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HomeMy WebLinkAboutR-2004-173 Yakima Hotel Section 108 Loan ApplicationRESOLUTION NO. R-2004- 173 A RESOLUTION authorizing the City Manager to submit an apphcation for $3,560,000 from the Section 108 Loan Guarantee Program of the United States Department of Housing and Urban Development (HUD) for Yakima Hotel, LLC to construct a Hilton Garden Inn Hotel. WHEREAS, the City of Yakima has been awarded a $1 million Economic Development Initiative (EDI) grant from the U.S. Department of Housing and Urban Development (HUD); and WHEREAS, the grant award from HUD was conditioned upon submittal of a $4 million application to the HUD Section 108 Loan Guarantee Program; and WHEREAS, HUD approved the use of EDI and Section 108 loan funds for the City of Yakima Economic Development Loan Fund m 2002; and WHEREAS, the City has requested and was approved for an additional $2,945,000 of Section 108 loan funds m 2004; and WHEREAS, the City has worked with the National Development Council in developing underwriting guidelines for the program; and WHEREAS, the City's Economic Development Loan Fund ("EDLF") meets the ehgibihty requirements of the Section 108 Loan Guarantee Program; and WHEREAS, the City has provided $3,310,000 m EDLF financing to three projects over the past two years; and WHEREAS, portions of the City of Yakima have been designated a federal Renewal Community by HUD, providing numerous federal tax incentives and priority for federal funding; and WHEREAS, under Section 108 of the Housing and Community Development Act of 1974, federal loans are available for the purposed of funding property rehabilitation for economic development activities that will create new and stable jobs for low and moderate -income residents; and WHEREAS, Yakima Hotel, LLC and JEM Development, LLC, represented by Joseph R. Morrier, Sr., have requested a $3,560,000 Section 108 loan to partially finance construction of a Hilton Garden Inn Hotel, and WHEREAS, the National Development Council has determined that the borrower and the proposed project can fulfill the requirements of the City's Economic Development Loan Fund; and WHEREAS, the project will leverage $5,966,000 in private financing and equity contributions; and WHEREAS, the project will create 71 new jobs m Yakima's Renewal Community; and WHEREAS, economic development is a priority for the City of Yakima, and the City intends to approach economic development on an inclusive, comprehensive basis which mvolves public, private and community-based efforts to achieve new investment and redevelopment m the City; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager is hereby authorized and directed to submit an application for $3,560,000 from the Section 108 Loan Guarantee Program of the United States Department of Housing and Urban Development (HUD) for Yakima Hotel, LLC to construct a Hilton Garden Inn hotel. The City Manager is hereby designated as the official representative of the City to act in connection with that funding application and is authorized to take such additional actions as may be necessary and prudent to complete the application process, including the execution of all related documents ADOPTED BY THE CITY COUNCIL this 16`h day of November, 2004 ATTEST: Paul P. George, Mayor >21 /'' j-.) City Clerk BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT /,, Item No. �✓ For Meeting Of: November 16, 2004 ITEM TITLE: Public Hearing and consideration of a resolution authorizing the City Manager to execute and submit a Section 108 loan application and all related documents to the United States Department of Housing and Urban Development in the amount of $3,560,000 for Yakima Hotel, LLC. SUBMITTED BY: Michael Morales, Grants Officer CONTACT: Michael Morales, 575-3533 SUMMARY EXPLANATION: Yakima Hotel, LLC, represented by Joseph R. Morrier, Sr., has applied for $3,560,000 in federal Section 108 loan funds to partially finance the construction of a Hilton Garden Inn Hotel at the site of the fonner Mervyn's department store in downtown Yakima. A Council Study Session on the project was held October 12, 2004 to provide analysis and discussion of the project with the developer, the City's consultant, and staff prior to public hearing and council action. Written public comments have been submitted to the Council and staff, and today's public hearing is the final opportunity for verbal comment in support of or opposition to the project prior to council action. Upon council approval of the request, the attached conditional approval letter would be transmitted from the City to Mr. Morrier. Provided that the applicant satisfies all of the conditions outlined in the letter, the City Manager would be authorized to execute all closing documents upon receipt from HUD. Matrix Bank's Conditional Loan Approval letter will be signed and submitted to the City on Monday, November 15. Staff will distribute the letter to council members as soon as it is received. Resolution _X Ordinance Contract Other: Application for loan funds Funding Source: U.S. Department of Housing and Urban Development City llanager Approval for Submittal: STAFF RECOMMENDATION: Staff recommends approval of the resolution. BOARD RECOMMENDATION: Council Economic Development Committee recommends approval. COUNCIL ACTION: Resolution to authorize submittal of the loan was adopted by 4 to 3 vote; McClure, Place & Whitman voting nay. Resolution No. R-2004-173 1 MEMORANDUM November 15, 2004 TO: Honorable Mayor Paul George Members of City Council FR: 1 ick Zais, City Manager ook, Director of Community & Economic Development iehael Morales, Economic & Community Affairs Specialist RE: JEM Development Application for Department of Housing & Urban Development Section 108 Loan Funds — Yakima Hilton Garden Inn Enclosed are documents related to tomorrow's study session and action item for the Hilton Garden Inn Section 108 loan. 1. Updated draft Conditional Approval letter from City of Yakima to Mr. Morrier for Section 108 financing. The letter was amended to include a deadline for closing of April 15, 2005; and to clarify Mr. Morrier's responsibility to pay for the costs of an environmental review and monitoring for Davis Bacon Act compliance. 2. Matrix Bank's Conditional Loan Approval letter signed by Mr. Morrier. Mrs. Morrier will be available to sign the letter on Wednesday, November 17. 3. Print out of e-mail from Dave Painter of Matrix Bank, who will be available to answer questions at tomorrow's meeting. The e-mail explains the changes to the personal guaranty that Mr. Morrier has negotiated with the bank. 4. Letter from Don Boyd explaining the default remedy process for the city as it relates to the personal guaranty. Mr. Joseph R. Morrier, Sr. JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn, Yakima, Washington 402 East Yakima Avenue, Suite 1400 Yakima, WA 98901 Re: Conditional Approval Letter Dear Mr. Morrier: The City of Yakima will proceed with a formal application to the United States Department of Housing and Urban Development for a Section 108 loan guarantee in the amount of $3,560,000 subject to the following conditions. If approved the proceeds of the Section 108 loan will be lent to an investment fund for investing in a New Markets Tax Credit fund ("Fund"). That fund will lend the Section 108 proceeds to the Borrower. Borrower: JEM Properties, LLC and Monier Hotel, LLC (collectively, "Borrower") Guarantors: Joseph R. Morrier, Sr., Elizabeth L. Morrier Business Location: 401 East Yakima Avenue, Yakima, WA Purpose: The purpose of the Loan is to provide a portion of the interim and permanent financing for the proposed Hilton Garden Inn in Yakima, Washington. Estimated Sources/Uses of Funds: USES Land/Construction/Contingency FFE/Property Management Systems Interest Reserves/Loan Fee Closing Costs/Franchise Fees/WC TOTAL AMOUNT $ 8,001,000 SOURCES Matrix Bancorp Conventional 1,020,000 HUD Section 108 New Markets Tax Credit Equity Owner Equity 208,000 297,000 $ 9,526,000 TOTAL AMOUNT $ 3,000,000 3,560,000 750,000 2,216,000 $ 9,526,000 Equity: The Borrower will contribute $2,216,000 of the total project costs in equity. Of that amount, $1,500,000 is allocated toward the contribution of the existing land and building, $244,000 is allocated toward payment of the construction soft costs, $22,000 is allocated toward payment of the cost of the JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 2 of 5 appraisal, Phase. I Report, and survey, $20,000 is allocated toward payment of legal fees, $24,000 is allocated toward payment of estirnated closing costs, $76,000 is allocated toward payment of the loan origination fee, S20,000 is allocated toward payment of the pre -opening expenses associated with the hotel, and $60,000 is allocated toward payment of the franchise fee. Proof of the equity injection and the source of these funds must be provided prior to the closing of the Section 108 Loan. Closing costs related to the Interim Loan, the Conventional Loan, and the Section 108 Loan will be paid at or prior to closing. Any changes to this allocation of the equity injection will require approval by the City of Yakima. Proof of equity must be providedfive days prior to the estimated closing date. Proof of equity must be supported by, but not limited to, cancelled checks (or a copy of the check and supporting bank statements reflecting the cancelled check), paid invoices, a cashier's check for funds not yet spent, or other means as determined only by Lender. Fees: A City of Yakima loan fee of $35,600 is due at. closing. In addition to the loan fee the Borrower shall be responsible for all legal fees, closing costs and trustee fees associated with preparing loan documents, closing the Section 108 Loan (including environmentalreview) and administering the loan (including monitoring for Davis Bacon compliance). In the event that the Section 108 Loan does not close, all costs and fees, to the extent they have been incurred, will be the responsibility of the Borrower. SECTION 108 LOAN Amount: The amount of the Loan will be $3,560,000. Term: The Section 108 Loan will be due on July 15, 2024. The Loan will be amortized over a twenty (18) Near term after expiration of the first seven (7) years of interest -only payments. Payment terms are interest -only for the first seven years, then principal and interest payments due monthly based upon a twenty (18) year amortization period. Interest Rate (Loan): The interest rate on the Loan will fluctuate based on the City of Yakima's cost of funds under the Section 108 Loan Program. The City of Yakima may fix the interest rate on the Loan once a year. The Borrower will be responsible for the costs of fixing the rate if the City chooses to do so. Payment: The first payment will be due on the fifteenth day of the month the Loan is closed and on the same day each month thereafter until paid in full Prepayment Penalty: Once the Loan is converted to a fixed rate it is subject to a ten (10) year lockout in which no prepayment is allowed. (Gate Fee: If a payment on the Loan is more than 10 days late, City may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. Amount: The .amount of the HUD Loan will be $3,560,000. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 3 of 5 LOAN CONDITIONS: The Loans are subject to and contingent upon the following: • The Fund being able to secure a Second Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 401 East Yakima Avenue, Yakima, WA, subject only to the First Deed of Trust in favor of Lender in the amount of $3,000,000. • Receipt, review, and approval, by the Fund and City of Yakima at their sole discretion, of the real estate appraisal ordered by Matrix Bancorp, reflecting a loan to value of not more than seventy (70%) percent by a Lender approved appraiser for the real property and FF&E. • Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to the Fund and the City in their sole discretion, insuring the Fund as to its second priority lien on the subject property at 401 East Yakima Avenue, Yakima, WA, subject only to Matrix Bancorp's first lien position. • The Fund being able to secure a UCC -1 and Security Agreement perfecting a second lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter for the proposed Hilton Garden Inn. • Review and approval by the Fund and City of Yakima of a satisfactory Phase I Environmental Site Assessment for the property located at 401 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R. Morrier, Sr. • Personal guaranty of Elizabeth L. Monier. • Evidence that Monier Hotel, LLC has unencumbered site control of the subject property at 401 East Yakima Avenue. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 4 of 5 Insurance: • Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. If the proposed hotel is not managed by Hilton Hotels, the management company must have extensive experience in hotel management and be acceptable to the Fund, the City of Yakima and Matrix Bancorp. The management agreement must have a termination provision allowing either Lender to terminate the contract if the loan were in default. • Review and Approval by the Fund and the City of Yakirna of the final construction contract. The contract shall require the contractor to obtained a payment and performance bond in the amount of the construction contract. • The Borrower obtaining and. providing proof of Workers' Compensation. Insurance in an amount meeting state law requirements and with an insurance company satisfactory to HUD Loan Lender. • The Fund receiving a copy, satisfactory in its own discretion, of the fire and extended coverage insurance on the business real property in the amount of full replacement cost with the Fund named as second mortgagee for the property at 401 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage in the amount of full replacement cost, or for the maximum insurable value if full replacement cost caruzot be obtained, for the personal property located owned by JEM Properties, LLC and/or Monier Hotel, LLC dba Hilton Garden Inn. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • The Borrower obtaining Flood insurance covering the Loan collateral if required by the Fundi. