HomeMy WebLinkAbout1994-09-06; Housing & Redevelopment Commission; 258; Family Housing Revenue Refunding BondsHOUSING AND REDEVELOPMENT COMWSION - AGENDA BILL
A6 # d&i% ’ TITLE: AUTHORIZATION TO ISSUE, SELL AND DELIVER ,, ’
MTG. 9106194 FAMILY HOUSING REVENUE REFUNDING BONDS ’
(SEASCAPE VILLAGE PROJECTJ IN A PRINCIPAL DEPT. CM AMOUNT NOT TO EXCEED $15,500,000
RECOMMENDED ACTION:
Adopt Resolution No. . dS S appointing members of the financing team for the Multifamily
Housing Revenue Refunding Bonds, Seascape Village Project.
Adopt Resolution No. as -authorizing the issuance, sale and delivery of Multifamily Housing
Revenue Refunding Bonds in a principal amount not to exceed $15,500,000 for the purpose of
refunding bonds previously issued by the Commission to finance the cost of a Multifamily Rental
Housing Project, dete rmining and prescribing certain matters relating thereto, and approving and
authorizing the execution of related documents, agreements and actions (Seascape Village
Project).
BACKGROUND:
In 1985, the Housing and Redevelopment Commission issued $16,215,000 in Multifamily Housing
Revenue Bonds to provide financing for a 208~unit Multifamily Residential Rental Project, known
as the Seascape Village Project, located at 6938 Seascape Drive in Carlsbad. The proceeds of the
bonds were used to make a loan to Lincoln Property Company, a California Limited Partnership,
to fund the construction of the units. The incentive to the City to participate in this project was
the restriction of twenty percent (20%) of the units, or 42 units total, to rents affordable to lower
income (80% of County median or below) households.
Although the Seascape Wage Project is complete and has been operational for approximately
eight years, in January 1989, the original developer, Lincoln Property Company, failed to make
payments to the trustee necessary to support the annual debt service requirements. Thus failure
constitutes a default under the terms of the trust indenture, loan agreements, and first and second
deed of trust, as well as other documents related to the financing. In December 1990, a
foreclosure action was filed by Continental Casualty Company (CCC), the bond insurer. The
foreclosure action was completed in December 1993 with the sale of the project to Seascape
Apartments, Inc., a corporation formed by CCC to take over the project.
It is important to note that during the period of the default there was no interruption of the
payment of interest and principal to bond holders. CCC provided all funds necessary to pay these
costs as required by the original bond documents. The refunding of the Seascape Apartments
Project bonds has been requested by CCC as allowed in the original bond documents as part of
the process of curing the default.
The Commission and CCC both stand to benefit from the refunding. CCC will receive the benefit
of reduced interest rates and continued tax-exempt funding of the project, while the Commission
will benefit by assuring that the low income units will continue to be available to low income
families. In addition, the Commission will be modifying the Regulatory Agreement provisions
related to determinin g rents or lower income tenants to provide a more favorable rent.
On November 7, 1989, the Commission agreed to proceed with the refunding of this issue based
on a request from the original property owner, Lincoln Property Company. Since that time, the
default and eventual sale of property have changed some of the conditions that existed at the time
of that original approval.
Page Two of Agenda Bill No. dS&
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The first resolution attachment to this agenda biIl will direct staff to proceed with the refunding
and approve the form of documents. The second will appoint a new underwriter who will
participate in the refunding. Staff is recommending the appointment of A. G. Edwards in place
of Dean Witter Reynlds, the underwriter selected in 1989, as the underwriter for the issue. The
selection of a new underwriter was necessary due to the withdrawal of Dean Witter Reynolds.
A. G. Edwards was mutually selected by the Commission staff and the new project owner,
Seascape Apartments, Inc. after interviewing representatives from Nuvene, Dillon Read, Stone and
Youngberg, and Donaldson Luffkin Jenerette. Fees and charges for the transaction are comparable
from ail firms. All costs are paid by Seascape Apartments, In. The Commission is not liable for
any costs related to the refunding.
