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HomeMy WebLinkAbout2011-04-26; City Council; 20515; SUBSTITUTE CREDIT FACILITY SANTA FE RANCH APTSCITY OF CARLSBAD - AGENDA BILL -u>AB# MTG. DEPT. 20,515 4/26/11 HNS Title AUTHORIZATION TO EXECUTE AND DELIVER AMENDED DOCUMENTS TO EFFECT THE DELIVERY OF A SUBSTITUTE CREDIT FACILITY FOR THE SANTA FE RANCH APARTMENTS DEPT. DIRECTO CITY ATTORNEY CITY MANAGER RECOMMENDED ACTION: Adopt City Council Resolution No. 2011-070 authorizing the City Manager, upon approval of the City Attorney, to execute the amended documents to effect the delivery of a substitute credit facility through a letter of credit from Wells Fargo Bank for the Santa Fe Ranch Apartments. ITEM EXPLANATION: In 1985, the City Council issued Multifamily Housing Revenue Bonds to provide financing for a 320-unit multifamily residential rental project, known as the Santa Fe Ranch Apartments (originally known as the Park La Costa Apartments), located at 3393 Calle Cancuna in southwestern portion of the City. The proceeds of the bonds were used to make a loan to La Costa Partners to fund the construction of the subject apartment units. The incentive to the City to participate in this project was the restriction of twenty percent (20%) of the units, or 64 units total, to rents affordable to lower income households (80%)of County area median or below. In May of 1993, the City Council agreed to assist with the refinancing of the outstanding bonds for the subject project and allow the owner to take advantage of lower interest rates. At that time, the City issued its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993 (Santa Fe Ranch Apartments f/k/a La Costa Apartments Project) (the "Bonds") which are currently outstanding in the principal amount of $15,920,000 under an Amended and Restated Indenture of Trust dated as of May 1, 2002 (the "Amended Indenture"). In May of 1998, the property was sold to Northwestern Mutual Life Insurance Company. The property was sold again in 2002 to Santa Fe Ranch, LLC a Delaware limited liability company who assumed the obligations of Northwestern Mutual with respect to the bonds. The primary financial obligation to the City is for Santa Fe Ranch, LLC to make the principal and interest payments on the bonds as they come due. To secure the payment of the bonds, the new owner provided a credit instrument (credit enhancement agreement) from the Federal Home Loan Mortgage Company (Freddie Mac). In the event of a default, the credit provider draws on the credit instrument to make any and all debt service payments. The City is not obligated to repay the bonds. The bonds are required to be backed by a credit enhancement during the entire period they are outstanding. DEPARTMENT CONTACT: Debbie Fountain 760-434-2815 debbie.fountain@carlsbadca.gov FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED DENIED CONTINUED WITHDRAWN AMENDED * D D D D CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER -SEE MINUTES D D D D Page 2 The current bonds mature on June 1, 2016. However, the above noted credit enhancement expires on June 6, 2011. The current owner, Santa Fe Ranch, LLC is requesting that the City approve a substitution of the credit enhancement. If approved by the Council, Wells Fargo Bank will replace the credit enhancement from Freddie Mac. Under the terms of the Amended Indenture this substitution must occur no later than May 2, 2011, unless Freddie Mac consents to an extension of this date. To date, no extension has been granted. If the substitution is not accomplished, under the terms of the Amended Indenture, the Bonds will be redeemed and the affordability provisions will terminate prior to bond maturity on June 1, 2016. It is in the interest of the City to allow for the credit substitution to ensure that the bonds remain outstanding and the affordability provisions remain in effect for several more years. If approved, the attached Council resolution approves the form of various revised financing documents which require execution by the City in connection with the substitution of credit under the Amended Indenture, and are on file in the City Clerk's Office. The Council resolution authorizes the City Manager, upon approval of the City Attorney, to execute and deliver the documents once they are finalized, and all preconditions in the Amended Indenture to the delivery of the letter of credit from the Bank have been satisfied. In connection with the delivery of the letter of credit by Wells Fargo Bank, the Bonds will be remarketed to new purchasers pursuant to the terms of the Reoffering Memorandum. FISCAL IMPACT: The City will continue to receive the fee from the owner of the Project that it is currently receiving annually in the amount of 0.23% of the outstanding principal amount of the Bonds (an annual fee of approximately $36,616). There is no other financial impact on the City General Fund as a result of the adoption of the attached resolution and the substitution of the Wells Fargo Bank letter of credit. All costs associated with the substitution will be paid for by the owner of the Project. ENVIRONMENTAL IMPACT: The proposed action is not a "project" within the meaning of the California Environmental Quality Act since it has no potential to cause either a direct physical change in the environment, or a reasonably forseeable indirect physical change in the environment (Public Resources Code section 21065). EXHIBITS: 1. Adopt City Council Resolution No. 2011 -070 authorizing execution of the amended documents to effect the delivery of a substitute credit facility through a letter of credit from Wells Fargo Bank for the Santa Fe Ranch Apartments. 