HomeMy WebLinkAbout1989-11-07; City Council; 10355; Refunding of Multifamily Housing Revenue Bondsb ClTilpF CARLSBAD -
t AGENDw'LL CAY
AB# I' E! ..., > 9 5' c
MTG. 11/7/89
DEPT. CITY
TITLE: DEPl
THE REFUNDING OF THE MULTIFAMILY HOUSING cl~y
FIN REVENUE BONDS, SERIES 1985 B
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RECOMMENDED ACTION:
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Adopt Resolution No. 8'/"39'3 directing the City to proceed with t refunding of the Multifamily Housing Revenue Bonds, Series 1985 B, Seasc; Village project and to return with documents.
ITEM EXPLANATION:
In 1985, the City of Carlsbad issued $16.215 million dollars in Multifam; Housing Revenue bonds for the construction of the Seascape Vi 11 age projec The Seascape Vi1 1 age project was a 208-unit apartment complex located 21.6 acres east of Paseo Del Norte between Caminito De Las Ondas a Buttercup Lane. The project complex consists of seven 16-unit and eic 12-unit two-story, garden apartment buildings.
Under the terms of the law allowing Multifamily Housing bonds to be issue the project must set aside 20% of the residential units to be occupied low and moderate income individuals or families at all times during t qualified project period. The City further required that the rents char{ on the low and moderate income units be limited to affordable rents determined by the City. The City has an opportunity to review the agreeme re1 ating to low and moderate income units as this refunding process gc forward.
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Foll owing the i sue of these bonds, Lincoln Property Company, Incorporat completed the construction and commenced operation of the Seascape Villa project. In December, 1988, Lincoln Properties, the operators of Seascap failed to make necessary interest and/or principal payments to the truste
Bank of California. In February, 1989, CNA Insurance Companies, the insur of the bond issue, sent a notice to Lincoln Properties indicating that default had occurred and certain actions would be taken by the insurer remedy this condition.
The City has been approached by Lincoln Properties, the insurer, C Insurance Companies and their underwriter, Newman and Associates, requesti that the 1985 Mortgage Revenue bond issue be refunded. This action allc the parties involved in this issue to restructure the debt and change t interest rate applicable to the debt service and thereby accompl ish a 1oh overall net cost to the operator. In the opinion. of CNA Insurance a Newman and Associates, this lower net cost a1 1 ows the Seascape Vi1 1 a project to become viable based on current cash flow estimates. The inter€ rates applying to the 1985 bond issue ranged from 6.0% to 10.5% with t largest portion of bonds being issued at 9.0%. Current interest rates f this type of issue are significantly below the rates experienced in 19 when the Seascape issue was first marketed.
Staff has worked with Newman and Associates and CNA Insurance Companies well as representatives of Lincoln Properties to review the feasibility refunding this issue. The investigation of this issue has revealed th
Lincoln Properties is experiencing a default condition on a simil ar bc issue in Azusa and that efforts in refunding that issue may impact t feasibility of refunding the City of Carl sbad issue. CNA Insurance h asked that the Azusa issue be linked with the Carlsbad issue to cros coll ateral ize the two projects. The City' s bond counci 1 , Stradl ing, Yocc
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Page Two of Agenda Bi 11 No. 121 3 55
Carlson and Rauth, has indicated that the concept of cross-collaterlizati
is acceptable in this case since the same partnership owns both project: and the terms of the two issues are virtually identical.
Staff is recommending that the Council authorize the refunding of 1 Multifamily Housing Revenue Bonds, Series 1985 B, Seascape Village projc and direct staff to work with the financing team to accomplish tl refunding. Because of the complexities of this type of issue, sta believes it is in the City’s best interest to assemble a financing tc capable of effectively carrying out the issue and coordinating the effor with the Azusa issue. To that end, staff is recommending that the Counc appoint the same financing team that was in place when the 1985 issue F first done. That team would include, Stradling, Yocca, Carlson and Rat as bond counsel as we1 1 as Newman and Associates as one of the underwriter Staff further recommends, however, that due to the close relationship wi the Azusa issue and the need to be sure that the City‘s interests i maintained, that the City retain an additional underwriter to act as 1c underwriter and on the City’s behalf in this issue.