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 5 of 5 Financials: Receipt, review and approval of financial statements and all supporting schedules, as requested, are to be within 120 days of closing the HUD Loan. Other Conditions: This loan is subject to evidence of fmal commitment and acceptance by the Borrower and approval by the City of Yakima of a conventional loan from Matrix Bancorp to the borrower in the amount of $3,000,000. This loan is subject to any and all other conditions required by the Fund and City of Yakima and their counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the Section 108 Loan. GENERAL NOTES: Conditional Approval: Please be aware that the final terms and conditions of the proposed financing are subject to approval by the City of Yakima and the US Department of HUD. Also, all legal and financial documents deemed necessary by the City in order to close the Loan must be provided and executed to the satisfaction of any or all of the parties listed above no later than April 15, 2005. No verbal statements to Borrower concerning this application by any employee or agent of Lender shall have binding effect. Morales, Michael From: Dave Painter [jdpainter.matrix@verizon.net] Sent: Tuesday, November 09, 2004 3:39 PM To: John Finke Subject: Morrier - Hilton Garden Inn, Yakima John, I have received a signed copy of the Commitment Letter dated October 1, 2004. Since that time, Matrix has accepted a request from Joe Morrier to vest title of the real estate in an LLC which would be completely owned and controlled by Joe and his wife. The children would hold no interest in the real estate nor the operating company and thereby would not be required to guaranty the loan. A revised commitment letter will not be issued until the formation of the vesting entity and final action by our board after approval by the city, and equity participant(s) verified. Regards, Dave Painter 9 MAS C BANCORP October 1, 2004 Mr. Joseph R. Morrier, Sr. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn, Yakima, Washington 402 East Yakima Avenue, Suite 1400 Yakima, WA 98901 Re: Conditional Approval Letter Dear Mr. Morrier: We are pleased to inform you that the Loan Committee of Matrix Capital Bank ("Lender") has granted Conditional Approval of a financing package that will meet your company's needs. The package is presented to you in three separate loans: (1) Lender's conventional permanent loan in the amount of $3,000,000 ("Loan"), and (2) $3,560,000 HUD Section 108 loan ("HUD Loan"), offered through the City of Yakima, WA ("HUD Loan Lender"), and (3) a $3,000,000 interim construction loan ("Interim Loan") offered through Lender, which will convert to the $3,000,000 permanent loan mentioned above upon completion of construction. Borrower: JEM Properties, LLC and Morrier Hotel, LLC (collectively, "Borrower") Guarantors: Joseph R. Morrier, Sr., Elizabeth L. Morrier, Joseph R. Morrier, Jr., Michael D. Morrier, and Elizabeth A McGree. Business Location: 339 East Yakima Avenue, Yakima, WA Purpose: The purpose of the Loan is to provide a portion of the interim and permanent financing for the proposed Hilton Garden Inn in Yakima, Washington. Estimated Sources/Uses of Funds: USES AMOUNT SOURCES AMOUNT Matrix Land/Construction/Contingency $ 8,001,000 Conventional $ 3,000,000 FFE/Property Management Systems 1,020,000 HUD Section 108 3,560,000 Interest Reserves/Loan Fee 208,000 Equity Injection 2,966,000 Closing Costs/Franchise Fees/WC 297,000 JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 2of14 TOTAL $ 9,526,000 TOTAL $ 9,526,000 Equity: The Borrower will contribute $2,966,000 of the total project costs in equity. Of that amount, $2,500,000 is allocated toward the contribution of the existing land and building, $244,000 is allocated toward payment of the construction soft costs, $22,000 is allocated toward payment of the cost of the appraisal, Phase I Report, and survey, $20,000 is allocated toward payment of legal fees, $24,000 is allocated toward payment of estimated closing costs, $76,000 is allocated toward payment of the loan origination fee, $20,000 is allocated toward payment of the pre -opening expenses associated with the hotel, and $60,000 is allocated toward payment of the franchise fee. Proof of the equity injection and the source of these funds must be provided prior to the closing of the Interim Loan. Closmg costs related to the Interim Loan, the :Loan, and the HUD Loan will be paid at or prior to closing of the Interim Loan. Any changes to this allocation of the equity injection will require Lender approval and could delay closing of the Interim Loan. Proof of equity must be provided five days prior to estimated closb7g date. Proof of equity must be supported by, but not limited to, cancelled checks (or a copy of the check and supporting bank statements reflecting the cancelled check), paid invoices, a cashier's check for funds not yet spent, or other means as determined only by Lender. Fees: Fees and closing costs for all the above-mentioned loans approximating $161,000 are part of the total project. That consists of estimated closing costs of $25,000, a loan origination fee of $76,000, and the franchise fee of $60,000. This is only an estimate of fees and may not be inclusive of all fees charged for the Interim Loan and the Loan. Portions of these fees are due at the time this Conditional Approval letter is signed. The :remaining closing costs will be due at closing and are the responsibility of the Borrowers. If the Interim Loan and/or the Loan are prepared for closing and does not close, a portion of these fees may still be due and payable to Lender or there may be amounts that have not been spent and which would be refunded. In the event that the Loan does not close, all costs and fees, to the extent they have been incurred, will be the responsibility of the Borrower. LENDER (MATRIX) CONVENTIONAL LOAN Amount: The amount of the Loan will be $3,000,000. Term: The maturity of the Loan will be twenty-five (25) years from the closing of the Loan. The Loan will be amortized over a twenty-five (25) year tern after completion of 12 months of interest -only payments. Payment terms are interest -only for the first 12 months and then. principal and interest payments due monthly based upon a twenty-five (25) year amortization period. Interest Rate; (Loan): The interest rate on the Loan will fluctuate based on the "Prime Rate", as published in the Wall Street Journal, plus 1.25%. The interest rate at the current prime rate of 4.75% would be 6.00% per year. The initial prime rate is set five (5) days prior to closing of the Loan. Rate Adjustment Period: Lender will adjust the interest rate for the first time on the first day of the calendar quarter following the initial disbursement of the Loan and on the first day of each calendar quarter thereafter. All dates of adjustment become effective on the first day of JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 3 of 14 the calendar quarter, based on the prime rate in effect for the first business day of the adjustment period. The change in interest rate is effective on that day whether or not Lender gives Borrower notice of the change. Payment: The payments are estimated at $19,472 per month during the amortized period. The principal and interest payments on the Loan will be calculated based upon the prevailing Prime Rate + 1.25% at the time the Loan's amortization period begins (12 months after closing of the Loan). The payment may go up or down, no more frequently than quarterly, based on the remaining principal balance and the interest rate, as needed to amortize principal over the remaining term of the Loan. The first payment will be due on the fifth day of the month after the Loan is closed and on the same day each month thereafter until paid in full. Lender will apply each installment payment first to pay interest accrued to the day Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal. Prepayment Penalty: The Loan is subject to a five (5) year flat prepayment penalty of five percent. (5%) Late Fee: If a payment on the Loan is more than 10 days late, Lender may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. HUD SECTION 108 LOAN NOTE: The following information regarding the HUD Loan is provided for informational purposes only. The terms and conditions associated with the HUD Loan will be disclosed at the time the HUD Loan is approved by the appropriate approval authority for HUD and funding is committed. Amount: The amount of the HUD Loan will be $3,560,000. Term: The maturity of the HUD Loan will be twenty-five (25) years from the closing of the HUD Loan. The HUD Loan will be amortized over a twenty-five (25) year term. Interest Rate (Loan): The interest rate on the Loan will be disclosed upon approval by the appropriate approval authority for HUD. For purposes of analysis, a fixed rate of 5.50% has been assumed. Rate Adjustment Period: The interest rate for the HUD Loan is estimated to be a fixed rate for the full term of the HUD Loan. The fixed rate will be determined when the funds for the HUD Loan have been committed. Payment: The principal and interest payment on the Loan is estimated to be $16,317 per month on an interest -only basis. The payment terms on the HUD Loan are anticipated to be interest -only for at least the first two years, after which the HUD Loan will begin monthly principal and interest payments based upon the amortization period set for the HUD Loan JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 4 of 14 (anticipated at this time to be twenty-five (25) years). The payment may go up or down based on the remaining principal balance and the interest rate, as needed to amortize principal over the remaining term of the HUD Loan. The first payment will be due on the fifth day of the month after interest -only period has matured and will continue thereafter on the same day each month thereafter until paid in full. The HUD Loan Lender will apply each installment payment first to pay interest accrued to the day HUD Loan Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal. Prepayment: Penalty: To be determined by the HUE) Loan ]Lender. Late Fee: To be determined by the HUD Loan Lender. LOAN CONDITIONS: The Loans are subject to and contingent upon the following: Collateral: LENDER CONVENTIONAL LOAN • Lender being able to secure a First Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 339 East Yakima Avenue, Yakima, WA. • Receipt, review, and approval, by Lender, at its sole discretion, of the real estate appraisal reflecting a value of at least $9,000,000 (+/-5%) by a Lender -approved appraiser for the real property and FF&E located at 339 East Yakima Avenue, Yakima, WA. • Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to Lender its sole discretion, insuring Lender as to its first priority lien on the subject property at 339 East Yakima Avenue, Yakima, WA. • Lender being able to secure a 1JCC-1 and Security Agreement perfecting a 1st lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter acquired for the business assets of the Hilton Garden Inn. • Review and approval by Lender of a satisfactory Phase i[ Environmental Site Assessment for the property located at 339 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R.. Monier, Sr. • Personal guaranty of Elizabeth L. Morrier. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 5 of 14 Insurance: • Personal guaranty of Joseph R. Morrier, Jr. • Personal guaranty of Michael D. Morrier. • Personal guaranty of Elizabeth A. McGree. • Personal guaranties of the spouses, if any, of Joseph R. Morrier, Jr., Michael D. Morrier, and Elizabeth A. McGree if required by legal counsel since Washington is a community property state. • Assignment of the leases and rents between JEM Properties, LLC, as Lessor, and Morrier Hotel, LLC, as Lessee. The lease must be for at least the term of the loan, including options exercisable by Morrier Hotel, LLC. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. • Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. The management agreement must have a termination provision allowing Lender to terminate the contract if the loan were in default. • The Borrower obtaining and providing proof of Workers' Compensation Insurance in an amount meeting state law requirements and with an insurance company satisfactory to Lender. • Lender receiving a copy, satisfactory in its own discretion, of the fire and extended coverage on the business real property is required in the amount of full replacement cost with Lender named as first mortgagee for the property at 339 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage is required in the amount of full replacement cost, or for the maximum insurable amount if full replacement value cannot be obtained, for the personal property located at 339 East Yakima Avenue, Yakima, WA. JEM Properties, LLC and M Conditional Approval Letter Page 6 of 14 Financials: Documentation: osier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn • Lender receiving proof of Dram Shop/Host liquor liability insurance in an amount and from an insurance company acceptable to Lender. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • Lender will advise you as to whether the business property or personal residences are in a Flood Plain. If so, then Flood insurance covering the Loan collateral will be required prior to closing of the Loan. • Receipt, review and approval of financial statements and all supporting schedules, as requested, are to be within 120 days of closing the Loan. The approval for all loans addressed in this Conditional approval Letter is contingent upon receipt and review of the 2003 tax returns :for all entities involved as well as the fiscal year end statements for those entities having a September 30 fiscal year end. • Lender being supplied with proof of purchase of the required liquor license prior to closing. • Lender will require that all payments on the Loan to be made through Automatic Funds Transfer (ACH debit). • • • Franchise approval from the Franchisor. Copy of the lease between JEM Properties, JJC and Morrier Hotel, LLC for the real property to e occupied by the proposed Hilton Garden Inn. Lease must be for at least the term of the Loan, including options exercisable by Morrier Hotel, LLC. Landlord's consent and/or landlord's consent to improvements. Copy of the parking agreement providing parking rights to JEM Properties, LLC and/or Morrier Hotel, LLC for the parking to meet the requirements set forth by the City of Yakima. • If applicable, copies of the A/R and A/P listings and agings for all entities. The A/R and A/P listings and agings must be of even date with the most recent financial statements provided to Lender. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 7of14 Other Conditions: • Copy of the HUD commitment to fund $3,560,000 of the project cost at the origination of construction. • Review and approval of the $2,966,000 equity injection by the principals to the proposed transaction. • Copies of the restructured notes extended by Key Bank to Yakima Mall Shopping Center Corporation showing the actual terms of the debt restructuring are substantially the same as provided verbally by the Key Bank Loan Office handling the transaction. The Loan is subject to any and all other conditions required by HUD, HUD Loan Lender, and Lender and its counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the Loan. Special Condition: The Loan is subject to Lender obtaining tax credits under the New Markets Tax Credits Program. If the tax credits are not obtainable by Lender, this Conditional Approval Letter is null and void. HUD SECTION 108 LOAN NOTE: This information is provided for informational purposes only. Lender assumes that the HUD Loan Lender will require a second lien position in the real property and business assets of JEM Properties, LLC and Morrier Hotel, LLC, which may not be the case. The HUD Loan Lender will advise you of the conditions of approval for the HUD Loan in a separate Conditional Approval Letter upon approval by them. • HUD Loan Lender being able to secure a Second Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 339 East Yakima Avenue, Yakima, WA, subject only to the First Deed of Trust in favor of Lender in the amount of $3,000,000. • Receipt, review, and approval, by HUD Loan Lender a at its sole discretion, of the real estate appraisal ordered by Lender, reflecting a value of at least $9,000,000 by a Lender -approved appraiser for the real property and FF&E located at 339 East Yakima Avenue, Yakima, WA. • Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to HUD Loan Lender in its sole discretion, insuring HUD Loan Lender as to its JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 8 of 14 Insurance: second priority lien on the subject property at 339 East Yakima Avenue, Yakima, WA, subject only to Lender's first lien position. • HUD Loan Lender being able to secure a UCC -1 and Security Agreement perfecting a second lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter for the proposed Hilton Garden Inn. • Review and approval by HUD Loan Lender of a satisfactory Phase I Environmental Site Assessment for the property located at 339 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R. Morrier, Sr. • Personal guaranty of Elizabeth L. Morrier. • Personal guaranty of Joseph R. Monier, Jr. • Personal guaranty of Michael D. Monier. • Personal guaranty of Elizabeth. A. McGree. • Personal guaranties of the spouses, if any, of Joseph R. Morrier, Jr., Michael D. Morrier, and Elizabeth A. McGree if required by legal counsel since Washington is a community property state. • Assignment of the leases and rents between JEM Properties, LLC, as Lessor, and Morrier Hotel, LLC, as Lessee. The lease must be for at least the term of the loan, including options exercisable by Monier Hotel, LLC. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. • Assignment of the management contract between Monier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. The management agreement must have a termination provision allowing Lender to terminate the contract if the loan were in default. • The Borrower obtaining and providing proof of Workers' Compensation Insurance in an amount meeting state law JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 9 of 14 Financials: Documentation: Other Conditions: requirements and with an insurance company satisfactory to HUD Loan Lender. • HUD Loan Lender receiving a copy, satisfactory in its own discretion, of the fire and extended coverage on the business real property is required in the amount of full replacement cost with HUD Loan Lender named as second mortgagee for the property at 339 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage is required in the amount of full replacement cost, or for the maximum insurable value if full replacement cost cannot be obtained, for the personal property located owned by TEM Properties, LLC and/or Morrier Hotel, LLC dba Hilton Garden Inn. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • HUD Loan Lender will advise you as to whether the business property or personal residences are in a Flood Plain. If so, then Flood insurance covering the Loan collateral will be required prior to closing of the HUD Loan. • Receipt, review and approval of financial statements and all supporting schedules, as requested, are to be within 120 days of closing the HUD Loan. The approval for all loans addressed in this Conditional Approval Letter is contingent upon receipt and review of the 2003 tax returns for all entities involved, as well as the fiscal year end statements for those entities having a September 30 fiscal year end. • As determined by HUD Loan Lender. This loan is subject to any and all other conditions required by the HUD, HUD Loan Lender, Lender and its counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the HUD Loan. (3) INTERIM LOAN: Lender proposes to provide to JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers ("Borrower") an Interim Loan to fund the project through Certificate of Occupancy. Terms are provided below: Loan Amount: $3,000,000 broken down as follows: JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 10 of 14 Interest Rate: Payments: Term: Prepayment and Exit Fee: Collateral: Land and existing building Construction, including contingency FF&:E Construction Softcosts Interest Reserves Appraisal, Environmental, Survey Origination/Monitoring/Closing Costs Bonding Estimate Property Management Systems Working Capital, Franchise Fee, Legal Total Less: HUD Loan &Equity Injection * Total $ 1,500,000 6,172,000 945,000 244,000 132,000 22,000 126,000 60,000 75,000 250,000 $9,526,000 6,526,000 $3,000,000 *See "Equity Injection" section page 1 for additional information regarding equity injection. Prime plus 1.25%, currently 6.00%, variable rate adjustable daily. Interest will be computed on the basis of a 360 -day year for the actual number of days elapsed. Interest only payments due monthly during construction through an interest reserve account. 12 months. The Borrower may prepay the Interim Loan at anytime subject to an exit fee of $1.50,000 (5% of the loan amount) Should the Borrower accept the permanent financing offered through Lender as substantially contemplated in this letter, this exit fee will be waived.. The loan is subject to the Lender securing its loan with a First Deed of Trust on Borrower's interest in the land and buildings to be constructed at 339 East Yakima. Avenue, Yakima, WA. Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to Lender its sole discretion, insuring Lender as to its first priority lien on the subject property at 339 East Yakima Avenue, Yakima, WA. Lender being able to secure a UCC -1 and Security Agreement perfecting a 1st lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter acquired for the business assets of the Hilton Garden Inn. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 11 of 14 UCC -1 and Security Agreement perfecting a 1s` lien position in all collateral - fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, materials, work in progress, and instruments now owned and hereafter acquired. Receipt, review, and approval, by Lender, at its sole discretion, of the real estate appraisal reflecting a value of at least $9,000,000 (+/-5%) by a Lender -approved appraiser for the real property and FF&E located at 339 East Yakima Avenue, Yakima, WA. Review and approval by Lender of a satisfactory Phase I Environmental Site Assessment for the property located at 339 East Yakima Avenue, Yakima, WA. Personal guaranty of Joseph R. Morrier, Sr. Personal guaranty of Elizabeth L. Morrier. Personal guaranty of Joseph R. Morrier, Jr. Personal guaranty of Michael D. Morrier. Personal guaranty of Elizabeth A. McGree. Personal guaranties of the spouses, if any, of Joseph R. Morrier, Jr., Michael D. Morrier, and Elizabeth A. McGree if required by legal counsel since Washington is a community property state. Assignment of the leases and rents between JEM Properties, LLC, as Lessor, and Morrier Hotel, LLC, as Lessee. The lease must be for at least the term of the loan, including options exercisable by Morrier Hotel, LLC. Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. The management agreement must have a termination provision allowing Lender to terminate the contract if the loan were in default. Monitoring Fee: $25,000 (estimated) Construction Bonding: $60,000 (estimated) Origination Fee: $76,000 JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 12 of 14 Contractor Information: 1) AIA Qualification Statement 2) Final detail cost information for the construction on the subject property. 3) Contractor financial statements 4) Other information as required ori attached closing needs list Survey: A copy of the property Survey for 339 East Yakima Avenue, Yakima, WA. The final terms of the Interim Loan are subject to approval by Lender and HUD. The Interim Loan must be closed in compliance with all requirements set forth by HUD. All legal and financial documents deemed necessary by Lender in order to close the Interim Loan must be provided and executed to the satisfaction of any or all of the parties listed above prior to closing of the Interim Loan. GENERAL NOTES: Required Documents: As mentioned above, Lender's Loan Committee has granted its Conditional Approval of the Interim Loan and the Loan.. The final approval of the Loan Committee and Lender's commitment to extend credit and advance funds under the Interim Loan and the Loan will be contingent upon, among other things, Lender's review and approval of each and every one of the items detailed herein, none of which may be waived except in writing from an authorized representative of Lender, specifically referring to this letter and the particular item being waived. This letter is not intended to set forth all of the material terms and conditions :for the Interim Loan and the Loan, all of which will be set forth in formal loan documents to be executed and delivered by Borrower, Lender, HUD (if necessary), third party guarantors and others, as applicable. In addition, if (and only if) the Interim Loan and the Loan are approved by Lender, the funding of the Interim Loan and the Loan will be contingent upon Lender's receipt (some if not all of which Lender will require) of the following: (a) evidence of no environmental hazards on the property through a Phase 1 or other means acceptable to Lender, and (b) title insurance with endorsements required by Lender. All of the aforementioned items shall be provided to Lender in a reasonably prompt manner. Lender will have the right to terminate this Conditional Approval in the event that any of the above items are unsatisfactory to Lender. Conditional Approval: Please be aware that the final terms and conditions of the proposed financing are subject to approval by the Lender and HUD. Also, all legal and financial documents deemed necessary by Lender in order to close the Interim Loan and the Loan must be provided and executed to the satisfaction of any or all of the parties listed above. No verbal statements to Borrower concerning this application by any employee or agent of Lender shall have binding effect. Lender's Conditional Approval is only applicable if the HUD Section 108 Loan materializes and the Interim Loan and the Loan quality for the New Markets Tax Credits. In the absence off either of the above-mentioned conditions materializing, Lender's Conditional Approval of the Loan is null and void. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 13 of 14 The Borrower provided the information used in granting this Conditional Approval in majority. If such information is found to be a misrepresentation, intentional or unintentional, this Conditional Approval shall become null and void. Any legal description, encumbrances and ownership are subject to verification and should not be relied upon as accurate in this Conditional Approval. Material Adverse Change: If at any time there is a material adverse change in the financial or any other condition, or the business prospects, of Borrower or any Guarantor, Lender will have no obligation to advance any funds whatsoever. To indicate your understanding and agreement with the terms and conditions contained in this Conditional Approval, please return an executed copy of this Conditional Approval to Lender, along with your check for $23,000 for payment of the $1,000 Lender Loan Packaging Fee, which is earned upon issuance of this Conditional Approval Letter, and a $22,000 deposit toward payment of the estimated costs of an appraisal, environmental report, and survey for the Interim Loan and the Loan. Upon execution of this Conditional Approval Letter and by signing below, Borrower acknowledges and agrees that this Conditional Approval Letter shall also constitute an authenticated record pursuant to the Uniform Commercial Code authorizing Lender to file a UCC -1 financing statement covering the following collateral: furniture, fixtures, equipment, machinery, inventory, accounts, general intangibles, chattel paper, documents, materials, work in progress, and instruments now owned and hereafter acquired. Lender further agrees to terminate such financing statement in the event the Loan is not closed and funded This Conditional Approval is valid until October 15, 2004. If this acknowledged letter is not received by October 15, 2004 Matrix will have no further obligation or responsibility in connection with the Loans, and the Conditional Approval will be considered null and void. Furthermore, if the Interim Loan does not close by January 15, 2005, this Conditional Approval Letter will be considered null and void, unless extended in writing by Lender. If you have any questions, please contact us. We look forward to working with you further and thank you for the opportunity to be of service to your business. Respectfully, JOR: Craig Kaffenberger — SBA Chief Operations Officer Matrix Capital Bank THIS COMMITMENT SUPERCEDES AND VOIDS ANY PRIOR LOAN APPROVALS, COMMITMENTS OR PROPOSALS. JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 14 of 14 ACKNOWLEDGED AND AGREED BY: JEM Properties, LLC Managing Member LLC Date (c/ der Managing Metnbe Date Guarantors Date Elizabeth L. Monier Date Joseph R. Mother, Jr. Date Michael D. Morrier Date Elizabeth A. McGree Date DO A DRESS: 2''° STREET .4A, WASHINGTON ,o901 TELEPHONE: 509-8346611 FACSIMILE: 509.834-6610 WEB SITE: www.cbblawfirm.com 1111 Carlson Boyd & Bailey PLLC Attorneys at Law November 8, 2004 Mr. Bill Cook, Director City of Yakima Dept. of Economic and Community Development 129 N. Second Street Yakima, WA 98901 Re: City of Yakima HUD 108 Loan with Morrier Hotel, L.L.C. Dear Bill: DONALD A. BOYD E•Mail: dbovd@cbblawfirm corn You asked that I summarize the collection remedies against the personal guaranty of Joe Morrier that will be available to the City of Yakima in the event the Morrier Hotel, L.L.C. defaults on its payments and/or other obligations under the proposed Section 108 loan. I attach a copy of the Guaranty form that was provided to you earlier as a form document. Upon a default by the borrower, the City should notify Joe Morrier and his wife of the default, and can, if it chooses, make an immediate demand on Joe and Mrs. Morrier