2. Revised Financing Documents (on file in the City Clerk's Office) 1 2 A RESOLUTION OF THE CITY OF CARLSBAD, CALIFORNIA APPROVING AND AUTHORIZING THE EXECUTION OF VARIOUS DOCUMENTS AND TAKING OF VARIOUS ACTIONS TO EFFECT THE DELIVERY OF A SUBSTITUTE CREDIT FACILITY FOR THE SANTA FE RANCH APARTMENTS PROJECT 3 4 5 6 WHEREAS, on March 19, 1985, pursuant to Chapter 7 of Part 5 of Division 31 of the Health7 and Safety Code of the State of California (the "Act"), the City of Carlsbad, California (the "City") 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RESOLUTION NO. 2011 -070 adopted its Resolution No. 7939 authorizing the issuance of the City's $15,920,000 Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) (the "Original Bonds") secured by an Indenture of Trust dated as of April 1, 1985 between the City and The Bank of California, N.A., the predecessor in interest to First Trust of California, National Association, as trustee for the Original Bonds, to provide financing for a 320-unit multifamily residential rental project, originally known as "La Costa Apartments" located in the City (the "Project"), which was constructed by La Costa Partners, a California general partnership (the "Original Owner"); and WHEREAS, on May 27, 1993, the City issued its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993 (La Costa Apartments Project) (the "Bonds"), pursuant to an Indenture of Trust dated as of May 1, 1993 (the "Indenture") between the City and First Trust of California, National Association, the proceeds of which were used to refund all of the outstanding Original Bonds; and WHEREAS, on June 23, 1998, the ownership of the Project was transferred by the Original Owner to The Northwestern Mutual Life Insurance Company (the "Prior Owner"); and WHEREAS, on May 23, 2002, the Prior Owner sold the Project to Santa Fe Ranch, LLC (the "Current Owner") and the City authorized the approval of the sale through its adoption of Resolution No. 2002-143 on May 14, 2002; and „ ,- WHEREAS, upon the sale of the Project, the Current Owner caused a Credit Enhancement Agreement to be provided by the Federal Home Loan Mortgage Corporation ("Freddie Mac") at 28 DOCSOC/1480881 v3/022062-0029 which time various amendments were made to the Indenture through the execution and delivery of an 2 Amended and Restated Indenture of Trust dated as of May 1, 2002 (the "Amended Indenture") and 3 other documents related to the Bonds; and 4 WHEREAS, the Credit Enhancement Agreement for Freddie Mac expires on June 6, 2011, 5 and the Current Owner has requested that the City approve various amendments to the Amended 6 Indenture and other documents related to the Bonds to facilitate the delivery of a letter of credit (the 7 "Substitute Credit Facility") from Wells Fargo Bank, National Association (the "Bank") to secure the 8 Bonds; and 9 WHEREAS, the City desires to authorize the amendments to the existing documents related 10 to the Bonds in order to effect the delivery of the Substitute Credit Facility by the Bank; and 11 WHEREAS, the forms of the various documents necessary to effect the delivery of the 12 Substitute Credit Facility by the Bank have been submitted to this City Council for approval; 13 NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Carlsbad as 14 follows: 15 1. The above recitals, and each of them, are true and correct. 16 2. The proposed forms of Second Amended and Restated Indenture of Trust (the 17 "Second Amended Indenture"), Second Amended and Restated Loan Agreement, First Amendment 18 to Second Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, 19 Second Amended and Restated Promissory Note and Intercreditor and Subordination Agreement 20 (collectively, the "Amended Financing Documents") presented at this meeting are hereby each 21 approved as the forms of said respective documents to be used in connection with the amendment of 22 various existing financing documents relating to the Bonds and the delivery of the Substitute Credit 23 Facility. The City Manager, Assistant City Manager, or the Finance Director or their written 24 designees (collectively, the "Authorized Officers") are hereby authorized and directed, for and in the 25 name of the City, to execute and deliver each of the Amended Financing Documents in substantially 26 the form hereby approved, with such additions thereto and changes therein as may be approved by 27 the Authorized Officer or Authorized Officers of the City executing the same, upon approval of the 28 2 DOCSOC/l 480881 v3/022062-0029 City Attorney. Approval of such additions and changes shall be conclusively evidenced by the 2 execution and delivery of such documents by one or more of the Authorized Officers. The City 3 Clerk is authorized to attest to the signature of any of the Authorized Officers on the Amended 4 Documents. 