The City of Azusa has retained the same financing team indicated above i
coordinate all efforts on their behalf, Because of the need to closc coordinate with the Azusa issue, staff recommends that the firm of Dr Wi tter a1 so be retained by the City of Carlsbad to act as lead underwri t on the Carl sbad issue. This will allow the two issues to proce simultaneously allowing Lincoln Properties and CNA Insurance to structu the issues as they have indicated.
Council should direct staff to take two actions. First, to proceed with t refunding of the Multi-Family Housing Revenue Bond Issue Series 8-1985, a Second, to return with documents to (1) form the financing team and (2) return with documents necessary to accompl ish the refunding.
has also hired the firm of Dean litter to act as lead underwriter
FISCAL IMPACT:
The City of Carl sbad should experience no additional expenses because the refunding of this issue. All costs, expenses, claims or other char< related to the refunding are to be borne by Lincoln Properties for the Is( itself. The City of Carlsbad is in no way financially responsible for i repayment of these bonds. The only source of revenue available to the bo holders for repayment are the mortgage payments made by Lincoln Propertie The bonds are insured by CNA Insurance Companies of Chicago there guaranteeing that in the event of default by Seascape or Lincoln Propertie the bondholders will receive full and fair payment for their investmen The issue will be structured to guarantee that all ongoing costs are a1 covered by Lincoln Properties.
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Page Three of Agenda Bill No. jc, 3-55
EXHIBITS:
1. Resolution No.8?-37? directing staff to proceed with the refundil of the 1985 Mortgage Revenue Bond Issue Series B-1985, Seascape Villa! project and to return with documents.
2. Letter dated October 24, 1989 from Dean Witter, Reynolds, Incorporatc regarding refunding of 1985 Mortgage Revenue Bond Issue.
3. A summary of Multi-Family Housing Revenue Bonds Series 1985 E.
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RESOLUTION NO. 89-397
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DIRECTING THE STAFF TO PROCEED WITH THE REFUNDING
OF THE MULTI-FAMILY HOUSING REVENUE BOND
ISSUE 1985 SERIES B SEASCAPE VILLAGE PROJECT AND TO RETURN WITH DOCUMENTS
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the purpose of constructing a multi-family housing complex under . 7
WHEREAS, the City of Carlsbad issued bonds dated April 1, 1985
8 mortgage revenue bond law in existence at that time; and
9 WHEREAS, the 1985 Multi-Family Housing Revenue bond issue has bl
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WHEREAS, the City Council of the City of Carlsbad does find that 1 16
owner operator; and 15
these bonds may be refunded in the event of default on the part of . 14
WHEREAS, under the terms of the 1985 mortgage revenue bond issl 13
the necessary debt service payment; and 12
Incorporated, owners and operators of the Seascape Village project to m8 11
placed into a default condition by the inability of Lincoln Propertil
17 housing units being provided to low and moderate income families is in 1
18 pub1 ic benefit and should be continued.
19 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City
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2. That the City staff is hereby directed to pursue the refund 22
1. The above recitations are true and correct. 21
Carlsbad, California as follows:
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documents necessary to accompl ish said issue. 24
of the Multi-Family Housing Revenue Bonds 1985 Series B and to return WI
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3. That the staff shall review the low and moderate hous-
elements of the agreement with Lincoln Properties to insure that the 1
income residents of Carlsbad are properly served by this agreement.
4. That documents necessary to form the financing team which sh;
include Stradl ing, Yocca, Carlson and Rauth as bond counsel, Dean Wittc
Reynolds, Incorporated as managing underwriter and Newman and Associatc
Incorporated to act as co-manager be returned to Council for approval.
PASSED, APPROVED AND ADOPTED at a regular meeting of the City Counc a
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of the City of Carl sbad, Cal iforni a, held on the 7th day of -
November , 1989, by the following vote, to wit:
AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Larson
NOES: None
ABSENT: None
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ALg*&~$NKg$Z*T
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ATTEST:
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DEAN WIT7EK REYNOLDS INC. (4:
101 California Street, P. 0. Box 7597, San Francisco, CA 94111 Telephone (415) 955-6331 :i #' :
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October 24,1989
Mr. James F. Elliott
Finance Director
City of Carlsbad
1200 Elm Avenue
Carlsbad, CA 92008-1989
Re: Refunding of 1985 Mortgage Revenue Bonds
(Seascape Apartments)
Dear Jim:
Further to our conversation on Monday, I have prepared this proposal letter which describes
Witter's role in connection with the City of Azusa's Multi-Family Housing Revenue Refunding Bo
sue, the structure of the financing and its link to the Seascape Apartment Project in Carlsbad, wl
proposed to be re-financed in a similar manner.
