12/18/2001 RA RPT 12 - Laserfiche WebLink

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CITY OF RIVERSIDE Riverside ~ AI~America c; , 1111. AGENCY MEMORANDUM People Serving Peopie 1998 HONORABLE MAYOR AND AGENCY MEMBERS DATE: December 4,2001 ITEM NO: 12 SUBJECT: Request for Approval and Execution of a Subordination Agreement - Riverside Park Apartments -1812 to 1892 Eleventh Street, and 1813-1891, 1804. 1824, 1844 Twelfth Streets - Eastside Neighborhood Background Several years ago, the Redevelopment Agency ("Agency") assisted Mr. Steven Peacock and his investment group by providing his partnership (Peacock Financial) with financing to make improvements to a 144-unit multifamily apartment properly known as the Riverside Park Apartments (previously known as the Berkeley, then the Oakview Apartments). The Riverside Park Apartments are located at 1812 to 1892 Eleventh Street, and 1813-1891, 1804, 1824, 1844 Twelfth Streets in the Eastside Neighborhood. The Agency's original financing package (1992) for the Riverside Park Apartments included a $650,000 forgivable second trust deed used for acquisition. In 1998, a $400,000 third trust deed (deferred loan) was granted to assist with refinancing the property and the write down of the principal of the first trust deed by the amount of $1 ,000,000. The current agreements allow Peacock Financial to sell the properly andlor allow financing in a senior position to the Agency notes only with approval of the Agency Board. The current First Trust Deed amount is approximately $2,115,747. Current Issue The owners of the Riverside Park Apartments, RP. Apartments Ltd. ("Owners") have requested that the Agency consent to allowing a higher First Trust Deed on the RP. Apartments in an effort to attract a new buyer to the project. There is currently a $2,000,000 First Trust Deed on the RP. Apartments. Pursuant the Agency's authorization, a First Trust Deed of approximately $4,200,000 would be placed senior to the Agency's Second and Third Trust Deeds. Pursuant to a written request from RP. Apartment Ltd., staff is forwarding this matter to the Agency Board for consideration. In exchange for the increase in debt senior to the Agency's, RP. Apartment's Ltd. has pledged to an early payoff of the Third Trust Deed (the total principal of this loan is due with a "balloon" payment in early 2003). All affordability covenants will remain "as-is" with respect to number of units and position on property title. Analysis The partnership that owns the RP. Apartments has endeavored to sell the properly since mid 1999. By not allowing a greater first trust deed for traditional purchase financing, the Agency may hinder finding another purchaser for RP. Apartments. The market sales price could not be met as new "senior position" financing would, in effect, be capped by the Agency. Corporate lenders will typically not lend for a property purchase in other than the first trust deed position. The Agency would grant consent for a higher first trust deed by executing a Subordination Agreement when a sale eventually occurred. The Agency would still reserve the right to consent to sell the RP. Apartments (a separate agreement), and it is expected that Staff would return to the Agency Board when and if a sale of the RP. Apartments occurred. Although the Agency weakens its equity position in the RP. Apartments with a higher First Trust Deed, it receives the benefit of an early payoff for the Third Trust Deed. 12-1