HomeMy WebLinkAboutRP 82-03; Jefferson Senior Housing; Redevelopment Permits (RP) (2)September 10, 1990
TO: FILE
FROM: Housing & Redevelopment Director
REGARDING: SUBORDINATION AGREEMENT ON JEFFERSON HOUSE I PROPERTY
In mid August, 1990, the Housing & Redevelopment Office received a
request to subordinate a Deed of Trust on Jefferson House I as it
was being sold by Jefferson House (Rick Engineering & Bob Ladwig)
to Capitol Growth Properties. The Deed of Trust had been
subordinated originally in Dec. 1983 and again in July, 1987 when
it was refinanced. The original recorded Promissory Note,
Subordination Agreement, and Deed of Trust for the Dec. 1983
transaction along with the necessary Agenda Bill and Resolution
were located at the City Clerk's Office. The recorded
Subordination Agreement for July 1987 was not in the Clerks file
but with Security Pacific Bank - the lender. A copy was requested
for our files and no Agenda Bill nor Resolution was located giving
authorization to execute this document.
HISTORY
The City of Carlsbad has held a Subordinated Deed of Trust
agreement with Jefferson House, a General Partnership, since
December of 1983 for the purpose of securing a senior housing
project. This Subordination Agreement is secured by a Promissory
Note in the amount of $765,440. This is consistent with Section
21.18.045 of the Carlsbad Municipal Code and insures that the owner
constructs, operates and maintains the property described in the
Subordination Agreement as a Senior Citizens Project. If the owner
fails to abide by the terms of the Subordination Agreement,
$765,440 plus ten percent (10*/.) per annum simple interest from the
date of the original Promissory Note (Dec. 1983) will be due and
payable to the City of Carlsbad.
The equity position required by the City for changing the zoning
from 20 du/acre to 75 du/acre and decreasing parking requirements
from 72 to 24 spaces is delineated in Section 21.18.045 of the
Carlsbad Municipal Code, the exact figure determined by the City
Manager and the Developer, and approved by the City Attorney. The
Project Differential was derived as follows:
Size of parcel 28,000 sq ft.
Size need for 48 units 104,544 sq ft.
(@ 20 units/acre)
Difference times Value Per sq ft. = Note
76,544 X $10.00 = $ 765,440
The total market value of the property ($2,495 Million) versus the
total of the 1st Trust Deed and the Subordination Agreement plus
interest ( $2,957,624 ) has given cause for alarm and reason to
redetermine the City's position. Please note the following:
1st Trust Deed Subord. Agr. Agr + Int
1983-84 $ 1,100,000 $ 765,000
1987 1,352,000 765,000 $ 1,120,680
Sept. 1990 1,500,000 765,000 1,457,624
TOTAL MARKET VALUE SEPT. 1990 * 2,495,000
If the buyer defaults on the 1st Trust Deed or fails to abide by
the provisions identified in RP-CUP 82-3 there will be inadequate
funding available to pay off the Subordinated agreement, a
potential loss of $462,624 or greater.
A review of the Housing Authority's files reveals that currently
twenty-three (23) units at Jefferson House I are rented to Section
8 Certificate recipients (low income households). Further the
total rents charged for these units ranged from $455 - $485 per
month, well within HUD's Fair Market Rents for one bedroom units.
The matter has been discussed with the City Manager, City Attorney,
and the Community Development Director. The Community Development
Director is now handling the matter.
KATHY GRAHAM
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JOHN E. MICHAELSEN
PRESIDENT
September 7, 1990
Mr. Marty Orenyak
Director of Community Deveiopment
CITY OF CARLSBAD
FAX - 438-0894
RE: Promissory Note in Favor of
the City of Carlsbad on
Jefferson House I Apartments
3090 Jefferson Street
Carlsbad, California
Dear Mr. Orenyak,
I am the General Partner of the buying entity that is Purchasing
Jefferson House I Apartments. This letter is to make you aware
that I have reviewed all the documents relating to the Note, fully
understand my obligations as the new owner and agree to be bound by
the terms and conditions bf the Note, Deed of Trust, Exhibit A to
the Deed, Section 21.18.045 of the Carlsbad Municipal Code and
Conditional Use Permit 82^3.
I understand that the amount of the Note is $765,440 plus interest
from the date of origination in 1983. I understand that no payment
shall be required on the Note exempt as provided in paragraphs 1
and 2 of Exhibit A, Additional Provisions to Subordinated Deed of
Trust.
I understand that in the operation of the project I must comply
with Section 21.18.045 of the Carlsbad Municipal Code in all
respects. I have carefully reviewed Exhibit A and Code Section
21.18.045, and I fully understand and agree to comply.
TEL: (619) 454-8857
FAX: (619) 454-3257
1120 SILVERADO STREET
LA JOLLA, CALIFORNIA 92037
Mr. Marty Orenyak
September 7, 1990
Page Two
I am involved as a General Partner in two other apartment
properties in Carlsbad, namely Laguna Palms and Carlsbad Coast
Apartments. We are excited about being involved with a third
project and specifically a seniors apartment.
Your acceptance of this letter acknowledges that the proj eat is now
in full compliance with Section 21.18.045 of the Carlsbad Municipal
Code.
The Buyer and Seller are anxious to close this transaction as
quickly as possible and I hope this letter will allow you to help
us in that regard. I appreciate your help and look forward to
working with your office in the future.
Please call with any questions that you may have.
Sincerely,
m £ k Michaelsen
President
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