DEQN WI'ITER'S ROLE IN AZUSA
As you know, Dean Witter was hired to senior manage the refunding of approximately $20 mill
outstanding multi-family housing revenue bonds which were issued for Lincoln Properties' Pacific
project in 1985. Newman & Associates, who senior-managed the original financing, is a co-manager
THE PROPOSED BOND STRUCTURE
The proposed bond structure for the Azusa financing is virtually identical to the one propos
Carlsbad. The developer (Lincoln Properties), the credit provider (CNA), the bond terms (6 year '
and the program documentation (as described below) are the same for both financings. Both fina
have experienced serious cash flow deficiencies which form the underlying legal basis for the re-finar
Finally, as you know, the two financings are linked via cross-default and cross-collateralization prov
in the Reimbursement Agreement.
1. Basic Structure. The basic structure of the proposed Refunding Bonds is typical for a multifan
sue and very similar to the 1985 issue.
(a) Use of proceeds. Funds raised from the issuance of bonds will loaned by the City to L
under a Loan Agreement. Lincoln will use these funds to repay its loan under thc
Bonds in full and the 1985 Bonds, in turn, will be retired.
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Mr. James E;. Ellliot
Finance Director
R@nding of (Seascape &aments)
Page 2 of 4
October
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(b) Pavment of the Refundinn Bonds. The Refunding Bonds of &sa will be paid initi;
rents from the Seascape Project). These will pledged to the City and Bond Trustee u
' ' above-described Loan Agreement. In the event that those rents are insufficient to
service, CNA Insurance Company is obligated to pay the shortfall under a surety. As
CNA bears ultimate responsibility for the Refunding Bonds. The strength of CNA's
results in a AAA rating on the Refunding Bonds. This guaranty is discussed in the .
tion.
the net rents from the Pacific Glen project. (The Carlsbad financing will initially loc
(c) CNA GuaraMSuretv. It is projected that the lower interest rate made possible by
funding Bonds will permit the Pacific Glen project to experience "positive cas
(Seascape also is projected to experience positive cash flow -- although not immedia
such event, CNA would not need to make payments under its guarantyhurety. Non
in the event that the cash flow projections are not realized, CNA would be required t
its guaranty. To mitigate against this possibility, CNA requires certain safeguards 1
effect, further secures the Bonds:
0 A letter of credit from a highly rated bank covering "worst case" scenario.
0 The guaranty of several Lincoln partners,
0 A deed of trust on the Pacific Glen project (and Seascape for Carlsbad).
e A special reserve fund to aid cash flow.
In the event that CNA still has to pay on its guaranty, it can resort to the following re:
0 Foreclose against and taking possession of the Project
0 Sell the Project to another owner
0 Pursue other remedies against Lincoln
0 Accelerate the bonds
In no event does CNA have legal recourse against the City and in no event is CNA re1
its obligation to pay under its guaranty.
(d) Documentation. The bond documents for the proposed financing are voluminous --
multi-family standards. The Azusa and Carlsbad documents will be generated by Cha
Cutler (CNA's counsel). They will use as a basis the documents for another Lincolrdc
financing -- the Coral Point Apartments Project for the City of San Diego.
A more detailed outline of the bond structure and description of the relevant documenta provided in appendices to this report.
2. Linkave with the Citv of Carlsbad. Although the above-described structure is consistent 1 1985 Azusa Bonds and other multifamily issues, the bond structure contains an unusual featr
underlying link to a Lincoln project in the city of Carlsbad.
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Mr. James F. Elllioi
Finance Director
Refunding of (Seascape Apartments)
Page 3 of 4
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October
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The Azusa and Carlsbad projects are linked in two ways. First, the Carlsbad project represel
tional collateral or security to the -sa financing and the Azusa project represents additic
lateral or security to the CarIsbad financing. Extra cash flow from either project can be use.
se.t any shortfalls the other may be experiencing. This arrangement is called "cross-collateral
Second, in the event that the CNA is required to pay on its surety bond or maranty for the 1
project, it can foreclose against the Pacific Glen project in Azusa and cause the acceleratio
payment of the Azusa's Refunding Bonds. This arrangement is called "cross-default".