FINANCING PROVISIONS:
The Financing Team has been working on this project for some time in an effort to negotiate the
provisions/terms of the agreement for issuance of the refunding bonds and ultimate refinancing
of the project.
CCC will issue a letter of credit to provide the credit enhancement necessary to this transaction.
In the event of any future default, CCC will be responsible for making all debt service payments.
The Commission is & obligated to repay the bonds. The new bonds will mature in 2005. The
Bonds will be fully insured during this entire period.
The interest rate for the new bonds will be a “floating” rate set weekly. The interest rate,
however, can be fixed at any time at the option of the property owner. The market for this short
term floating rate debt would allow the issue to be placed today at a rate of about 2-l/2% plus
remarketing costs. Since the market is changeable, this rate should be used by the Commission
only as an indication, not as the expected interest rate for the new debt.
REGULATORY AGREFMEPJT:
The following basic provisions will be outlined in the amended Regulatory Agreement:
1. Not less than 20% of the units, or 42 units total, shall be continuously occupied by Lower
Income Tenants at an “affordable rent”.
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The “affordable rents” for the restricted units shall not exceed 30% of one-twelfth of the
maximum adjusted annual income of the household of appropriate size which is deemed
to be a “lower income” (800/6 of median gross income) household. When setting the rents
for the restricted units, the property owner shall further reduce the affordable rent by a
utility allowance based on the “Utility Rate Schedule” established for the City Housing
Authority’s Section 8 Rental Assistance Program. “‘1% +
The “affordable rent” on a restricted unit shall never exceed 90% of the lowest rent
charged for a comparable market-rate unit in the project.
Note: The current agreement allows for a situation where the market rate rents could be
lower than the restricted “lower income” units. The provision outlined above will ensure
that the market rate rents will never be lower than the rents for the lower income
affordable units.
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Page Three of Agenda Bill No. $?S8
4. Priority for the restricted units shall be given to households currently on the City’s Section
8 Rental Assistance Waiting List.
5. The City of Carlsbad will receive an annual fee equal to 23 basis points (0.23%) of the
original principal amount of bonds payable in semi-annual instalhnents ($35,650 per
year).
6. The City of Carlsbad shall also receive an origination fee in the amount of 23 basis points
(0.23% - $35,650) of the amount of bonds payable at the closing.
HOUSING AND REDEVELOPMENT COMMISSION ACTION:
Staff recommends that the Housing and Redevelopment Commission approve the actions necessary
to issue the refunding bonds to refinance the Seascape Village Project. The following actions are
required by the Council:
1. Adopt the attached resolution appointing the Underwriter.
2. Approve Issuance of Bonds in the amount of $15,500,000.
3. Approve the following documents (as to form):
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Indenture of Trusts. Sets forth the rules of the financing between the City of
Carlsbad and the Trustee (First Trust of California).
Loan Agreement and Administration Agreement. This document includes the Note
and administration rules for the project. It outlines the provisions whereby the
City will loan the bond proceeds to the property owner (Seascape Apartments,
Inc.).
Amended and Restated Renulatorv Agreement. Sets forth the rules governing the
units restricted as affordable in terms of rent and occupancy.
Redemution. Defeasance and Pavment of Prior Bonds Agreement. Provides for an
agreement between the City and First Trust of California on how the prior bonds
will be repaid.
First Deed of Trust and Securitv Agreement with Assignment of Leases and Rents.
This document assigns the City’s first deed of trust interest in the Project and
receipt of rents to the Trustee to secure repayment of the Bonds. The remedies
under this document are further assigned to CCC.
Intercreditor Agreement. Places the CCC (the issuer of the surety) in a position
responsible for the enforcement of the refunding, including taking action in the
event of default by the property owners.
Form of Bond (found in Exhibit A to the Indenture of Trust). Provides for the
language to be printed on the bond.
