12/18/2001 RA RPT 10 - Laserfiche WebLink

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CITY OF RIVERSIDE Riverside tEa1d AI~America n , 1111. AGENCY MEMORANDUM People Serving People 1998 HONORABLE MAYOR AND AGENCY MEMBERS DATE: December 18,2001 ITEM NO: 10 SUBJECT: Fox Theater Owner Participation Agreement BACKGROUND: The Fox Theater was purchased by Mr. H. J. "Joe" Zivnak earlier this year. In the meantime, Mr. Zivnak has retained the services of architects and engineers expert in the field of theater restoration. However, Mr. Zivnak faces complex and costly challenges in regard to the Theater's preservation, including unreinforced masonry, roof replacement, HVAC and plumbing repairs along with significant architectural features that must be carefully preserved and restored. The total cost of the improvements, which have yet to be determined, will take millions of dollars and several years to complete. However, due to the limited cash flow currently generated at the site, it is extremely difficult for Mr. Zivnak to obtain financing for the rehabilitation. However, the Agency's assistance will enable Mr. Zivnak to secure the funds necessary to improve the office space, which, when occupied, will generate additional cash flow and hence allow for additional financing. In an effort to initiate improvements on this important historic building, the Redevelopment Agency directed staff, on August 14, 2001, to proceed with the preparation of an Owner Participation Agreement with Mr. Zivnak. As presented, the OPA will authorize Agency assistance in the amount of $917,000 for seismic retrofit and roof replacement. At the same meeting, the Agency authorized $20,000 to be paid to Dr. Prahbu V. Dhalla to acquire pre-planning documents, plans, specifications and studies. The documents were prepared for and paid by Dr. Dhalla during the time he had a purchase option on the Fox Theater property. Payment has since been made to Dr. Dhalla for said documents. CURRENT ISSUE: Mr. Zivnak is prepared to move forward with the seismic improvements and roof replacement. It is proposed that the $917,000 be provided as 1 O-year forgivable loan as outlined in the attached draft Owner Participation Agreement and related documents. As proposed, the loan will be secured by a Promissory Note, and will be forgiven 1/10 each year over the life of the loan, provided that the building is maintained according to the Covenants, Conditions and Restrictions. It should be noted that if the building is not maintained accordingly, Mr. Zivnak would be required to repay the loan on a pro-rata basis. Additionally, the loan proceeds will be disbursed directly to contractors andlor on a reimbursement basis. Finally, it should be noted that these funds will be subject to the normal redevelopment restrictions. The Fox Theater has been mostly vacant and neglected for many years due to the cost required to rehabilitate and seismically retrofit the building. The Agency funds will enable Mr. Zivnak to move forward by allowing him to leverage the Agency's $917,000 toward a much higher level of total improvements. 10-1