontractors and materialmen to perform work or furnish materials to the project. 35) Borrower shall deposit with Lender prior to any advance of funds, the difference between the loan funds available for construction and the total cost of construction. BAKERSFIELD REDEVELOPMENT AGENCY MEETING, September 27, 1984 Page 2 In our opinion, it would require a significant effort to satisfy these conditions and thus does not provide acceptable assurances so that the Agency may complete its obligation to begin acquisition of the site. Additionally, the developer was required, pursuant to the Disposition and Development Agreement (DDA) to reach agreement with California Republic Bank. On August 29, a document was delivered to the Redevelopment Agency as a proposed Exchange Agreement between California Republic Bank and the Moreland Corporation. It is our understanding that this agreement has been reviewed by the Bank's Board of Directors and has been approved. However, we have received no such document in final or executed form. In addition to not receiving the document, there is a condition contained within the draft received on August 29 that does not satisfactorily provide for the exchange of property nor give Moreland Corporation the necessary rights to develop the Galleria over the property now used as a parking ramp. An alternative proposal has been submitted by the developer in which he indicates that the need for further consideration of the exchange of the California Republic Bank's property would no longer be necessary. While this may, in effect, eliminate the need for an agreement between California Republic Bank and the Moreland Corporation, several issues in this regard must be considered. For this reason, we are recommending that the Agency disapprove the agreement as submitted in draft form on August 29 insofar as it does not meet the requirements of the DDA with respect to the exchange of these properties. Contained within this packet is a letter that has been drafted for the purpose of giving notice to the developer that the Agency intends to terminate the agreement pursuant to Section 511 of the DDA. I am, therefore, recommending subject to the determination and findings contained within this attached letter to Moreland Corporation, that the Agency finds Moreland Corporation in default of the Truxtun Galleria Disposition and Development Agreement. Mr. Ralph Wegis, Attorney on behalf of the Moreland Corporation, stated that they have given consideration to the two principal areas of consideration in the memorandum. He addressed the issue of the agreement with California Republic Bank/Chester Avenue Associates stating that there have been numerous meetings with Chester Avenue Associates relative to the acquisition of the property. He indicated that efforts of the Moreland Corporation to satisfy the interest of Chester Avenue Associates include substantially redesigning the Galleria project to reduce its scope, reduce its infringement upon the parking structure, reduce the overall size, and until the last meeting, the needs were reduced to merely relocating a parking ramp and satisfy the leaseholder about the relocation of that ramp and their need to utilize the ramp to get to the parking structure. He stated that they prepared a draft agreement that would solve all issues of interest to the parties in good faith and they responded with a letter that voiced objections to that agreement in several particulars. He stated that they met with the Agency Chairman and City Attorney, Mr. Guay, Mrs. Self, a tenant of California Republic Bank, to discuss the matter. He indicated that their response to Mr. Moreland's request was unacceptable. He stated that they have not been able to develop anything further in view of the comments already made. He stated that they have also submitted to California Republic Bank a proposal which was also submitted to the Agency and requested some response. He explained that it completely eliminates the need for the acquisi- tion of that ramp which is the sole consideration to holding up this project, and therefore eliminates the need for an agreement with California Republic Bank and the Moreland Corporation. With respect to the financial considerations in the memorandum, he stated that they have met with staff and Harbour Financial Corpora- tions and were unaware of any need for specific clarification on any problem areas in the letter of commitment until 4:00 p.m. He stated that upon receiving the provisions in the memorandum regarding Harbour Financial's interest in modifying the provisions, they would contact the financial entity to see what their position was with respect to those items. He stated that they have received from BAKERSFIELD REDEVELOPMENT AGENCY MEETING, September 27, 1984 - Page 3 Gary Hagelman the following telegram: The City of Bakersfield California Redevelopment Agency c/o Mr. Terry Moreland, Moreland Corp. Bakersfield, CA 93301 Because of the memorandum received from City consultants, we are addressing the conditions found to be of significant concern. We are hereby eliminating from the list of conditions items 27, 33, 34 and 35 in their entirety. Additionally, we are extending the loan commitment from 24 months to 30 months to give City Redevelopment Agency sufficient time for site assembly and demolition. Harbour Financial Corporation, Dublin, Ohio Gary R. Hagelman, President Mr. Joe Lewis, citizen, questioned the Agency about the acqui- sition of property by eminent domain. He stated opposition to the project because it would close off Eye Street and would cost the