Form of Preliminary Official Statement. Basically used by the Bond Underwriter (A.
G. Edwards & Sons, Inc.) as information for buyers of the bonds.
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Page Four of Agenda Bill No. $? f; 8
3 Form of Bond Purchase Agreement. Outlines the agreement between the City and
the Underwriter as to how the Underwriter will purchase the bonds from the City.
These documents are on file with the City Clerk’s Office. They are in substantially final
form, however the most recent copies have been redlined to show changes from the prior
version of the documents. These redline notations will be removed upon the completion
of the financing and final clean copies will be available for signature.
4. Appoint First Trust of California as Bond Trustee. First Trust of California is also the
trustee for the prior bonds. The trustee will make and record all bond transactions.
FISCAL IMPACT:
The issuance of the refunding bonds for the Seascape Village Project does not impose any fiscal
obligation on the City of Carlsbad or the Housing and Redevelopment Commission. The City and
Agency are not obligated in any way to repay the bonds. In addition, the Agency wiIl be
compensated for staff costs associated with the financing and monitoring of the project for
compliance with the affordable rent provisions. An up-front origination fee of 0.23% ($36,616)
will be paid to the Agency to cover the staff time and incidental costs related to issuance. In
addition, the Agency will also receive 0.23% annually to cover ongoing administrative costs.
Although the Agency is not directly responsible for the repayment of these bonds, the Agency’s
name is associated with this debt. It is in the Agency’s best interest to assist the property owner
by refunding this issue to help create a positive cash flow for the project. In addition, the
protection of 42 low income units is important to the Agency’s affordable housing program.
EXHIBlTS:
1.
2.
3.
4.
5.
6.
7.
Resolution No:255 appointing members of the financing Team.
Resolution No. s6 authorizing the issuance, sale and delivery of Multifamily Housing
Revenue Refunding Bonds in a principal amount not to exceed $15,500,000 for the
purpose of refunding bonds previously issued by the Commission to finance the cost of a
Multifamily Rental Housing Project, dete rmining and prescribing certain matters relating
thereto, and approving and authorizing the execution of related documents, agreements
and actions (Seascape Village Project).
Indenture of Trust (on file in City Clerk’s Office).
Loan Agreement, Including Form of Note and Administration Agreement (on file in City
Clerk’s Office),
Amended and Restated Regulatory Agreement (on file in City Clerk’s Office).
Redemption, Defeasance and Payment of Prior Bonds Agreement (on file in City Clerk’s
Office).
First Deed of Trust and Security Agreement with Assignment of Leases and Rents (on file
in City Clerk’s Office).
Page Five of Agenda Bill No. 258
8. Intercreditor Agreement (on file in City Clerk’s office).
9. Form of Bond (found in Exhibit A to the Indenture of Trust) (on file in City Clerk’s office).
10. Form of Preliminary Official Statement (on file in City Clerk’s Office).
11. Form of Bond Purchase Agreement (on file in City Clerk’s Office).
I EXHIBIT 1
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,- -1 .-_ :c RESOLUTlON NO. 255
RESOLUTION OF THE CARLSBAD HOUSING AND
REDEVELOPMENT COMMISSION APPOINTING
MEMBERS OF THE FINANCING TEAM FOR THE
MULTIFAMILY HOUSING REVENUE REFUNDING
BONDS, SEASCAPE VILLAGE PROJECT
WHEREAS, on November 7, 1989, the City Council appointed the
members of the financing team to work with staff on the Multifamily Housing
Revenue Refunding Bonds, Seascape Village Project; and
WHEREAS, the original financing team included Dean Witter Reynolds as
underwriter for the project; and
WHEREAS, Dean Witter Reynolds has subsequently ceased its participation
in this project; and
WHEREAS, the City staff has worked with the project owner, Continental
Casualty Company (CCC), to select a new underwriter for the project, and staff
and CCC have interviewed representatives of four underwriting firms; and
WHEREAS, CCC and the City staff are recommending that the Commission
select A. G. Edwards and Sons, Inc., as the underwriter for the Seascape Village
Project.
I NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of
the C&-lsbad Housing and Redevelopment Commission as follows:
1. That the above recitations are true and correct.
2. That staff and CCC representatives have interviewed
representatives of Nuveene, Donaldson Luffkin Jenerette, Stone and Youngberg,
and A. G. Edwards as potential underwriters for the Seascape Village Project
I Multifamily Refunding Bonds.
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;;g -- That the Commission concurs with the recommendation of the staff
and CCC and hereby appoints A. G. Edwards and Sons, Inc. as underwriter for __.
the Seascape Village Proj.ect Multifamily Refunding Bonds.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Carlsbad
Housing and Redevelopment Commission of the City of Carlsbad, California on
the 6th day of SEPTEMBER , 1994, by the following vote,
to wit:
AYES: Commissioners Lewis, Stanton, Kulchin, Nygaard, Finnila
NOES: None
ABSENT: None
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EXHIBIT 2
TA- RESOLUTION NO. -256
:-A RESOLUTION OF THE CARLSBAD HOUSING AND
REDEVELOPMENT COMMISSION AUTHORIZING THE ISSUANCE,
SALE AND DELIVERY OF MULTIFAMILY HOUSING REVENUE
REFUNDING BONDS IN A PRINCIPAL AMOUNT NOT TO EXCEED
$15,500,000 FOR THE PURPOSE OF REFUNDING BONDS
PREVIOUSLY ISSUED BY THE COMMISSION TO FINANCE THE
COST OF A MULTIFAMILY RENTAL HOUSING PROJECT,
DETERMINING AND PRESCRIBING CERTAIN MATTERS
RELATING THERETO, AND APPROVING AND AUTHORIZING THE
EXECUTION OF RELATED DOCUMENTS, AGREEMENTS AND
ACTIONS WITH REGARD TO THE SEASCAPE VILLAGE PROJECT
WHEREAS, on May 7, 1985, pursuant to Chapter 1 of Part 2 of’Division
24 of the Health and Safety Code of the State of California (the “Law”), the
Carlsbad Housing and Redevelopment Commission (the “Commission”) adopted
its Resolution No, 046 (authorizing the issuance of $16,215,000 Multifamily
Housing Revenue Bonds, Series 1985 B (Seascape Village Project) (the “Prior
Bonds”) secured by an Indenture of Trust dated as of April 1, 1985 (the “Prior
Indenture”) between the Commission and The Bank of California, N.A., the
predecessor in interest to First Trust of California National Association, as trustee
for the Prior Bonds (the “Prior Trustee”), to provide financing for a 208~unit
multifamily residential rental project known as “Seascape Village” (the “Project”)
locaied in=the City of Carlsbad (the “City”), which was constructed by Lincoln
Seascape, A California Limited Partnership (the “Developer”); and
WHEREAS, the Commission has been advised. that the Developer has
defaulted in its payment obligations under that certain Loan Agreement dated as
of April 1, 1985 (the “Prior Loan Agreement”) between the Commission and the
Developer and that certain Secured Note A and Secured Note B, both dated May
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21, 1985 and payable to the order of the Commission, pursuant to which the
Deve&@& agreed to pay sufficient amounts in order to pay the principal and
interest on the Bonds when due; and .-
WHEREAS, as a result of continuing defaults, the issuer of the credit
enhancement for the Prior Bonds instituted foreclosure proceedings against the
Project and, following a foreclosure sale, Seascape Apartments, Inc., an Illinois
corporation (the “Owner”), acquired title to the Project; and
WHEREAS, prior to the Owner’s acquisition of the Project, the credit
enhancer notified the Prior Trustee to call the Prior Bonds for redemption
pursuant to its rights under the Prior Indenture; and
WHEREAS, the Commission intends to issue its Multifamily Housing
Revenue Refunding Bonds, Series A of 1994 (Seascape Village Project) (the
“Bonds”), the proceeds of which will be used exclusively to refund the Prior
Bonds; and
WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of
1986, the City Council has conducted a public hearing regarding the issuance of
the Bonds by the Commission and has approved the issuance of the Bonds; and
WHEREAS, the Commission has determined that the refunding of the Prior
Bonds will accomplish a valid public purpose of the Commission by continuing
to provide housing for lower income persons and families within the meaning of
the Law; and
WHEREAS, the Commission is authorized and wishes to issue revenue
refunding bonds pursuant to the provisions of Article 11 of Chapter 3 of Part 1
of Division 2 of Title 5 of the Government Code of the State of California (the
“Refunding Bond Act”) to refund the Prior Bonds; and