CNA views this cross-default and cross-collateralization requirement as more secure and 1
greater leverage to assure Lincoln's performance. CNA also will not budge from this require
IMPLICATIONS OF LINKAGE
1. Conseauences of Proceeding with the Cross-Collateralization and Cross-Default Arrangeme]
(a) Worst Case Scenario. The worst that could happen to either Carlsbad or Azusa is I
Refunding Bonds could be accelerated due to a problem experienced by the Lincoln
in the other's city. The bondholders still would be paid in full by CNA -- only a littlt
than expected. Neither City would have liability to pay on the Bonds.
It is possible that an acceleration of the Refunding Bonds could have a minor imj
Azusa's or Carlsbad's rewtation in the bond market for being associated with a fi!
which is accelerated. We expect such impact to be negligible at best because:
0 The possibility of acceleration will be clearly disclosed and,
0 Any acceleration, at most, should only be by a few years because the c
bond maturity is quite short (1996) and the bond of additional reserves
cover both the Carlsbad and Azusa projects for at least 3 to 4 years.
@) Proiected Scenario. Bmd on our review of the Azusa and Carlsbad numbers, it see!
the refunding by both Azusa and Carlsbad will cure each projects cash flow problems a
the assumptions underlying Lincoln's projections seem reasonable. However, no o
guarantee whether these projections will, in fact, be realized. Moreover, although one
accurately predict interest rates in the future, the low interest rates on the Refunding
(currently 6 5/8% or so) will likely induce CNA to maintain the outstanding Bonds
than take other actions.
2. Consequences of not Proceeding with the Cross-Collateralization and Cross-Default Arrang
According to CNA, the refusal of Azusa or Carlsbad to approve this arrangement will prevc
refunding from proceeding. Therefore, both cities would stand to lose:
0 Lincoln as a project owner
0 Its upfront and annual fees
e Loss of low/mod units
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Mr. James F. Ellliot
Finance Director
Refunding of (Seascape Apartments)
Page 4 of 4
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FEES AND LIABILITY OF THE CITY
All fees relating to the re-financing will be paid by Lincoln. There wilI be two sources of fu
the reserve fund for the outstanding bonds and (2) payments from Lincoln. In this regard, yc
note that the City of Azusa is charging a fee of l/4% upfront and l/8% annually, subject to i.
Carlsbad receives a higher fee.
As noted before, neither City will have direct financial responsibility for the Refunding Bc
risk will be borne by CNA, the ”rated credit provider.
On behalf of Dean Witter, we would be delighted to serve as the City of Carisbad’s ir
banker for this financing. Multi-family refundings due to cash flow defaults tend to be a littll
than origind issuances of multi-family bonds. Even with a clear legal basis for proceeding -- and
to have one here -- it is helpful to have the independent view of participants who truly work fol
rather than the developer. Given our role in Azusa, and the linkage between the Azusa and Ca
nancings, we believe that we can effectively serve the City as its investment banker.
I encourage you to call me if you would like to discuss the Azusa financing further or thc
that we can render on your behalf. I look forward to seeing you soon.
Best regards,
Qm
Peter J. Ross
Vice President
Municipal Finance Department
PJR:lmc
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.- APPENDIX
BOND STRUCTURE
FINANCING DOCUMENTS
Name Parties Purvose
1. Loan Agreement City and Lincoln 0 City loans bond proc
Lincoln to repay loan UI
Bonds.
0 Obligates Lincoln to rep;
times and in amounts suj
pay refunding bonds.
2. Deed of Trust Lincoln and Deed of Trust 0 Secures Lincoln’s oblig
Trustee repay loan under
Agreement.
3. Trust Indenture City and Bond Trustee 0 Sets forth bond execu
payment terms.
0 Identifies flow of funds.
0 Provides Trustee’s rem
protect bondholders.