to pay on the guaranty. If an installment payment is not made, then during the 10 -day cure period the City could only demand that the installment payment be made. If after the 10 -day cure period, and after notice to the borrower and to the Morriers of acceleration of the entire debt, then the entire balance would be due. If the Morriers do not voluntarily write a check to the City to cover the debt owed, then the City would have to file a law suit against the Morriers. The suit could be joined with a suit against the borrower so that all claims are included in one action. However, the City could decide to start an action against the Morriers only, and leave the claim against the borrower to be handled separately. Because of a statutory prohibition against having multiple actions running to collect on a debt, it would be best to use this action only if the City uses the Mr. Bill Cook November 8, 2004 Page 2 of 2 judicial foreclosure action against the Hotel, and joins this claim in the same suit. The relief requested from the Court would be to have the Morriers found to be personally liable for the full debt, and allow the City to pursue their other assets for payment of the debt. As with any lawsuit, the Morriers would both have to be personally served with the Summons and Complaint. They would then have 20 days within which to file an answer to the Complaint. Then, the City could file for summary judgment if there are no material issues of fact as to why the Morriers are not liable on the debt. The summary judgment hearing would occur within about 60 days after the motion for summary judgment is filed. If the court grants the City's motion, then a Judgment a.gainst the Morriers will be signed by the Judge. The Judgment immediately becomes a lien against their non-residential real property, and upon recording the Judgment with the Yakima County Auditor it becomes a lien upon their residence. The City can then start going after the Morrier's property. This would include having the Sheriff conduct a sale of the real property. For bank accounts, a garnishment proceeding can be commenced. For other forms of personal property, an attachment proceeding can be commenced. With regard to all of the Morriers assets, it will be important to have the Morriers complete a personal financial statement that will be attached to the guaranty and that will form. the basis of what the City understands to be the assets that support the guaranty. Please let me know if you need any additional information. Ve truly urs on oyd Encl. UNCONDITIONAL GUARANTY PARTIES: City: The City of Yakima, a Washington municipal corporation Borrower: , a Guarantor: Joseph _ . Morrier and Morrier, husband and wife RECITALS: Concurrent with this Guaranty, City and Borrower have entered into a Loan Agreement and Promissory Note to borrow Three Million Five Hundred and Sixty Thousand Dollars ($3,560,000.00). Borrower is using the funds to pay construction costs, purchase equipment and start-up supplies, inventory and other goods, for start-up working capital to construct, equip and commence operations of a hotel business to be located at Yakima Avenue, Yakima, Yakima County, Washington, pay the closing costs for this advance under the loan agreement. The undersigned has agreed to enter into this Unconditional Guaranty of all Borrower's obligations thereunder. The Personal Financial Statement appended hereto as Attachment "A" supplements this Guaranty and is provided to the City as an integral part of this Guaranty. Guarantor acknowledges that the City has specifically relied upon the Personal Financial Statement in agreeing to provide the loan to Borrower and Guarantor represents and warrants under penalty of perjury that the Personal Financial Statement contains full and complete information regarding the Guarantors financial status as of the date hereofd. AGREEMENT: As an inducement and in consideration of any and all contemporaneous or future financial accommodations by City to Borrower, the undersigned Guarantor, unconditionally guarantees the prompt payment when due and at all times thereafter of any and all existing, contemporaneously incurred and future indebtedness and liability of every kind (including all extensions, renewals and modifications thereof), absolute or contingent, however created or evidenced, owing from Borrower to City plus Guaranty Page 1 such interest as may accrue thereon. Credit may be granted by City to Borrower from time to time w:i.thout further authorization of or notice to Guarantor. Guarantor agrees to pay City all expenses of every kind including, without limitation, any and all fees and expenses incurred by it on account of the services of any attorney employed or retained by it, including in-house counsel, in protecting or defending City's interest and in attempting to collect all or any part of such indebtedness and in enforcing this guaranty, with or without suit. Every immediate and successive assignee of any part of such indebtedness guaranteed hereby shall have the right to enforce all agreements and obligations contained in this guaranty for its own benefit as fully as if named herein, but City shall nevertheless have the right to enforce this guaranty for its own benefit as to so much of the liability guaranteed as has not been assigned. Guarantor waives notice of (a) the acceptance of this guaranty; (b) any and all indebtedness of any kind covered by the guaranty; and (c) any and all demands, nonpayments or other defaults in respect of such indebtedness. If more than one person or legal entity signs this Unconditional Guaranty, all references to "Guarantor" herein shall bind each of the undersigned jointly and severally. The liability of Guarantor under this guaranty shall be continuing and shall remain in full force and effect as long as Borrower is or may be indebted to City on account of any indebtedness covered by the guaranty. It shall not be affected in any way by (and the City is hereby expressly authorized to make without notice to anyone) any sale, pledge, surrender, compromise, release, acceleration, discharge, renewal, extension, substitution, exchange or modification of any kind whatsoever of all or any part of the indebtedness covered by the guaranty, or of all or any part of the security or collateral given to secure such indebtedness, including the release or addition of other guarantors. In addition, such liability of Guarantor shall not be affected in any way by the failure or invalidity of or any defect in any security or collateral given to secure such indebtedness. No exercise or non -exercise, waiver, change, impairment or suspension by City of any right or remedy given it by this Unconditional Guaranty or by Borrower and no dealings by City with Borrower or any other person shall in any way affect any of the obligations of Guarantor hereunder or any security furnished by Guarantor, now or hereafter, or give Guarantor any recourse against City. The obligations of Guarantor to City hereunder are independent of Borrower's obligations and a separate action or actions may be brought and prosecuted by City against Guarantor, whether or not such action or actions are also brought against Borrower, other guarantors or any security granted to City. Guarantor waives and agrees not to assert or otherwise take advantage of (a) any right which it may have to require City to proceed against Borrower or any other person, firm or corporation or to proceed against or exhaust any security held by it at any time Guaranty Page 2 or to pursue any other remedy in its power; (b) any defense which it may have in the nature of statute of limitations in any action hereunder or for the collection of any indebtedness or the performance of any obligation guaranteed hereby; (c) any defense which it may have by reason of incapacity, lack of authority, or lack of shareholder or other approvals relating either to Borrower or Guarantor or the failure of City to file or enforce a claim against the estate (either in administration, bankruptcy, or other proceeding) of Borrower or of any other or others; (d) any lack of demand, protest and notice of any kind including, without limitation, notice of the existence, creation or incurring of new or additional indebtedness or of any action or non -action on the part of Borrower, City, any endorser, creditor of Borrower or Guarantor under this or any other agreement, or any person whomsoever, in connection with any obligation or evidence of indebtedness held by City as collateral or in connection with any indebtedness guaranteed hereby; (e) any defense which is may have based upon an election of remedies by City; and (f) any duty which City may have to disclose to Guarantor any facts which it may now or hereafter know about Borrower, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Borrower and of all circumstances bearing on the risk of non-payment of any indebtedness guaranteed hereby. Until all indebtedness of Borrower to City is paid in full, Guarantor shall have no right of subrogation and waives any right which it may otherwise have to enforce any remedy whatsoever which City may have against Borrower and any benefit of or right to participate in realization or any security now or hereafter granted to City. With or without notice to Guarantor, City may, in its sole discretion and at any time and from time to time and in such manner and upon such terms as it considers fit, apply any or all payments or recoveries from Borrower, Guarantor, any other guarantor or source, or from any security granted to City, under this or any other agreement, in such manner and order or priority as City may determine, to any indebtedness of Borrower to City, whether or not such indebtedness is guaranteed hereby or is otherwise secured or is due at the time of such application. For consideration as recited above, Guarantor subordinates any and all indebtedness of Borrower to Guarantor to any and all indebtedness of Borrower to City. If City so requests, any such indebtedness of Borrower to Guarantor shall be collected and received by Guarantor as trustee for City and paid to City on account of Borrower's indebtedness to it, without reducing or affecting Guarantor's liability under any of the provisions of this guaranty. This guaranty is in addition to and independent of any other guaranties at any time in effect with respect to all or any part of Borrower's indebtedness to City and may be enforced regardless of the existence of any such other guaranties which shall continue to remain in full force and effect. Guaranty Page 3 No provision of this guaranty or any right or remedy of City hereunder can be waived nor can Guarantor be released from its obligations hereunder except in writing duly executed by an authorized officer of City. Should any one or more provisions of this guaranty be determined to be illegal or unenforceable, all other provisions shall nevertheless be effective. This guaranty shall be construed and performed according to the laws of the State of Washington. Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in Yakima County, Washington, in any action or proceeding brought to enforce or otherwise arising out of or relating to this guaranty and irrevocably waives to the fullest extent permitted by law any objection which it may have now or hereafter to venue or any claim that such forum is an inconvenient forum. EXECUTED this day of , 2004. Joseph _ . Monier STATE OF WASHINGTON ) ) ss: County of Yakima ) Morrier On this day personally appeared before me Joseph . Morrier, to me known to be the individual described in and who executed the within and foregoing instrument, and acknowledged that he signed the same as his free and voluntary act and deed, :For the uses and purposes therein mentioned. 2004. GIVEN under my hand and official seal this day of NOTARY PUBLIC in and for the State of Washington Residing at My Commission Expires: Guaranty Page 4 STATE OF WASHINGTON County of Yakima ) ) ss: ) On this day personally appeared before me . Morrier, to me known to be the individual described in and who executed the within and foregoing instrument, and acknowledged that she signed the same as her free and voluntary act and deed, for the uses and purposes therein mentioned. GIVEN under my hand and official seal this day of 2004. Guaranty NOTARY PUBLIC in and for the State of Washington Residing at My Commission Expires: Page 5 Original Message From: ronanderson[mailto:ron@heritagebrokers.com] Sent: Monday, November 15, 2004 8:17 AM To: Dick Zais Subject: Hotel Dick , I am submitting this to the Yakima City Council to express my support for Joe Morrier and the proposed project for the hotel in downtown Yakima. The hotel will serve as a new hub in attracting business back to the city center and will increase shopping traffic for exisiting businesses, of which, several are struggling at this point. I urge the council to approve the funds and the project as soon as possible so as to lessen the impact any delays in timing with the various agencies and private investors will have on the success of this venture. Thank you Ron Anderson 1400 Lakesie Ct #105 Yakima, WA 98902 248-9400 13 lig Hilton Garden Inn - Yakima, WA. schematic desi• n - December th 200 . MEMORANDUM November 10, 2004 TO: Honorable Mayor Paul George Members of City Council FR: Dick Zais, City Manager Bill Cook, Director of Community & Economic Development Michael Morales, Economic & Community Affairs Specialist RE: JEM Development Application for Department of Housing & Urban Development Section 108 Loan Funds — Yakima Hilton Garden Inn A public hearing and council action have been scheduled for November 16 to gather public input on the proposal from JEM Development, representing Yakima Hotel, LLC, for a $3,560,000 loan from the City to partially finance the construction of a 104 -room Hilton Garden Inn Hotel in the downtown. In preparation for the meeting: the following documents are enclosed for addition to the project notebook prepared for the October 12 Study Session: 1. Updated staff report on the proposed project, including recommendations. 2. Updated underwriting analysis and recommendation from John Finke of the National Development Council, consultant to the city's Economic Development Loan Fund. 3. Updated opinion to HUD regarding conflict of interest issues from Don Boyd, legal counsel to the city's EDLF. 4. Draft Conditional Approval letter from City of Yakima to Mr. Morrier for Section 108 financing. 