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WHEREAS, all acts, conditions and things required by the Refunding Bond
Act arz~$+ all other laws of the State of California, to exist, to have happened
and to have been performed precedent to and in connection with the issuance of 2
the Bonds exist, have happened, and have been performed in regular and due
time, form and manner as required by law, and the Commission is now duly
authorized and empowered, pursuant to each and every requirement of law, to
issue the Bonds for the purpose, in the manner and upon the terms herein
provided; and
WHEREAS, the Bonds are to be issued hereunder in an aggregate principal
amount not to exceed $15,500,000 and are to be designated as the “Carlsbad
Housing and Redevelopment Commission Multifamily Housing Revenue
Refunding Bonds, Series A of 1994 (Seascape Village Project)“; and
WHEREAS, the forms of the various documents have been submitted to
this Board of Commissioners for approval;
NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of
the Carlsbad Housing and Redevelopment Commission as follows:
1. The above recitals are true and correct.
2. The Board of Commissioners hereby approves the issuance by the
Commission of the Bonds in an aggregate principal amount not to exceed
$lS,sOO,OOO, provided that the initial interest rate on the Bonds shall not exceed
10% and the price thereof shall not be less than 100% of the aggregate principal
amount thereof, all as may be specified in the Bond Purchase Agreement
approved below.
3. The proposed forms of Indenture of Trust (the “Indenture”), Loan
Agreement (including the fox-r-n of Note attached thereto), Administration
Agreement, Amended and Restated Regulatory Agreement and Declaration of
Restr&@ve Covenants (the “Regulatory Agreement”), Agreement Regarding
Redemption, Defeasance and Payment of Prior Bonds (the “Escrow Agreement”), :-
First Deed of Trust, Assignment of Rents and Security Agreement and
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5 Intercreditor Agreement presented at this meeting are hereby each approved as
6 the forms of said respective documents to be used in connection with the
7 issuance of the Bonds. The Chairman and the Secretary are hereby authorized
and directed, for and in the name of the Commission, to execute and deliver each
such document in substantially the form hereby approved, with such additions
thereto and changes therein as may be approved by the officers executing the
same, upon consultation with the City Attorney. Approval of such additions and
changes shall be conclusively evidenced by the execution and delivery of such
documents by such officers.
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19 directed to execute, by manual or facsimile signature in the name and on behalf
20 of the Commission and under its seal, Bonds in the aggregate principal amount
21 set-forth _&-I the Bond Purchase Agreement.
22 II -- 5. The form of the Preliminary Official Statement relating to the Bonds
4. The form of the Bonds as set forth in the Indenture (as the
Indenture may be modified pursuant to the provisions of Section 3 hereof) is
hereby approved. The Chairman and the Secretary are hereby authorized and
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presented at this meeting is hereby approved in the form presented, and the
underwriter named in the Bond Purchase Agreement (the “Underwriter”) is
hereby authorized to distribute the Preliminary Official Statement to prospective
purchasers in the form hereby approved, together with such conforming changes
therein or additions thereto as are determined necessary by the Chairman, upon
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consultation with the City Attorney, to make such Preliminary Official Statement
“fina&@% of its date, within the meaning of Rule 15~2-12 of the Securities and
Exchange Commission (the “Rule”), and the Chairman is hereby authorized and
directed to execute a final Official Statement in substantially the form of the
Preliminary Official Statement, together with changes therein and additions as
are deemed necessary by the Chairman, upon consultation with the City Attorney,
to make such Official Statement complete and accurate as of its date. Approval
of such additions and changes shall be conclusively evidenced by the execution
and delivery of the final Official Statement by the Chairman. The Underwriter
is further authorized to distribute the final Official Statement to the purchasers
of the Bonds upon its execution as described above.