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4. Surely Bond
5. Reimbursement
Agreemen tc
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6. Second Deed of Trust
7. Intercreditor
Agreement
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Parties PUrOOSe
CNA and Bond Trustee a Allows Trustee to draw
bond if Lincoln does r
payments under Loan Ag
CNA and Lincoln e Establish financial requ
on Lincoln for CNA
surety bond in favor of
(e.g., reserve funds, L
Credit, guarantees and 1
link).
e Establishes remedies of
event it pays CNA's out 1
surety bond -- e.g.,
acceleration of bonds, etc.
Lincoln and Deed of Trust e Secures Lincoln's obligatic
Trustee the Reimbursement Agree
CNA, City and Bond Trustee e Establishes rights and rem
City, Trustee and CNA
event that CNA pays UI
surety bond.
NEW ISSUE 0 Rating: Standard & Pool
(See “Rating” herei - In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, and assuming continzing compli the requirements of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended (the “Code”), including certain tions pursuant to the Code, interest on the Bonds is exempt from income taxation by the United States of America and j personal income taxation imposed by the State of California; provided, however, that no opinion is expressed as to tk effect of the delivery of an Alternate Credit Instrument on the exemption of interest on the Bonds from income taxation by the United States of America oi State of California personal income taxation. Such exemption from income taxation by the United States of America will be inapplicable to interest on any Bond during any
period while it is held by a “substantial user” of the facilities financed by the Bonds or a “related
person”, as those terms are used in Section 103(b)(13) of the Code, and the regulations thereun- der. See “Tax Exemption” herein for a discussion of the Code and certain other matters, including a description of the limited circumstances under which the Surety Bond described herein may be drawn upon and other Bond Owners’remedies if the tax exempt status of the interest on the Bonds is not maintained.
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$16,215,000
REDEVELOPMENT COMMISSION
.. CARLSBAD HOUSING AND
MULTIFAMILY HOUSING REVENUE BONDS,- SERIES 1985 B (Seascape Village Project) Maturity Dates: June 1 and Dec Dated: April 1, 1985 as described bel First Tender Date for Term Curl Interest Bonds: December 1, 19!
The Bonds will be issued in the form of Current Interest Bonds, consisting of Serial Current Interest Bonds maturing as shown Term Current Interest Bonds maturing December 1, 2005, and Compound Interest Bonds maturing December 1, 1995.
The Term Current Interest Bonds will be required to be tendered by the owners thereof to the Trustee for purchase, at a pri 100% of the principal amount thereof, on December 1,1995 and on certain dates thereafter (the “Reset Dates”), subject to the ri owner of such a Bond to waive such mandatory tender, as described herein. The Bonds will also be subject to mandatory, or extraordinary redemption by the Issuer prior to maturity under the circumstances and at the prices and times set forth herein
Interest on the Current Interest Bonds will be payable semiannually on June 1 and December 1 of each year, commencing Jc Interest on the Compound Interest Bonds will be accrued and compounded semiannually on each June 1 and December 1, commenc 1985, and paid at maturity or upon earlier redemption. Interest on the Bonds will be computed on the basis of a 360-day year cc twelve 30-day months. The Current Interest Bonds will be issued in the denomination of $5,000 principal amount or any integr thereof (except that one Current Interest Bond maturing on December 1,1985, shall be in the denomination of $3,059.45 or in a del equal to the sum of $3,059.45 plus an integral multiple of $5,000). The Compound Interest Bonds will be payable at maturity in the $5,000 or any integral multiple thereof which maturity amount includes both principal and interest. The stated principal arna Compound Interest Bond will be less than the maturity amount thereof as described under the caption “The Bonds” herein. All of
Compound Interest Bonds will be payable upon surrender thereof at the principal corporate trust office of The Bank of California Francisco, California, as Trustee. Interest on the Current Interest Bonds will be payable by check or draft mailed to (OK by wire certain registered owners as described herein) the registered owner of the Bonds as of the close of business on the fifteenth day of preceding each interest payment date.