5. Recent letters from the public about the proposed project 6. Agenda Statement and Resolution for council action. Matrix Bank's Conditional Loan Approval letter will be signed and submitted to the City on Monday, November 15. Staff will distribute the letter to council members as soon as it is received. November 10, 2004 TO: Honorable Mayor Paul George Members of City Council FR: Dick Zais, City Manager Bill Cook, Director of Community & Economic Development Michael Morales, Economic & Community Affairs Specialist RE: JEM Development Application for Department of Housing & Urban Development Section 108 Loan Funds — Yakima Hilton Garden Inn Introduction On November 16, the City Council will hold a Public Hearing and consider approval of the proposal from JEM Development, representing Yakima Hotel, LLC, for a $3,560,000 loan from the City to partially finance the construction of a 104 -room Hilton Garden Inn Hotel in the downtown. The U.S. Department of Housing & Urban Development directly loans Section 108 funds to CDBG entitlement communities like Yakima. Cities may loan these dollars to eligible community and economic development activities. The loans are guaranteed to HUD by the city's pledge of CDBG funds sufficient to cover debt service in the event of default. In the City of Yakima's case, our CDBG funds are further protected by a $1 million loan loss reserve, capitalized by a $1 million Economic Development Initiative grant from HUD. Borrowers of Section 108 funds must be able to repay the loan to the city and HUD. For this reason, prior to approval, borrowers are required to pledge collateral valued in excess of the loan amount, and demonstrate sufficient net worth to enforce a personal guaranty. Eligible communities are able to borrow up to five times their annual CDBG entitlement, which for Yakima equals nearly $7 million. The city started the Economic Development Loan Fund (EDLF) in November 2002, with $4 million in Section 108 funds and the EDI grant. To date, we have made $3,385,000 in loans to three different projects: • Trail Wagons for $2,940,000 • Yakima Cellars Winery for $110,000 • Pepper's Restaurant for $335,000 In 2004, the city recently applied, and was recently approved for an additional $2,945,000 in Section 108 funds, which will be added to the $615,000 remaining from the initial capitalization. 1 This transmittal is a summary of the different aspects of the proposal, including the project description, proposed and committed financial components, collateral and security for the Section 108 loan, city tax revenue impacts, and community benefits. Staff from the Department of Community & Economic Development, the City Attorney, and the Finance Department have prepared this mfoiiiiation packet with the assistance of John Finke of the National Development Council, the city's economic development consultant, and Don Boyd of Carlson, Boyd & Bailey, the city's legal counsel for Section 108 loans. Project Description The project will be located at 401 East Yakima Avenue, site of the former Mervyn's department store. The project will create 71 full-time equivalent jobs, and will include underground parking, a restaurant, pool and day spa. As part of the attached franchise license agreement with Hilton, Yakima Hotel, LLC will be required to provide professional, experienced management for the hotel that meets the quality standards set forth by the Hilton Corporation. JEM Development believes that this hotel is the critical first step in the redevelopment of the fanner Yakima Mall property. Beginning with the new restaurant that will be part of the hotel, JEM Development plans a facelift for the stretch of property that continues down Yakima Avenue to 31-d Street that will attract a mix of quality retail, dining and entertainment to the area. The company is in discussions with various tenants, and is actively marketing the former JCPenney building for reuse as a professional office complex. JEM Development will finance future improvements to the property. Financial Structure The total project cost is estimated at $9,526,000, of which $6,560,000 will be debt. The project will provide a maximum Loan to Value Ratio (LTV) of 70%. The remaining $2,966,000 will come from equity contributions by both the borrower and New Markets Tax Credit (NMTC) equity provided by Trans Capital. The breakdown of the project financing is as follows: Instrument Source Amount Commercial Loan — Senior position Matrix Bank $3,000,000 Section 108 funds — 2nd position City of Yakima $3,560,000 New Markets Tax Credit Equity Trans Capital $750,000 Land J. Morrier, Sr. $1,500,000 Cash equity J. Morrier, Sr. $716,000 TOTAL $9,526,000 2 The NMTC equity will be provided through an approved Community Development Entity (CDE) per the program requirements. Use of the NMTC will require that the city's Section 108 funds and the equity be invested in the CDE, with the city owning 99.9% of the CDE. The CDE will loan the funds to Yakima Hotel, LLC. This structure does not affect the personal guaranty of the borrower, nor the city's ability to pursue it in the event of a default. Another aspect of the NMTC program is that projects are required to make interest -only payments for the first seven years, thereby reducing the debt burden on a project in its early years. This debt service requirement will only apply to the Section 108 loan, and not the Matrix Bank portion of the financing. A more complete description of the NMTC program, and our consultant's experience with the program is attached. The City will not provide a temporary interest subsidy to this project. Presently, the interest rates for the Matrix Bank loan and the Section 108 are both estimated at 6%, Matrix's rate is variable for its term (25 years), while the city's funds will be offered at a floating rate until there is an opportunity, with the borrower's consent, to convert the loan to a fixed rate. Our next opportunity to make a conversion would be the summer of 2005. To better understand the impact on the economics of this project if interest rates were to rise, we calculated an interest rate sensitivity that demonstrates the project can absorb up to a 10.7% interest rate on Matrix's loan, and still remain above the 1.2 debt coverage ratio required by the city and HUD. If approved, the City will not close on our Section 108 loan until all other financing, including the borrower's cash equity, are confirmed and in place. Mr. Monier will need to incur significant expenses in order to meet the closing requirements of all the lenders and investors, including appraisal, final building design and legal expenses. As stated earlier, the NMTC equity must close by March 31, 2005, and we would recommend April 15, 2005 as the deadline for Mr. Morrier to close on our loan. For these reasons, we request that the approval resolution presented to council also authorize the City Manager to execute all application and closing documents, provided that there are no substantive changes to the project. Security & Collateral The City will hold a second lien position on the hotel property, including underground parking. Matrix Bank will be in first position on the property. The assets of Joseph Morrier, Sr. and Elizabeth Morrier, JEM Development, the Yakima Mall Shopping Center Corporation and all related entities will be subject to Morrier's personal guaranty. In addition, the City will seek to mirror the conditions of Matrix Bank where appropriate. 3 In the unlikely event of a default, the City will be subject to a junior lien deed of trust position. To compensate for this position, the City will be further protected by its $1 million EDI grant, that will be entirely placed in a loan loss reserve. Provided that the reserve has not been substantially impacted by other loan losses, it is estimated to cover the city's obligation to HUD for over 4 years, providing the city with ample time to complete the foreclosure process and enforce the personal guaranty prior to a call for CDBG funds. Remedies that will be employed in the case of a default will include foreclosure, transfer of operations, and the sale of the subject property to pay the outstanding balance of the loan. As with all Section 108 loans, the City's CDBG funds will serve as the ultimate recourse for repayment of debt service should all other remedies fail to pay the loan balance to HUD in full. CDBG funds may only be deducted from the city's account in the amount of the annual debt service required in the terms of the loan from HUD. Don Boyd, legal counsel, has provided a summary of this process and the city's recourse under separate cover. Community Benefits The project will directly create 71 full time equivalent jobs in the downtown. In addition to this direct benefit, the hotel is expected to generate additional sales and property tax revenues for the city, and can also enhance the hotel tax base to assist our convention and tourism industry. Located in the heart of the Yakima Renewal Community, the project represents an important step in the redevelopment of the downtown. Sales tax in the 16 square -block downtown PBIA dropped 6% from September 2003 to September 2004, and has declined by over 25% since 1999 (excluding Bon Marche & Nordstrom). PBIA assessments dropped from $50,000 in 2003 to $35,000 in 2004, and its reserves have continued to erode over the past three years. The hotel represents a major investment in the downtown, and is consistent with the recent financial support the city provided to expand the Yakima Convention Center and build the Gateway to Wine Country Visitor Center, as well as the state and federal funds secured to improve the Capitol Theatre and North Front Street. Beginning with the increased availability of quality hotel rooms and the restaurant, this project will expand our offering of attractions to our growing tourism, sports and convention industries. The city's Finance Department estimates that the project would generate tax revenues to the city in the following ways: • $59,500 one-time additional sales tax on $7.0 milhon construction • $32,000 in new property tax revenue for a $9.0 million building (2004 rate) • $55,000 in hotel tax revenue for 104 rooms at 62% occupancy 4 • $10,000 in combined utility revenue for water/sewer usage and utility taxes (2004 rates) for the hotel only. The full service restaurant could substantially increase this figure. • $1,400 in additional assessment to the Yakima Downtown Association PBIA • $1.45 million payroll. With the standard multiplier effect of 1.4 for the hospitality industry, this could provide up economic impact of $2 million to the community. Recommendation Based on the complete analysis of the project's financial structure, the risk to and protection of the city, and the impacts, we recommend approval of JEM Development's loan request for the following reasons: • We believe that the project will be a catalyst for the renewal and redevelopment of downtown Yakima because it is a high quality, bold statement at the entrance to the heart of the Central Business Distnct. It will further promote and encourage expansion of our hospitality, tourism and convention business. • Project's ability to cover debt service, based on a professional market analysis • Financial strength of the borrower and ability to repay the loan. • A maximum 70% Loan to Value Ratio (70%) • The NMTC equity infusion by Trans Capital and New Markets, LP. • The 2 to 1 leverage of private capital to Section 108 loan funds. • The 1.5 debt coverage ratio of the project, which exceeds our required ratio of 1.2. • Protections provided to the city by interest on the project property and personal guaranty of the borrower. • Additional security to the city provided by the $1 million loan loss reserve, funded by the Economic Development Initiative Grant. 5 Memo To: Bill Cook, Director From: John Finke, Director Date: 11/10/2004 Re: Hilton Garden Inn Section 108 On October 13, 2004 Mr. Momer signed Matrix Bank's Conditional Approval letter in the amount of $3,000,000 to help finance a Hilton Garden Inn in Yakima. (Subsequently Mr. Morrier agreed to purchase the hotel site at 401 East Yakima Avenue from his children and Matrix Bank agreed to modify the Conditional Approval letter to remove the requirement that Mr. Morrier's children guarantee the loan. A modified commitment letter will be issued when Mr. Morrier satisfies the conditions of the existing letter.) The borrowers are Jem Properties, LLC and Morrier Hotel, LLC. The Guarantors will be Joseph R. Morrier, Sr. and Elizabeth L. Momer. While the loan commitment has a number of conditions, I feel that I have sufficient information to complete a Section 108 loan application and initiate the City approval process for the proposed Hilton Garden Inn. Mr. Momer Sr. has provided drawings, cost estimates, evidence of site control including onsite parking, an outside feasibility study, and financial information. The current plan is to have Hilton manage the property. The financing requires the commitment by the City of Yakima to a $3,560,000 Section 108 investment and additional equity commitments through the New Markets Tax Credits (NMTC) program and from the borrowers. While I had expected that the NMTC commitment would come from an allocation to CBO Financial, a Baltimore Community Development Entity (CDE), we were unable to resolve differences between the goals of Matrix Bancorp and those of that CDE. I have since gone to NDC's own allocation of NMTC and secured a commitment to place Tax Credits with Trans Capital, an investment fund made up of smaller banks. NDC's Community Development Entity (NDC New Markets Investment, L.P.) will then serve as the CDE and will receive the Section 108 funds to lend to the project. NDC has successfully worked with Trans Capital on other transactions and anticipates no difficulty in securing the necessary equity investment for the NMTC allocation. One of Trans Capital's requirements is that the NMTC fund by March 31, 2005. The project remains the same as previously discussed. Its costs total: $9,526,000. The sources of funds are as follows: Matrix Bancorp $3,000,000 First Deed of Trust Section 108 $3,560,000 Investment into CDE with the City of Yakima owning 99.99% CDE Loan to Hilton Garden Inn Second Deed of Trust and Guarantees NMTC Equity $ 750,000 Equity 1 Borrower Equity $2,216,000 Land estimated at $1,500,000 and cash equity of $716,000. As soon as Mr. Monier completes architectural drawings, the bank will order an appraisal. The bank's commitment is conditioned on a $9,000,000 appraisal. The appraisal will need to equal $9,371,430 to achieve the City of Yakima's stated target of at least a 70 percent (70%) loan to value ratio. If the appraisal establishes the project's value at less than $9,371,430, the bank loan or the Section 108 will need to be adjusted downward and the equity adjusted upward to maintain the loan to value ratio at 70 percent (70%). The project shows strong projected cash flow. With a 6 percent (6%) interest rate on the Matrix Bancorp loan and a 6 percent (6%) interest rate on the Section 108 loan, the hotel's projected cash flow results in a 1.5 debt coverage