5 3. The amended form of the Bonds (the "Amended Bonds") as set forth in the Second 6 Amended Indenture (as the Second Amended Indenture may be modified pursuant to the provisions 7 of Section 2 hereof) is hereby approved. The Mayor and the City Clerk are hereby authorized and 8 directed to execute, by manual or facsimile signature in the name and on behalf of the City and under 9 its seal, Amended Bonds in the aggregate principal amount to be outstanding under the Indenture in 10 order to exchange the Amended Bonds for the form of the Bonds outstanding prior to the delivery of 11 the Substitute Credit Facility. 12 4. The form of the Remarketing Memorandum relating to the Bonds presented at this 13 meeting is hereby approved, and Stem Brothers & Co. (the "Remarketing Agent") is hereby 14 authorized to distribute the Remarketing Memorandum to prospective purchasers of the Amended 15 Bonds in the form hereby approved, together with such changes therein or additions thereto as are 16 determined necessary by the City Manager, Assistant City Manager, or the Finance Director, or their 17 designees, upon approval by the City Attorney, to make such Remarketing Memorandum accurate in 18 all respects as of its date. Each of the Authorized Officers, acting alone, is hereby authorized and 19 directed to execute a certificate of accuracy of the description of the Amended Bonds and the City in 20 the Remarketing Memorandum and approval of any additions and changes to the form of 21 Remarketing Memorandum presented at this meeting shall be conclusively evidenced by the 22 execution and delivery of such certificate by any one of the Authorized Officers. The Remarketing 23 Agent is further authorized to distribute the final Remarketing Memorandum to the purchasers of the 24 Amended Bonds. 25 5. Stradling Yocca Carlson & Rauth, a Professional Corporation ("Bond Counsel"), is 26 hereby appointed as bond counsel to the City with respect to the delivery of the Substitute Credit 27 Facility, and each of the Authorized Officers, acting alone, is hereby authorized to execute an 28 3 DOCSOC/1480881 v3/022062-0029 1 agreement for services with Bond Counsel. All actions heretofore taken by the officers and agents of 2 the City with respect to the delivery of the Substitute Credit Facility by the Bank are hereby 3 approved, confirmed and ratified,. The Authorized Officers and the City Attorney are each hereby 4 authorized and directed, jointly and severally, for and in the name and behalf of the City, to do any 5 and all things and take any and all actions, including granting all required consents of and waivers 6 from the City, and execute and deliver any and all certificates, agreements and other documents 7 necessary to accomplish the delivery of the Substitute Credit Facility by the Bank and the 8 remarketing of the Amended Bonds in accordance with the provisions of this Resolution. 9 6. If any section, paragraph or provision of this Resolution shall be held to be invalid or 10 unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or 11 provision shall not affect any remaining provisions of the resolution. 12 7. This Resolution shall take effect on the date of its adoption. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DOCSOC/l 480881 v3/022062-0029 1 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council 2 of the City of Carlsbad on the 26th day of April, 2011, by the following vote to wit: 3 .. AYES: Council Members Hall, Kulchin, Blackburn, Douglas and Packard. 4" 5 NOES: None. 6 ABSENT: None. 81' 9 10 11 MATT HALL' Mayor ' 12 ATTEST: 13 14 15 ^^ M. WOOD, City Clerk 16 (SEAL) 17 18 19 20 21 22 23 24 25 26 27 28 Lisa Hildabrand All Receive-Agenda Item #_"( For the Information of the: From: Sent: To: Cc: Subject: Debbie Fountain Tuesday, April 26, 2011 10:21 AM Lisa Hildabrand John Coates FW: agenda item #7 Asst. CM ^CA^CC I/O --- Hi Lisa. The original amount of the bonds was $15,920,000, and the full amount remains outstanding, According to Bond Counsel, it is not uncommon for the full amount of these type of bonds to remain outstanding until they reach maturity. The bonds will mature on June 1, 2016, unless extended, and will need to be repaid in full. It is my understanding that the property owner/borrower may request an extension on the bond term, but nothing has been negotiated yet on that issue. Let me know if you need any additional information. Thanks. Debbie Fountain Housing and Neighborhood Services Director 2965 Roosevelt Street, Suite B Carlsbad., Ca. 92008 Website: www.carlsbadca.gov P:(760) 434-2935 - Direct P:(760) 434-2811-Office F:(760) 720-2037-Fax E: debbie.fountain@carlsbadca.-Rov Date: Distributer): City Clerk Asst. City Clerk Deputy Clerk BookFrom: Lisa Hildabrand Sent: Monday, April 25, 2011 6:07 PM To: Debbie Fountain Cc: John Coates Subject: agenda item #7 Debbie- Couple of questions on item #7: What was the original amount of the bonds and how much has been paid down? What is the schedule for the payment of the remainder of the outstanding bonds? Thanks. Lisa