will be issued as fully registered Bonds. The principal of and premium, if any, on the Current Interest Bonds, and the Accreted I
MATURITIES, AMOUNTS, INTEREST RATES AND YIELDS
Current Interest Bonds
(Interest Payable Semiannually)
Serial Current Interest Bonds
Total Total Total
Due Principal Interest Principal Interest Principal Interes Amount Rate Yield Due Amount Rate Yield Amount Rate Due
12/1/85 $ 8,059.45 11.00% 6.00% 6/1/89 $120,000.00 9.50% 8.00% 12/1/92 $265,000.00 8.40‘ 6/1/86 5,000.00 10.75 6.50 12/1/89 125,000.00 9.50 8.00 6/1/93 275,000.00 8.60 12/1/86 10,000.00 10.75 6.50 6/1/90 165,000.00 8.00 8.00 12/1/93 285,000.00 8.60 6/1/87 40,000.00 10.50 7.00 12/1/90 170,000.00 8.00 8.00 6/1/94 295,000.00 8.80 12/1/87 40,000.00 10.50 7.00 6/1/91 235,000.00 8.20 8.20 12/1/94 310,000.00 8.80 6/1/88 80,000.00 10.25 7.50 12/1/91 240,000.00 8.20 8.20 6/1/95 325,000.00 9.00 12/1/88 80,000.00 10.25 7.50 6/1/92 250,000.00 8.40 8.40
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$12,050,000 9.00% Term Current Interest Bonds due December 1, 2005 at 9.00% (First Tender Date is December 1, 1995)
Compound Interest Bonds
(Interest Compounded Semiannually and Payable
at Maturity or Earlier Redemption)
Total Total Principal Interest Payment at Amount Rate Maturity Yield Due
December 1, 1995 $841,940.55 11.50% $2,775,000.00 10.50%
The Bonds are being issued to finance a loan by the Carlsbad Housing and Redevelopment Commission (the “Issuer” Seascape, A California Limited Partnership (the “Developer”), the proceeds of which loan shall be used to pay all or a portion 0. the acquisition, construction and installation of a 208-unit multifamily residential rental property, together with functionally subordinate facilities (the “Project”).
Newman and Associates, Inc.
May 21, 1985
PaineM
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--. OFFICIAL STATEMENT
$16,215,000
MULTIFAMILY HOUSING REVENUE BONDS, SERIES 1985 B
(Seascape Village Project)
INTRODUCTION
CARLSBAD HOUS I NG AND REDEVELOPMENT COMM I SS I ON
.. This Official Statement, including the cover page, the selec
information and the appendices, is provided to furnish certain informatior
connection with the issuance by the Carlsbad Housing and Redevelop
Commission (the "Issuer") of its Multifamily Housing Revenue Bonds, Sei
1985 B (Seascape Village Project), in the aggregate principal amount
$16,215,000 (the "Bonds"). The Bonds will be dated, mature and bear interc
and will be subject to mandatory tender for purchase and redemption priol
maturity as described herein under the caption "The Bonds".
The Bonds are to be issued pursuant to an Indenture of Trust to be d:
as of; April 1, 1985 (the "Indenture") between the Issuer and The Bank
dated as of April 1, 1985 (the "Loan Agreement") between the Issuer
Lincoln Seascape, A California Limited Partnership (the "Developer"),
Issuer agrees to issue the Bonds and, after funding a Reserve Account
paying certain costs of issuance, to lend the proceeds to the Developer
finance the acquisition, construction and installation of a residential re]
property (the "Project") to be located in the City of Carlsbad, Califor]
The loan of Bond proceeds to the Developer will be evidenced by two promis!
notes (the "Notes") from the Developer to the Issuer and secured by a Dee(
Trust, Assignment of Rents and Security Agreement dated as of April 1,
(the "Deed of Trust") from the Developer to the Deed of Trust Trustee, for
benefit of the Issuer and the hereinafter described Surety and certain o
security documents (herein, together with the Loan Agreement, the Notes
the Deed of Trust, ref erred to as the "Loan Documents"). No partner, as s
of the Developer shall be personally liable for the indebtedness
obligations of the Developer arising with respect to the Project.
foregoing provisions shall not limit or otherwise affect in any way any
letter of credit, (ii) separate written guaranty (including the Guara
(iii) separate written indemnity agreement executed and delivered by
Person in connection with the transactions contemplated by the "Finan
Documents" (defined in the Commitment) or (iv) certain rights of the ISS
See "The Loan Agreement - Obligation Absolute but Non-recourse".