taxpayers a lot of money. Mr. Kennon stated that by law the City is obligated to negotiate with property owners before considering eminent domain. In either case, the Agency would pay fair market value. Mr. Kennon stated that if the Agency chose to accept the redesign and no longer address the issue of the parking ramp, then staff has been advised by the Agency's counsel that it might require some changes in the DDA. Mr. Gene Denari, citizen, expressed his objection relative to staff having two weeks and Mr. Moreland having four hours to respond to the memo. Chairman Rockoff stated that Mr. Moreland would have 30 days to cure any default, if the Agency finds him in default. Mrs. Walters was present and expressed concern that the developer had plenty of time to submit the letter of credit, and asked several questions of staff. She expressed opposition to the Galleria project. Mr. Wegis clarified that they are not critizing the timeliness of the documents and that they are very appreciate of being able to review the memorandum. Mr. David Segesman, real estate broker, representative of Gibraltar Savings and Loan as a loan agent, stated that they have submitted an application for this project to their main office's major loan committee. Mr. Wegis stated that Bank of America is evaluating the project so that the Moreland Corporation can be in a position to come before the Agency and work out any difficulties that could not be remedied with Harbour Financial. Ms. Elizabeth Van Alstein was recognized and asked several questions regardign the commitment to finance. She stated that the Agency has already done more than its share to accommodate Mr. Moreland and she also commented that lives are being mortgaged if it continues. Mr. Wegis stated that given the fact that the Agency may consider some drastic moves if financing is not in place within very strict criteria, it was felt that the Moreland Corporation should give as many lenders as possible the opportunity to make a decision. He stated that many lenders are not willing to commit because it is not assured that the agreement with the County will be approved. Executive Director Caravalho stated that in October 1983 the Disposition and Development Agreement was entered into and in January they were granted a 125 day extension and there was an additional 90 days after that period with an additional 15 days and then 14 days, equaling approximately eight months of extensions. Ms. Jean Kamrar, citizen in favor of the Galleria, stated that in the "13th hour" Gibraltar Savings has come forward and Bank of America has shown interest, and she, therefore, requested that the Agency provide more time to evaluate this project. BAKERSFIELD REDEVELOPMENT AGENCY MEETING, September 27, 1984 - Page 4 City Attorney Oberholzer questioned if the Harbour Financial Commit- ment is a commitment for permanent financing or for a construction loan. Mr. Wegis stated that included in the letter of commitment was the permanent financing, knowing that the construction would follow. City Attorney Oberholzer stated that after reading the submittal from Harbour Financial, it appears to be permanent financing. Mr. Wegis stated that they have been operating on the assumption that is is permanent financing and Mr. Hagelman has indicated that they would also be interested and willing to offer construction financing. He explained that this has never been expressed as a concern of the Agency, but it is permanent. Agency Member Childs questioned staff regarding the conditions of the commitment that have been waived by Harbour. City Attorney Oberholzer stated that the letter contains 43 con- ditions which must be met before financing is assured and, therefore, it does not constitute an irrevocable letter of commitment. He explained that the most significant of these conditions are numbers 27, 33, 34 and 35. City Attorney Oberholzer stated that since the commitment was made in writing, the alterations should be made in writing from the president of Harbour Financial Corporation. He stated that this can be done in the 30-day period or during an extended period of time. Mr. Oberholzer explained that Harbour Financial Corporation is an organization that has been incorporated since March of this year, and based on informa- tion received, it is a two-man operation made up of mortgage brokers. He further explained that they go out and acquire the funds which provide permanent financing for the project. Agency Member Childs questioned if the Moreland Corporation came tonight with an irrevocable letter of credit from the Bank of America and the staff was satisfied with this letter, what would the Agency's obliga- tion be. City Attorney Oberholzer stated that the Agency is not obligated to terminate the agreement or give notice of default. The Agency can allow the agreement to go on, and each time the developer submits a new letter of commitment the Agency has to act within 15 days to either approve or disapprove it. The Agency can give a specific time to perform, and if he does not perform during that time, then the Agency would initiate the termination proceedings. If the developer is able to provide an irrevocable letter of credit, then the project proceeds. Agency Member Moore made a motion that the evidence of financing submitted by the redeveloper from Harbour Financial Corporation dated September 7, 1984 and the additional letter dated September 24, 1984 is disapproved for the reasons contained in the Memorandum from Keyser Marston Associates, Inc., dated September 26, 1984 and the information submitted at this meeting. City