ratio. The debt coverage ratio is that ratio by which the projected cash flow available for debt service exceeds the projected debt service. The interest rate on the Matrix Bancorp loan could increase to 10.7 percent (10.7%) before the debt coverage ratio would drop to the 1.2 guideline in the City of Yakima's Section 108 program. In my evaluation of the proposal, I have reviewed the financing commitment, the plans, the projections, the project's costs and the financial condition of the borrowers. If the banks conditions to closing are met it is my recommendation for the city to proceed with the Section 108 loan. • Page 2 ADDRESS: 230 S. 2"° STREET YAIIMA, WASHINGTON 98901 TELEPHONE:PlIC 509-834-6611 FACSIMILE - 509 -834-6610 WEB SITE: www.cbblawfirm.com Attaile orneys at Law - November 9, 2004 Mr. Jon Wingard HUD Section 108 Program Staff Attorney Office of General Counsel Via Email Only DONALD A. BOYD E -Ma l: dbovd@cbblawfirm.com Re: City of Yakima HUD Section 108 loan to Morrier Hotel, LLC. Dear Mr. Wingard: I write to discuss to issue of whether there is a conflict-of-interest in having the National Development Council work under contract as a consultant to the City of Yakima in analyzing the proposed loan of HUD Section 108 funds in the amount of $3,560,000 to Morrier Hotel, LLC. We have previously conversed with you on this subject, and now wish to clarify certain questions that arose during our prior discussions. The first issues to address are the factual issues surrounding the funding of the Morrier Hotel project and NDC's role in assisting the City of Yakima. Role of NDC: As we previously disclosed, John Finke is an employee of the National Development Council ("NDC"). NDC is engaged by the City as an independent contractor under a Technical Assistance Agreement commencing September 1, 2004 to provide services to the City that include analyzing proposed HUD Section 108 loans by the City. NDC has no authority to approve any HUD 108 project which authority rests solely with the City. Nor does NDC receive any compensation from any HUD 108 loan transaction. Further, no CDBG funds are used to pay NDC under its contract with the City. Funding for Morrier Hotel Project: The funding for the Morrier Hotel Project is coming from three sources: 1. Matrix Bank will provide a loan of 33,000,000 and will receive a first position mortgage of the hotel property and other collateral interests. Mr. John Wingard November 9, 2004 Page 2 of 4 2. NDC New Markets Investments, L.P. will provide 84,413,740 in funding. $3,560,000 will be in the form of a loan to the project. 8853,740 will be equity to the project which will be gifted to the property and the end of the tax credit compliance period. In exchange, NDC New Markets Investments, L.P. will receive a second position mortgage of the hotel property and other collateral interests. NDC has no ownership interest in NDC New Markets Investments, L.P. 3. Joe Morrier will deliver $2,112,260 in equity funding. The critical portion in the conflict-of-interest question is the funding from NDC New Markets Investments, L.P. NDC New Markets Investments, L.P. NDC New Markets Investments, L.P. is a limited partnership that will be made up of two partners: HEDC New Markets, Inc., a Delaware corporation (owning 0.01% interest in the partnership) and Yakima Investment Fund, L.L.C., a Washington limited liability company, (owning 99.99% interest). HEDC New Markets, Inc. is a 501(c)(3) entity which has received an allocation of New Markets Tax Credits from the U. S. Treasury Department. HEDC New Markets, Inc. was created in 2002 for the purpose of assisting low income communities by obtaining an allocation of tax credits through the New Markets Tax Credit program and distributing those credits in support of appropriate improvement projects. As a 501(c)(3), HEDC New Markets, Inc. issues no stock and has no shareholders. NDC holds no ownership interest in HEDC New Markets, Inc. Only one member of the board of directors of NDC is common to the board of directors of HEDC New Markets, Inc. I enclose copies of HEDC New Markets, Inc.'s Articles of Incorporation, By -Laws and current Annual Report filed with the state of Delaware for your reference. NDC New Markets Investments, L.P. will be capitalized by a contribution of $4,920,000 from Yakima Investment Fund, L.L.C. NDC New Markets Investments, L.P. will loan the funds to the entity owning the Morrier Hotel Project. HEDC New Markets, Inc. utilizes financial intermediaries that purchase the tax credits to fund an approved project. An intermediary gets repaid through the tax credits for its funding of the project in accordance with New Markets Tax Credit program regulations. Mr. John Wingard November 9, 2004 Page 3 of 4 In the Morrier Hotel Project, HEDC New Markets, Inc. will transfer tax credits in an amount of 81,918,800 to NDC New Markets Investments L.P. who in turn will transfer those tax credits to the Yakima Investment Fund LLC in consideration for its investment of $4,920,000. Trans Capital Corporation will invest $1,360,000 into the Yakima Investment Fund for the tax credits. HEDC New Markets, Inc. will receive no payment from the Morrier Hotel. All compensation that HEDC New Markets, Inc. receives will be paid by Trans Capital, the purchaser of the tax credits, solely in consideration for the tax credits. Yakima Investment Fund L.L.C. The Yakima Investment Fund, L.L.C. is comprised of one member, Trans Capital Corporation. Trans Capital will resell the tax credits to financial institutions that have an appetite for tax credits. Yakima Investment Fund, L.L.C. will be capitalized by an equity investment of $1,360,000 from Trans Capital in consideration for the tax credits of $1,918,800 in accordance with Treasury Department regulations. The City of Yakima will lend the Yakima Investment Fund L.L.C. $3,560,000 from its HUD Section 108 funds available for this project. Repaying the Loan from NDC New Markets Investments L.P. Morrier Hotel will repay the loan from NDC New Markets Investments, L.P. by paying the interest required to allow the City of Yakima to repay the HUD Section 108 loan for seven years. In addition, Trans Capital will receive New Markets Tax Credits totaling S1,918,800 over seven years. Morrier will not pay Trans Capital any return beyond the tax credits. At the end of seven years, upon the termination of the tax credits, NDC New Markets Investments, LP will dissolve and assign the loan to the Yakima Investment Fund LLC. Trans Capital will exit from LLC for a nominal price and assign the loan to the City of Yakima. The payments made by Morrier will change to permit a principal repayment component on the HUD 108 loan. The amortization will be based upon 18 years, but will have a balloon payment due on the twentieth anniversary of the loan origination date. The equity portion will be gifted to the project and remain in the community. Based upon the above facts, the City of Yakima does not believe a conflict of interest exists and this transaction does not violate the provisions of 24 C.F.R. 570.611. The City will proceed on the assumption that this transaction does not cause a conflict of interest unless it receives notice from HUD to the contrary. Mr. John Wingard November 9, 2004 Page 4 of 4 Very truly yours, Donald A. Boyd Encl. cc. Bill Cook Michael Morales John Finke Mr. Joseph R. Morrier, Sr. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn, Yakima, Washington 402 East Yakima Avenue, Suite 1400 Yakima, WA 98901 Re: Conditional Approval Letter Dear Mr. Morrier: The City of Yakima will proceed with a formal application to the United States Department of Housing and Urban Development for a Section 108 loan guarantee in the amount of $3,560,000 subject to the following conditions. If approved the proceeds of the Section 108 loan will be lent to an investment fund for investing in a New Markets Tax Crecht fund ("Fund"). That fund will lend the Section 108 proceeds to the Borrower. Borrower: JEM Properties, LLC and Morrier Hotel, LLC (collectively, "Borrower") Guarantors: Joseph R. Morrier, Sr., Elizabeth L. Morrier Business Location: 401 East Yakima Avenue, Yakima, WA Purpose: The purpose of the Loan is to provide a portion of the interim and permanent financing for the proposed Hilton Garden Inn in Yakima, Washington. Estimated Sources/Uses of Funds: USES Land/Construction/Contingency FFE/Property Management Systems Interest Reserves/Loan Fee Closing Costs/Franchise Fees/WC TOTAL AMOUNT $ 8,001,000 1,020,000 208,000 297,000 SOURCES Matrix Bancorp Conventional HUD Section 108 New Markets Tax Credit Equity Owner Equity $ 9,526,000 TOTAL AMOUNT $ 3,000,000 3,560,000 750,000 2,216,000 $ 9,526,000 Equity: The Borrower will contribute $2,216,000 of the total project costs in equity. Of that amount, $1,500,000 is allocated toward the contribution of the existing land and building, $244,000 is allocated toward payment of the construction soft costs, $22,000 is allocated toward payment of the cost of the JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 2 of 5 appraisal, Phase I Report, and survey, $20,000 is allocated toward payment of legal fees, $24,000 is allocated toward payment of estimated closing costs, $76,000 is allocated toward payment of the loan origination fee, $20,000 is allocated toward payment of the pre -opening expenses associated with the hotel, and $60,000 is allocated toward payment of the franchise fee. Proof of the equity injection and the source of these funds must be provided prior to the closing of the Section 108 Loan. Closing costs related to the Interim Loan, the Conventional Loan, and the Section 108 Loan will be paid at or prior to closing. Any changes to this allocation of the equity injection will require approval by the City of Yakima. Proof of equity must be provided five days prior to the estimated closing date. Proof of equity must be supported by, but not limited to, cancelled checks (or a copy of the check and supporting bank statements reflecting the cancelled check), paid invoices, a cashier's check for funds not yet spent, or other means as determined only by Lender. Fees: A City of Yakima loan fee of $35,600 is due at closing. In addition to the loan fee the Borrower shall be responsible for all legal fees, closing costs and trustee fees associated with preparing loan documents, closing the Section 108 Loan and admimstering the loan. In the event that the Section 108 Loan does not close, all costs and fees, to the extent they have been incurred, will be the responsibility of the Borrower. SECTION 108 LOAN Amount: The amount of the Loan will be $3,560,000. Term: The Section 108 Loan will be due on July 15, 2024. The Loan will be amortized over a twenty (18) year term after expiration of the first seven (7) years of interest -only payments. Payment terms are interest -only for the first seven years, then principal and interest payments due monthly based upon a twenty (18) year amortization period. Interest Rate (Loan): The interest rate on the Loan will fluctuate based on the City of Yakima's cost of funds under the Section 108 Loan Program. The City of Yakima may fix the interest rate on the Loan once a year. The Borrower will be responsible for the costs of fixing the rate if the City chooses to do so. Payment: The first payment will be due on the fifteenth day of the month the Loan is closed and on the same day each month thereafter until paid in full Prepayment Penalty: Once the Loan is converted to a fixed rate it is subject to a ten (10) year lockout in which no prepayment is allowed. Late Fee: If a payment on the Loan is more than 10 days late, City may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. Amount: The amount of the HUD Loan will be $3,560,000. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 3 of 5 LOAN CONDITIONS: The Loans are subject to and contingent upon the following: • The Fund being able to secure a Second Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 401 East Yakima Avenue, Yakima, WA, subject only to the First Deed of Trust in favor of Lender in the amount of $3,000,000. • Receipt, review, and approval, by the Fund and City of Yakima at their sole discretion, of the real estate appraisal ordered by Matrix Bancorp, reflecting a loan to value of not more than seventy (70%) percent by a Lender approved appraiser for the real property and FF&E. • Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to the Fund and the City in their sole discretion, insuring the Fund as to its second priority lien on the subject property at 401 East Yakima Avenue, Yakima, WA, subject only to Matrix Bancorp's first lien position. • The Fund being able to secure a UCC -1 and Secunty Agreement perfecting a second lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter for the proposed Hilton Garden Inn. • Review and approval by the Fund and City of Yakima of a satisfactory Phase I Environmental Site Assessment for the property located at 401 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R. Morrier, Sr. • Personal guaranty of Elizabeth L. Morrier. • Evidence that Monier Hotel, LLC has unencumbered site control of the subject property at 401 East Yakima Avenue. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Monier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. • Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 4 of 5 Insurance: the management of the proposed Hilton Garden Inn. If the proposed hotel is not managed by Hilton Hotels, the management company must have extensive experience in hotel management and be acceptable to the Fund, the City of Yakima and Matrix Bancorp. The management agreement must have a termination provision allowing either Lender to terminate the contract if the loan were in default. • Review and Approval by the Fund and the City of Yakima of the final construction contract. The contract shall require the contractor to obtained a payment and performance bond in the amount of the construction contract. • The Borrower obtaining and providing proof of Workers' Compensation Insurance in an amount meeting state law requirements and with an insurance company satisfactory to HUD Loan Lender. • The Fund receiving a copy, satisfactory in its own discretion, of the fire and extended coverage insurance on the business real property in the amount of full replacement cost with the Fund named as second mortgagee for the property at 401 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage in the amount of full replacement cost, or for the maximum insurable value if full replacement cost cannot be obtained, for the personal property located owned by JEM Properties, LLC and/or Morrier Hotel, LLC dba Hilton Garden Inn. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • The Borrower obtaining Flood insurance covering the Loan collateral if required by the Fund. Financials: Receipt, review and approval of financial statements and all supporting schedules, as requested, are to be within 120 days of closing the HUD Loan. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 5 of 5 Other Conditions: This loan is subject to evidence of final commitment and acceptance by the Borrower and approval by the City of Yakima of a conventional loan from Matrix Bancorp to the borrower in the amount of $3,000,000. This loan is subject to any and all other conditions required by the Fund and City of Yakima and their counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the Section 108 Loan. GENERAL NOTES: Conditional Approval: Please be aware that the final terms and conditions of the proposed financing are subject to approval by the City of Yakima and the US Department of HUD. Also, all legal and financial documents deemed necessary by the City in order to close the Loan must be provided and executed to the satisfaction of any or all of the parties listed above. No verbal statements to Borrower concerning this application by any employee or agent of Lender shall have binding effect. CITY OF YAKIMA APPLICATION FOR LOAN GUARANTEE FROM U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FOR A HILTON GARDEN INN HOTEL IN THE AMOUNT OF $3,560,000 NOVEMBER 16, 2004 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON Project Description The purpose of this Section 108 application is to assist with economic and community development activities in the City of Yakima. The guaranteed loan funds will be used to partially finance the construction of a Hilton Garden Inn hotel within Yakima's federally designated Renewal Community The project has been evaluated by City of Yakima staff, as well as by consultants expert in financial underwriting. The loans will be structured using a loan loss reserve. The project will be located at 401 East Yakima Avenue, site of the former Mervyn's department store. The project will create 71 full-time equivalent jobs, and at least 51 percent of these jobs shall be either filled by or made available to low and moderate -income persons as defined in the Community Development Block Grant regulations. The hotel will include underground parking, a restaurant, pool and day spa. As part of the franchise license agreement with Hilton, Yakima Hotel, LLC will be required to provide professional, experienced management for the hotel that meets the quality standards set forth by the Hilton Corporation. The hotel is the critical first step in the redevelopment of the former Yakima Mall property, and the revitalization of downtown Yakima. Beginning with the new restaurant that will be part of the hotel, JEM Development plans a facelift for the stretch of property that continues down Yakima Avenue to 3rd Street that will attract a mix of quality retail, dining and entertainment to the area. The company is in discussions with various tenants, and is actively marketing the former JCPenney building for reuse as a professional office complex. JEM Development will finance future improvements to the property The total project cost is estimated at $9,526,000, of which $6,560,000 will be debt. The project will provide a maximum Loan to Value Ratio (LTV) of 70% The remaining $2,966,000 will come from equity contributions by both the borrower and New Markets Tax Credit (NMTC) equity provided by Trans Capital. The breakdown of the project financing is as follows: Instrument Source Amount Commercial Loan — Senior position Matrix Bank $3,000,000 Section 108 funds — 2"d position City of Yakima $3,560,000 New Markets Tax Credit Equity Trans Capital $750,000 Land J Morrier, Sr. $1,500,000 Cash equity J. Morrier, Sr. $716,000 A. TOTAL $9,526,000 The NMTC equity will be provided through an approved Community Development Entity (CDE) per the program requirements. Use of the NMTC will require that the city's Section 108 funds and the equity be invested in the CDE, with the city owning 99.9% of the CDE. The CDE will loan the funds to Yakima Hotel, LLC. This structure does not affect the personal guaranty of the borrower, nor the city's ability to pursue it in the event of a default. Another aspect of the NMTC program is that projects are required to make interest -only payments for the first seven years, thereby reducing the debt burden on a project in its early years. This debt service requirement will only apply to the Section 108 loan, and not the Matrix Bank portion of the financing. Section 108 Submission Requirements A. Community Development Objectives The Section 108 loan fund will result in lending for economic and community development in Yakima. In doing so the loan fund will further the City of Yakima's Economic Development Goals as listed in the City's 2000 — 2004 Consolidated Plan. The Strategic Plan section of the Consolidated Plan states that: "The City of Yakima is committed to combating poverty on all fronts. The chief weapon in this battle is economic development. This has been identified by our city council as our number one 2 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON priority We are actively engaged in fostering and pursuing new partnerships with both public and private organizations to create new employment opportunities and better utilize our limited resources to meet community needs." Stated in the Strategic Plan is the expectation that the City of Yakima will directly assist businesses and development projects with Section 108 loans. B. Description of how the Proposal meets one of the Criteria in 24 CFR 570.200(a)(2) - National Objectives. Section 570.200(a)(2) lists the National Objectives that must be met by all Community Development Block Grant and therefore Section 108 projects. This section requires that all funded activities meet one of three national objectives. These objectives are. 1) benefit to low and moderate income families, 2) aid in the prevention or elimination of slums or blight; and 3) meeting other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available. Section 570.208 defines the criteria under which an activity may meet the requirements of Section 570.200(a)(2). Each project funded through the Section 108 loan fund will meet one of the National Objectives listed in Section 570.200(a)(2) as detailed in Section 570.208. The loan to Yakima Hotel, LLC for the Hilton Garden Inn will create an additional 65 new jobs for low - and moderate -income persons. The loan will specifically meet the requirements of Section 570.208(a)(4) and (a)(4)(iv). Section 570.208(a)(4) defines activities that meet the requirements of 570.200(a)(2) through the creation or retention of jobs. The subsection states that to qualify as a job creation or retention activity the project must "create or retain permanent jobs where at least 51 percent of the jobs, computed on a full time equivalent basis, involve the employment of low -and moderate -income persons." Sections 570.208(a)(4)(i) & (ii) specify that to qualify under Section 570.208(a)(4) the jobs created or retained must be either held by or be available to low- and moderate -income persons. Section 570.208(a)(4)(iv) lists minimum standards for the presumption that jobs will be "held by or made available to low- and moderate -income persons." Finally Section 570.208(a)(4)(v) states that a census tract will qualify for the presumption permitted under paragraph (a)(4)(iv) if it meets the following criteria: A: It has a poverty rate of at least 20 percent as determined by the most recently available decennial census information; B • It does not include any portion of a central business district, as this term is used in the most recent Census of Retail Trade, unless the tract has a poverty rate of at least 30 percent as determined by the most recently available decennial census information; and, C: It evidences pervasive poverty and general distress by meeting at least one of the following standards. (1) All block groups in the census tract have poverty rates of at least 20 percent; (2) The specific activity being undertaken is located in a block group that has a poverty rate of at least 20 percent; or (3) Upon written request of the recipient, HUD determines that the census tract exhibits other object determinable signs of general distress such as high incidence of crime, narcotics use, homelessness, abandoned housing, and deteriorated infrastructure. Because the Hilton Garden Inn is located in a census tract with over 40 percent poverty and within a block group with greater than 20 percent poverty the project will qualify for the presumption test available under 570.208(a)(4)(iv). C. Section 108 Eligibility In addition to furthering a National Objective, all Section 108 loans must also meet the eligibility requirements of the Community Development Block Grant program. All activities funded through the City of Yakima's Section 108 loan fund will meet the program eligibility requirements as set forth in Sections 570.201,202,203 or 204. 3 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON The loan to Yakima Hotel, LLC meets the eligibility requirements of Section 570.203(b). Under 24 CFR 570.203 (b) the City can provide assistance to private for-profit business, including, but not limited to, grants, loans, loan guarantees, interest supplements, technical assistance, and other forms of support, for any activity where the assistance is appropriate to carry out an economic development project, excluding those described as ineligible in Section 570.207(a). In addition, all activities funded under Section 570.203 must the guidelines provided in Section 570.209 (Guidelines for evaluation and selecting economic development projects) Section 570.207(a) excludes: buildings or portions thereof, used for the general conduct of government, general governmental expenses and political activities. Proceeds of the Section 108 loan to Yakima Hotel, LLC will not be used for the general conduct of government, general governmental expenses, nor for political activity. D. Section 570.209 Guidelines Section 570.209 Guidelines Guidelines and Objectives for Evaluating Project Costs and Financial Requirements. All activities eligible under Section 570.203 must meet the requirements of Section 570.209. This section outlines guidelines for ensuring that a proposed project carries out an economic development objective in an appropriate manner These guidelines under 570.209(a) are not mandatory but serve as a framework for financially underwriting economic development projects. In evaluating proposed projects benefiting from the Section 108 Economic Development Loan Fund the City of Yakima uses the following criteria. Project Management The City of Yakima, Department of Community and Economic Development (DCED) administers the fund. DCED will underwrite all loans and uses the National Development Council (NDC) to advise on project feasibility. NDC has a more than 35 -year track record of assisting local governments in structuring and implementing economic development and housing projects. Underwriting Standards for City of Yakima EDI / Section 108 Loan Fund 1. National Objective All loans must meet a national objective as specified in 24 CFR 570.208 No loan shall be approved without verification of compliance with the national objective requirements, specified in 24 CFR 570.208, by the Washington State Office of the United States Department of Housing and Urban Development. 2. Eligibility In addition to meeting one of the program's National Objectives all projects assisted through the loan fund must fall within one of the eligible activities listed in 570 703. 3. Guidelines for evaluating and selecting economic development projects 4 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON For all activities eligible under 570.703(i), economic development activities, the project will be required to meet the guidelines listed under 570.209: Guidelines for evaluating and selecting economic development projects. No loan shall be approved without verification of compliance with the public benefit standards as specified in 24 CFR 570.209(b) by the Washington State Office of the United States Department of Housing and Urban Development. 4. Financial Underwriting In loan underwriting the City shell adhere to the follow criteria. A. Real Estate Loans Real Estate Loan shall be evaluated based on: Ability to Repay Collateral Development Team Capacity and Experience Developer Commitment Character of the Developer Ability to Repay Projects to be funded will have at least a 1.lprojected debt coverage ratio If the project includes more than a small percentage of its rental income from start-up or financially weak tenants then a higher debt coverage ratio shall be required. Collateral Projects to be funded should have a loan to value ratio of not greater than 80 percent. This value must be supported by an appraisal prior to funding. If greater than an 80 percent loan to value ratio is proposed, outside collateral sufficient to provide an 80 percent loan to value shall be required. In certain cases outside guarantees may suffice for additional collateral. Development Team Capacity and Experience Projects funded shall have a development team that has both the capacity and experience to complete the project as demonstrated by past projects and financial strength. Developer Commitment Developer commitment can take many forms. While each project is likely to be different the forms of developer commitment that can be expected include: adequate equity, guarantees of completion, guarantees to fund shortfalls or guarantees of minimum cash flow. Character Projects to be funded should have developers with good credit histories, demonstrated integrity, and quality references. 