California, N.A., as Trustee (the "Trustee"), Pursuant to a Loan Agree1
Concurrently with, and as a condition to the issuance of the Bonds,
Developer will deliver to the Trustee, for the benefit of the Bond Owner:
surety bond (the "Surety Bond") issued by Continental Casualty Company
"Surety") in substantially the form of Appendix B to this Official Staten
The Developer and the Surety will enter into a Reimbursement Agreement d
as of April 1, 1985 (the "Reimbursement Agreement") setting forth cer
obligations and undertakings of the Developer with respect to
construction, operation and use of the Project among other matters, and
reimbursement of the Surety for amounts paid under the Surety Bond or adva
by the Surety to cure defaults under the Loan Documents and the hereina
described Second Deed of Trust Documents. The obligations of the Devel
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under the Reimbursement Agreement will be secured by the Deed of Trust and
Second Deed of Trust, Assignment of Rents and Security Agreement (the "Seco
Deed of Trust") dated as of April 1, 1985 from the Developer to the Deed
Trust Trustee for the benefit of the Surety and certain other securi
documents (herein collectively referred to as the "Second Deed of Tru
Documents") creating mortgage liens on and security interests in and to t
Project, any leases of space in the Project and the revenues therefrom, whi
liens and security interests will be junior and subordinate to the liens
the Deed of Trust and the other Loan Documents. The Surety Bond will be
effect only with respect to payments of principal and Accreted Value of a
interest becoming due upon the Bonds (other than the principal and inter€
becoming due upon an optional redemption) through December 1, 1995 (t
"Surety Period") and the purchase price payable for Term Current Inter€
Bonds required to be tendered to the Trustee for purchase on December
1995. The Surety Bond and any Alternate Credit Instrument are sometin
referred to herein and in the Indenture, the Loan Documents and the Secc
Deed of Trust Documents as a "Qualified Credit Instrument'' and the Surety
other issuer of a Qualified Credit Instrument is sometimes referred to her€
and in the Indenture, the Loan Documents and the Second Deed of TrL
Documents as the "Credit Instrument Obligor".
In connection with the issuance of the Bonds, the Developer, the Isst
and the Trustee will enter into a Regulatory Agreement and Declaration
Restrictive Covenants dated as of April 1, 1985 (the "Regulatory Agreement
which will restrict in certain respects the use and occupancy of the Projec
The Regulatory Agreement, among other things, will require that at least i
of the units in the Project be occupied by individuals or families of low z
moderate income, within the meaning of Section 103(b)(4)(A) of the Inter1
Revenue Code of 1954, as amended (the I'Code"), during the Qualified Projc
Period as defined herein (see "The Regulatory Agreement" below) and that ox
available for occupancy, each unit must be rented or available for rental or
continuous basis during the remaining term of the Bonds or the Qualif:
Project Period, whichever is longer. See "The Regulatory Agreement" and Y
Exemption" below. The units for individuals or families of low or moder:
income must be rented at Affordable Rents (as such term is defined in i
Regulatory Agreement) and the Developer must use its best efforts to r(
one-half of such units, on a priority basis, to Very Low Income Tenants
such term is defined in the Regulatory Agreement).
The Bonds are limited obligations of the Issuer payable, except to .
extent paid out of moneys attributable to Bond proceeds or the income from '
temporary investment thereof and earnings on the Reserve Account descril
herein, solely from and secured by the moneys derived pursuant to the Ll
Agreement and the other Loan Documents and, through December 1, 1995, f
payments by the Surety of claims properly submitted by the Trustee,
Obligee, under the Surety Bond. The Bonds are limited obligations of
Issuer payable solely out of Bond proceeds, revenues and other amounts deri
under the Loan Agreement, and the funds and accounts held under and pursu
to the Indenture and pledged therefor. The Bonds and the interest thereon
not constitute a general obligation indebtedness or loan of credit of
Issuer, the State of California or any political subdivision thereof wit
the meaning of any constitutional or statutory provision. No owner of
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Bond shall have the righf'to compel the exercise of any taxing power of t
Issuer, the State of California or any political subdivision thereof for t
payment of the Bonds or the interest thereon or other costs incident theret
The Issuer will pledge and assign to the Trustee all its right, title a
interest in and to the Notes, the Loan Agreement and the other Loan Document
and all moneys, revenues and receipts to be received thereunder (except i
right to receive certain indemnification and expense payments, and its rig
to certain notices and certain other communications). The payments to be ma
by the Developer on the Notes and pursuant to the Loan Agreement are in
amount anticipated to be sufficient, together with other funds available und
the Indenture to pay the principal of, premium, if any, and interest on t
Bonds when due.