Attorney Oberholzer stated that the telegram has not been presented, and if the letter is going to be modified, it should be in written form in the same manner in which it was received. Agency Member Christensen's substitute motion was following roll call vote: AYES: Barton, Childs, Christensen, Moore, Rockoff NOES: None ABSENT: Ratty, Payne approved by the Agency Member Christensen made a motion that the Draft Exchange Agreement between California Republic Bank and the Moreland Corporation is disapproved for the reasons that itis not an executed document and that it does not allow the Moreland Corporation to acquire the rights necessary to develop the Galleria on that property now used as a parking ramp. BAKERSFIELD REDEVELOPMENT AGENCY MEETING, September 27, 1984 - Page 5 Agency Member Barton questioned how the developer plans to get around the problem with Chester Avenue Associates, if the Agency forces the developer into default on that issue. Mr. Wegis stated that they have responded with a proposal that completely eliminates the need for that ramp and at the same time preserves the project. He stated that they need to understand what they can do to cure the default. They have done their best to respond to any concerns to cure the defaults but they need direction. Agency Member Childs questioned the meeting staff attended with the developer and with Chester Avenue Associates. City Attorney Oberholzer stated that the Chairman also attended this meeting, Chester Avenue Associates was represented by Mr. Larry Guay, Mr. Wegis, Mr. Moreland, Mr. Denatale, and Bob Self. He stated that Mr. Guay had indicated that there were a number of conditions that he felt the developer had not met with respect to his concerns. Mr. Self had indicated that he was opposed to the project and to redevelopment itself, and that it was his position that he would not agree to anything with respect to offers made by the developer. He stated that Mr. Guay indicated that he was still willing to negotiate. Mr. Wegis stated that the project could be redesigned to eliminate the need for the ramp. City Attorney Oberholzer stated that this would not require a major modification to the Disposition and Development Agreement. He stated that during the default period, if the developer comes forward with a plan, or a financial commitment which would be acceptable to the Agency at the end of that 30-day period, you do not have to terminate the agreement. Executive Director Caravalho stated that the key issue is the irrevocable commitment for financing and stated that an agreement entered into nearly a year ago with many extensions granted and in terms of administering the business of the Agency, there are other projects and commitments with potential and this project lingers on and the key issue is we want to see an irrevocable commitment and have the project proceed. This has not happened, and the fact is the developer has not met their agreement. He stated that it is time to find them in default. Mr. Caravalho stated that the major obstacle is not the ramp, but the financing commitment. Agency Member Moore called for the question. Agency Member Christensen's motion that the Draft Exchange Agreement between California Republic Bank and the Moreland Corporation be disapproved for the reasons that it is not an executed document and that it does not allow the Moreland Corporation to acquire the rights necessary to develop the Galleria on that property now used as a parking ramp, was approved by the following roll call vote: AYES: Barton, Childs, NOES: None ABSENT: Ratty, Payne Christensen, Moore, Rockoff, Agency Member Moore commented that the community level of frustration over the Galleria project has reached new heights. We are now into the eighth month of extensions: 125 days on December 14, 1984; 90 days on May 22, 1984; 14 days on August 29; and 15 days on September 12. Additionally, we have been assured of financing in May, July, August, and September; each time to learn there was no irrevocable commitment. Red flags have been raised in the eyes of many in regard to the developer's ability to obtain financing. The major evaluation and test for approving any loan is the project's ability to repay that loan. Additional concerns are: a 40% office vacancy rate downtown; the use of the County of Kern as a tenant for 10 years in the amount of $4.5 million; and, all the Agency's monies tied up until after 1990. In review of this latest in a series of failures to perform on the part of the developer, Agency Member Moore moved to accept the staff recommendation and find the developer in default of the Disposition and Development Agreement and made a motion that the Redevelopment Agency has chosen to invoke the provision of Section 511, "Termination by Agency", of the DDA between the Agency and Moreland Corporation due to a failure of the redeveloper to: (1) provide evidence of financing; and (2) provide an agreement between California Republic Bank as delineated in the proposed letter from the Executive Director to the Moreland Corporation, dated September 27, 1984; and that the Executive Director is hereby directed to submit notice of this action and written demand upon the developer. The motion was approved by the following roll call vote: AYES: Barton, Childs, NOES: None ABSENT: Ratty, Payne Christensen, Moore, Rockoff ADJOURNMENT There being no further business to come before the Redevelopment Agency, Agency Member Christensen made a motion to adjourn at 9:51 p.m. /~G r~ g o~ I~k~o, Secretary Bake~s~e~d Redevelopment Agency Bakersfield Redev~l'opment Agency