6. The form of the Bond Purchase Agreement (the “Purchase
Agreement”) presented to this meeting and the sale of the Bonds pursuant thereto
are hereby approved; and upon receipt of a completed Purchase Agreement,
executed by a duly authorized representative of the Underwriter, the Chairman
is authorized and directed to evidence the Commission’s acceptance of the offer
made thereby by executing and delivering the same in substantially the form
hereby approved with such additions thereto and changes therein as may be
approved by the Chairman, upon consultation with the City Attorney. Approval
of such additions and changes shall be conclusively evidenced by the execution
and delivery of the Purchase Agreement by the Chairman.
7. First Trust of California, National Association (the “Trustee”) is
hereby appointed as Trustee for the Commission and the owners of the Bonds
with the powers and duties set forth in the Indenture, the Loan Agreement, the
Escrow Agreement, the Intercreditor Agreement and the Regulatory Agreement;
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provided, however, that the Housing and Redevelopment Director of the City (the
“Dire$@) may approve the selection of another trustee meeting the criteria set
forth @I the Indenture if such a substitution is deemed by the Director to be
advisable to consummate the delivery of the Bonds in a timely and cost efficient
manner. The Trustee or its agent appointed under the Indenture is hereby
requested and directed to authenticate the Bonds by executing the certificate of
authentication and registration appearing thereon and to deliver the Bonds, when
duly executed and authenticated, in accordance with written instructions
executed on behalf of the Commission by the Director, which instructions said
officer is hereby authorized and directed, for and in the name and on behalf of
the Commission, to execute and deliver to the Trustee. Such instructions shall
provide for the delivery of the Bonds in accordance with the Purchase Agreement,
upon payment of the purchase price thereof.
8. First Trust of California, National Association is hereby appointed
as Program Administrator.
9. The proceeds of the Bonds shah be expended solely to refund the
Prior Bonds as provided by the Indenture and the Escrow Agreement. The
Commission hereby approves the refinancing of the loan to the Owner in
accordance with the terms and conditions of the various documents .described
herein.
10. All actions heretofore taken by the officers and agents of the
Commission with respect to the sale and issuance of the Bonds are hereby
approved, confirmed and ratified, and the officers of the Commission, including,
in particular, the Director and the Treasurer of the Commission or any
representative of the Commission duly designated by the Chairman, is hereby
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authorized and directed, jointly and severally, for an in the name and behalf of
the @@mission, to do any and all things and take any and all actions and -
execute and deliver any and all certificates, agreements, acceptances, and other :.
documents, including, but not limited, to those described in the Purchase
Agreement, which they, or any of them, may deem necessary or advisable to
accomplish the lawful issuance, sale and delivery of the Bonds in accordance with
the Refunding Bond Act and the provisions of this resolution.
11. All resolutions or parts thereof in conflict herewith are, to the
extent of such conflict, hereby repealed.
12. If any section, paragraph or provision of this resolution shall be
held to be invalid or unenforceable for any reason, the invalidity or
unenforceability of such section, paragraph or provision shall not affect any
remaining provisions of this resolution.
13. This resolution shall take effect on the date of its adoption.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Carlsbad
Housing and Redevelopment Commission of the City of Carlsbad, California, on
the 6th day of SEPTEMBER J 1994, by the following vote,
to wit:
; AYES: Commissioners Lewis, Stanton, Kulchin, Nygaard, Finnila
- NOES: None