Brief descriptions of the Issuer, the Developer, the Surety, the Projec
the security for the Bonds, the Bonds, the Notes, the Regulatory Agreemer
the Loan Agreement, the Indenture, the Deed of Trust, the Surety Bond, t
Reimbursement Agreement, the Second Deed of Trust Documents and t
Intercreditor Agreement follow. Such descriptions do not purport to
comprehensive or definitive. All summaries herein of documents and agreemer
are qualified in their entirety by reference to such documents and agreement
and references herein to the Bonds are qualified in their entirety
reference 'to the forms thereof included in the Indenture and the informati
with respect thereto included in the aforesaid documents and agreements, i
of which are available for inspection at the office of the Trustee during j
business hours. During the period of the offering, forms of the LC
Agreement, the Notes, the Regulatory Agreement, the Deed of Trust, t
Indenture, the Surety Bond, the Reimbursement Agreement, the Second Deed
Trust Documents and the Intercreditor Agreement may be obtained from Nem
and Associates, Inc., 717 Seventeenth Street, Suite 2180, Denver, Colorac
80202 and PaineWebber Incorporated, 555 California Street, San Francisc
California 94104 (the "Underwriters"). Information with respect to 1
Surety, including certain financial information, is set forth in Appendix
hereto. The information contained in this Official Statement under i
headings "The Project" and "The Developer" has been furnished by the Develo]
and the information in Appendices B and C to this Official Statement has bc
furnished by the Surety.
THE ISSUER
The issuer of the Bonds is the Carlsbad Housing and Redevelopm
Commission. The Issuer is authorized pursuant to the Act to issue reve'
bonds such as the Bonds for the purpose of financing the construction
development of multifamily rental housing and the provision of capi
rental housing.
improvements in connection with and determined necessary to such multifam
THE DEVELOPER
Lincoln Seascape, A California Limited Partnership (the "Developer") i!
limited partnership established and existing under the laws of the State
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California. The sole managing general partner of the Developer is Lin
Property Company No. 1077, A California Limited Partnership. Preston Butc
/ a resident of California, Edward O'Brien, a resident of California, Wil Hirsch, a resident of California, The Jeffrey Blake Pogue Lincoln Trus
Texas trust, Stephen P. Jarchow, a resident of California, Stuart L. Leede resident of California, Greg Neville, a resident of California, and
Pogue, a resident of Texas, are the general partners of Lincoln Prog
Company No. 1077, A California Limited Partnership.
Neither' the Developer nor Lincoln Property Company No. 1077, A Califo
Limited Partnership, has an operating history. Both limited partnerships
newly formed in May, 1984 for the express purpose of developing the Proj
Management and administration for the Developer and the Project will
provided by Lincoln Property Company N.C., Inc., Foster City, California.
is not expected that the Developer will accumulate any assets other than
Project and assets related to the Project.
THE PROJECT
The Project Will consist of an approximately 171,534 square foot, 208-,
generally east of Paseo del Norte between Caminito De Las Ondas and Butte
Lane in the City of Carlsbad, County of San Diego, California.
apartment complex located on an approximately 21.56-acre site situ
The Project's apartment complex consists of seven 16-unit and e
12-unit two-story garden apartment buildings of a Mediterranean influence
light stucco exterior, terra cotta tiled roofs and wood trim, two swim
pools, two tennis courts, and a recreational building. Of the 208 Pro
apartment units, 88 are one bedroom/one bath units sized at approximately
square feet, 44 are two bedroom/one bath units sized at approximately
square feet, 16 are two-bedroom/two bath units sized at approximately
square feet, and 60 are two bedroom/two bath units sized at approximately
square feet.
The general contractor for the Project is S.C.L.C., Inc., an Or;
County, California-based firm in which Messrs. Butcher, Hirsch, O'Brien
Pogue are principal shareholders. S.C.L.C.'s contract provides for it tc
paid a fixed price for the Project,
Construction of the Project has not commenced.
APPLICATION OF BOND PROCEEDS
The sale of the Bonds will produce $16,018,061.95 in proceeds, prio
deduction of the costs of issuing the Bonds but after deducting Underwritl
discount. It is estimated that such moneys will be applied as follows: 1
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