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HomeMy WebLinkAboutMINUTES - 12071993 - 1.161 Contra Costa TO: REDEVELOPMENT AGENCY •s County FROM: Phil Batchelor Executive Director DATE: December 7, 1993 SUBJECT: Approve Settlement Agreement with Westamerica Bank and D&M Development on Anchor Cove Development in Bay Point SPECIFIC REQUEST(S)OR RECOMMENDATIONS(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS APPROVE and AUTHORIZE the Deputy Director of Redevelopment to execute Settlement Agreement with Westamerica Bank and D&M Development, Inc. U FISCAL IMPACT No effect on the General Fund. The Redevelopment Agency will pay Westamerica Bank and total of $43,760.99 to clear D & M Development Corporation's debt to the Bank. The Redevelopment Agency will forgive a $141,957.46 debt currently owed to it by D & M Development in return for which the Agency will receive title to the property and assume the development rights that exist. A total of $185,718.45 will be spent out of the Bay Point Redevelopment Project Area Low- Moderate Income Housing'Set-Aside. A total of$164,281.55 will be returned to the Agency out of the $350,000 original loan to D & M Development Corporation. The Agency will incur a very small loss of annual tax increment during the period it holds the property, and assume responsibility for small holding costs (certain taxes and/or assessments, and property maintenance. BACKGROUNDIREASONS FOR RECOMMENDATIONS On April 20, 1993, the Board approved a Construction Loan of$350,000 to D&M Development, Inc. out of the Bay Point Redevelopment Project Area Low- and Moderate-Income Housing Fund. The loan was in support of a ten (10) unit affordable condominium project,in the .Bay Point Project Area: Westamerica Bank also made a construction loan of $575,000 to D & M Development, Inc. The Redevelopment Agency negotiated and executed a Loan Servicing Agreement with.Westamerica Bank in which the Bank managed the entire construction loan for the project. CONTINUED ON ATTACHMENT: X YES SIGNATURE: RECOMMENDATION OF EXECUTIVE DIRECTOR_RECOMMD ION OF A NCY.COMMIT E APPROVE OTHER SIGNATURE(S): CTION OF AGENCY ON 12/7/93 APPROVED AS RECOMMENDED x OTHER VOTE OF COMMISSIONERS r I HEREBY CERTIFY THAT THIS IS A X UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE REDEVELOPMENT AGENCY ON THE DATE SHOWN. Contact: Carole Norris 646-4076 ATTESTED December 7 , 1993 cc: Community Development' PHIL BATCHELOR, Redevelopment Agency AGENCY SECRETARY Auditor-Controller County Counsel Via Redevelopment Westamerica Bank D&M Development BY ,DEPUTY Both the Agency and the Bank loans were expected to be repaid from the sales proceeds of the units. As a result of these commitments,D&M Development developed full plans and specifications, and began the process of pulling the necessary permits to begin construction. On June 15, 1993, Westamerica Bank informed the Agency that D & M Development was projecting cost overruns of over $300,000, and that the Bank was freezing disbursements pending a meeting with D &M and the Agency. A portion of the AGency funds disbursed by Westamerica should not have been released pursuant to the Loan Servicing Agreement. At the time funds were frozen, a total of$141,957 in Agency funds had already been disbursed by the Bank for land acquisition and other costs requested by D&M. A total of$43,760.99 had been disbursed from the Bank loan. It was determined that the Agency had three reasonable options available. 1.Foreclose on its Loan with D& M and hold the Bank accountable for the release of funds. The Loan Servicing Agreement between the Bank and the Agency required that the Bank receive written notice from the Agency prior to disbursing funds. The Bank did not receive this authorization from the Agency prior to disbursing funds, therefore County Counsel advised the Agency that if the Agency foreclosed on its loan, it might have legal recourse against both the Bank and D&M Development,to recover fimds,but that pursuing that course could be expensive and time consuming. 2._Reguire that the Bank Loan the Additional Funds,and subordinate its interest to the new Loan. In this scenario the Bank would make the additional loan and the Agency would subordinate. At the time of sale, the Bank and the Agency would be repaid on a pro-rata basis,based on the percentage of total loan funds from each source. Assuming a sales price of $112,000, the approximate market for condominiums of this size in this location, the Agency would risk at least $80,000 in loan funds under this scenario. The risk could actually be greater, dependent upon the actual sales prices of the condominiums. 3. Negotiate a Settlement Agreement in which the Bank forecloses on D & M; the Agency takes out the Bank's financial interest of$43,760.99;D& M and the Bank agree to transfer title and development rights to the property to the Agency; and all parties hold one-another harmless from future lawsuits pertaining to the loans. After lengthy discussions with County Counsel, the Agency agreed that the Settlement Agreement was the option which best protected its interests. Because the site is within walking distance from the proposed BART station, the market for housing on this site will increase as the BART Station construction becomes more imminent. In the future, the market value of the condominiums should increase and support the construction costs of the project. In the Settlement Agreement the Agency would also become the owner of all plans, specifications and development rights to the land. It therefore would not have to expend additional dollars for architectural services or land use permits in the future. Therefore, by taking out the Bank and becoming the owner of the property the Agency both protects its financial interest and protects its ability to construct affordable housing in the future. Staff is therefore recommending this Settlement Agreement. CM/DMSeri(e.doc G4.8