5 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON B. Business Loans Business Loans shall be evaluated based on: Ability to Repay Collateral Guarantees Financial Strength Management Experience Character of the Principals Ability to Repay All businesses funded with the program shall have existing cash flow (profits after tax, plus deprecation, plus excess officers income, plus rent savings if applicable) sufficient to repay the loan. Projections must be supported by strong evidence that they will materialize. Collateral All business loans must be supported by collateral. Real Estate must be supported by an appraisal and will be generally accepted up to 80 percent of its value. Machinery and equipment depending on its nature will be accepted from 40 percent to 60 percent of its fair market value. Accounts receivable and inventory will normally be used to secure operating debt and will generally not be taken as collateral. Outside collateral such as personal residences shall be valued up to 90 percent of their fair market value. Guarantees All principals with 20 percent or more or a controlling interest, if less than 20 percent, shall provide personal guarantees. Financial Strength Three years of financial statements on the business plus a personal financial statement on all principals of the business shall be analyzed to determine if the company is well run and has the ability to manage its accounts and pay its obligations. Management Experience The management must have experience in the business or in a similar business, be able to demonstrate an ability to manage and have the depth in management to withstand unforeseen transitions. Character of the Principals The personal financial statements and credit history of the principals must demonstrate honesty and trustworthiness. D. Eligibility under 24 CFR 570.703 6 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON Each of the projects to be assisted with Section 108 guaranteed loan funds and Economic Development Incentive grant funds must meet one of the eligibility requirements listed in 24 CFR 570 703 The initial two projects detailed in this application are eligible under 570.703(i), - economic development activities eligible under Section 570.203 Other projects to be funded under the program may also qualify under 570.703(a)(b)(c)(d)(e)(f)(h)&(1). E Project Evaluations 1. Project Underwriting - Hilton Garden Inn Tower a. Ability to Repay Yakima Hotel, LLC owns the Hilton Garden Inn Building. Joseph and Elizabeth Morrier are the owners of Yakima Hotel, LLC. Mr. Morrier commissioned the Chambers Group, Inc to undertake a feasibility analysis of the proposed project in January of 2004 That report included site inspection, a review of the economy and demographics of the City of Yakima, a review and analysis of existing and proposed competitive lodging facilities, recommendations concerning project size and scope, and projections of future operating levels and average daily room rates. Included in the report were projected operating revenue and expenses before debt service and taxes. Based on these projections the project meets the City of Yakima's and the programs required debt coverage ratios. In addition, the loan will be personally guaranteed by Joe Morrier b. Collateral The loan will be collateralized with a second deed of trust on the Hilton Garden Inn building. Currently Yakima Hotel, LLC has secured a senior loan from Matrix Bank. The total of the Section 108 loan and the senior loan do not exceed 70 percent of the appraised value of the Hilton Garden Inn Building as rehabilitated. The loan is conditioned on an appraisal showing that the combined total of the Section 108 loan and all senior debt do not exceed 70 percent of value. c. Guarantees The loan will be personally guaranteed by all owners of more than 10 percent of the stock of Yakima Hotel, LLC. d. Financial Strength In evaluating, the loan consultants to the City reviewed the development plan, the feasibility study, personal financial statements of the principal owner of stock in the Yakima Hotel, LLC, income and expenses of the Hilton Garden Inn Building, and discussed the finding of the feasibility study with its authors. Based on this information the City is satisfied that the borrower and its guarantor have the financial strengths to perform under this loan. e. Management Experience The borrower will hire a hotel management firm to operate the hotel. The operating pro forma includes an adequate management fee to pay for this service. 7 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON f. Character of the Principals The company's principals are long standing members of the Yakima community and are held in the highest esteem. 2. Section 570.209 Guidelines for evaluating project costs and financial feasibility a. Reasonableness of the Proposed Project Costs Each use of loan funds shall be evaluated to ensure the reasonableness of proposed project costs. The scope of this evaluation shall depend on the size and nature of each project. Care will be taken to use third party evaluations of costs wherever appropriate, and particular attention will be exercised when an activity involves a non -arms -length transaction. Staff and consultants to the City have reviewed the proposed project costs for the hotel with the owner and with the authors of the feasibility study. The loan proceeds will be used for rehabilitation and related soft costs of development of a 104 -room hotel in the for Mervyn's Department Store building. The costs associated with the use of proceeds are reasonable. b. Commitment of all Sources of Funds. The City and its consultants shall review every project to verify that all sources of funding are committed and available prior to approval of an activity to be funded by the Section 108 / EDI fund. Consultants to the City have reviewed the owner's financial statements and are satisfied that the owner has the necessary financing and equity to commit to the project. The balance of the funding will be in Section 108 debt. c. Substitution of CDBG funds for Private Sources. City staff, assisted by consultants, will review all projects to insure that each loan minimizes the use of CDBG funds. It is in the City of Yakima's self interest to insure that there be no substitution of CDBG funding for non-federal fimding Given the limited availability of federal funds, the city staff will work diligently to maximize the use of private, non-federal funding in all projects. All projects will be reviewed to insure that private sources of financing have been maximized and that the rate of return on equity is reasonable and within general standards. The project is for the development of a new hotel in an existing building in downtown Yakima. The loan will be secured by a second deed of trust and a personal guarantee. Currently there are no conventional lenders willing to commit to this market segment at reasonable terms. The loan is structured similarly to other loans in the fund but with an 18 year term and without EDI rate subsidy d. Feasibility of the Project. 8 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON All projects seeking assistance under the Section 108 / EDI loan fitnd shall be evaluated as to project feasibility. The scope of each evaluation will depend on the nature of prospective projects. For existing businesses, three years of financial statements will be reviewed and analyzed, projections evaluated and project costs verified. For business start-ups, projections will be compared to industry averages and evaluated by others experienced in the line of business. In addition, at risk capital will be required on the part of the borrower. For real estate projects, appraisals will be required and reviewed, appropriate pre -leasing levels will be set and prospective tenants' credit worthiness will be evaluated. In some cases formal market feasibility studies will be required. In other cases less formal evaluations will be sufficient. In all cases the prospective borrowers' experience and capacity to perform will be reviewed. Please refer to the discussion under project underwriting above. e. Return on owner's equity. Staff will evaluate all projects to determine the owner's return on equity and compare this projected return to industry norms. The loan fund will seek to participate in projects where its participation will help secure the owner a return commensurate with the risk. Projects where the return on equity is high will need to demonstrate why the fund's involvement is necessary, or why its participation should not be lessened. Projects where the return on equity is low will need to further justify feasibility and accuracy of costs. It shall be the goal of the fund to maintain a viable portfolio of loans with the minimum fund involvement. The projections for Hilton Garden Inn do not show returns on equity that are either unreasonable or excessive given the nature of the project. f. To the extent practicable the Section 108 funds should be disbursed on a pro rata basis It shall be a goal of the fund to disburse funds on a pro rata basis with other fiuzds being used in specific projects. In those situations where pro rata disbursement is not followed, staff will justify the procedure and seek alternative means to mitigate risk. The City will fund based on invoices and cost reimbursement. 2. Standards for evaluating public benefit All projects eligible under Section 203 and Section 204 will be required to comply with Section 570.209. Section 570.209(b)(1) establishes the standards for evaluating public benefit in the aggregate, Section 570.209(b)(2) applies those standards and 570.209(b)(3) establishes the standards for individual activities. All projects funded through the Section 108 / EDI loan fund will comply with the standards of subsections 570.209(b)(1), (2) & (3). All projects funded through the loan program will be required to meet the individual standard of Section 570.209(b)(3). The City of Yakima anticipates qualifying projects under both 570.209(b)(3)(i)(A) & (B) - the creation or retention of at least one full-time equivalent permanent job for every $50,000 of CDBG assistance and the provision of goods and services to low- and moderate -income persons where the CDBG assistance does not exceed $1,000 per low- and moderate -income person to which goods or services are provided by the activity. 9 ECONOMIC DEVELOPMENT LOAN FUND YAKIMA, WASHINGTON Projects assisted with the loan fund will be located within the federally designated Renewal Community Within this area all census tracts have levels of poverty exceeding 40 percent. Section 570.209(b)(2)(v)(F) exempts activities from meeting the aggregate standard for public benefit if the activity provides assistance to businesses that operate within a census tract that has at least 20 percent of its residents who are in poverty. If a project should fall outside of this area, it will be required to meet the aggregate standard as well as the individual standard. The Hilton Garden Inn Building is within the Renewal Community boundary. As such it can be exempted from the aggregate standard. Because of the strong job generation projected for the Trail Wagons loan the City of Yakima does not anticipate needing to exempt Hilton Garden Inn Tower from the aggregate standard. The Hilton Garden Inn building, restaurant and spa will create 71 full-time equivalent jobs, or one job for every $50,000 of public assistance. D. A Description of the Pledge of CDBG Guarantee The City of Yakima understands that if the participants in this Section 108 loan fund fail to make timely payments and the City of Yakima therefore fails to make a required payment on its notes, HUD will deduct that payment from the City of Yakima's CDBG Letter of Credit and in accepting this loan guarantee, the City of Yakima has pledged its CDBG funds and all other applicable grants as security for the guarantee. (Please refer to Attachment A - Certifications.) H. A Schedule for Repayment of the Loan In requesting approval of this loan guarantee fund the City of Yakima is requesting a commitment for a 20 - year term. Please use the following principal repayment Year Principal Repayment August 2005 $ 0 August 2006 $ 0 August 2007 $ 0 August 2008 $ 0 August 2009 $ 0 August 2010 $ 0 August 2011 $ 0 August 2012 $ 165,000 August 2013 $ 174,000 August 2014 $ 183,000 August 2015 $ 193,000 August 2016 $ 203,000 August 2017 $ 213,000 August 2018 $ 224,000 August 2019 $ 235,000 August 2020 $ 246,000 August 2021 $ 258,000 August 2022 $ 270,000 August 2023 $ 284,000 August 2024 $ 297,000 F. Certifications Please see Attachment A - Certifications. 10 MARSH January 29, 2004 Re.CF Cope �,pri,;$,\,sc p`�10t City of Yakima Department of Economic Development 129 N. 2nd Street Yakima, WA 98901 Subject: Yakima Mall Loan Request Deborah A. Krautwurm Vice President Marsh Advantage America A Service of Seabury & Smith, Inc. 1430 N 16th Avenue P 0. Box 2547 (98907) Yakima, WA 98902 800 572 9170 509 248 7460 Fax 509 248 9007 deborah.a.krautwurm@seabury.com www. marshadvantage.com JAN 3 0 2004 CITY OF YAKIMA COMMUNITY DEVELOPMENT In the next few days, you will be reviewing and deciding to approve the loan request of the GEM Development group, owners of the Yakima Mall property. The proposal to add an upscale hotel could act to begin the process of revitalizing our downtown, something that is important to all of us. As past board chair for the Yakima Valley Visitor & Convention Bureau we take great pride in the beautiful, newly enlarged convention center. Many of the larger groups using the facility and unhappy with their current hotel options. These groups have been very clear that they want new, modern, clean facilities with bar and restaurant onsite. We must keep our conventioneers happy or the groups can choose to go elsewhere for their events. Maybe the addition of some additional competition will encourage the existing facilities to revitalize their properties, as well. I hope you will give this request favorable consideration. Yakima is a wonderful community and we need a strong, vital downtown. We must start somewhere, and sooner rather than later. Sincerely, 14 1' Debora A. Kraut Vice President MAX Marsh & McLennan Companies February 17, 2004 George E. Coson III 801 Country Club Dr. Yakima, WA 98901 Yakima City Council 129 N. 2nd St. Yakima, WA 98901 RECEIVED CITY OF YAKIMA FEB 2 0 2004 OFFICE OF CITY COUNCIL Re: Recommendation on use of Section 108 loan funds for Hilton Project. Dear Council Members, I have been a businessman and private property investor in Yakima for over 30 years. During this time I've bought, sold, and managed millions of dollars of residential and commercial real estate in the city, which in turn gives me a reasonably informed overview of our local economy. Recently, as you are aware, I've been involved in the vacant house controversy, which is now under consideration by the City Council. I strongly feel that the current growing vacant house problem is primarily a symptom of deeper problems, which have at their source a number of factors including local income demographics, ongoing softness in agriculture, lack of good jobs, and increasing competition between public and private housing. Further, an imbalance between occupied home ownership and transient renters in low-income areas of the city has diminished a sense of community. This leaves only the police department to deal with the neighborhood social problems that lead to graffiti, drug and gang activities. These problems in turn further undermine these poorer neighborhoods. Against the background above there also exists today a major negative psychological perception that the heart of the city is in collapse. This is highlighted by the image of the boarded up Yakima Mall. This perception specifically impacts the nearby northeast and southeast residential areas, further eroding their potential for private investment and renewal. Nonetheless, we can't solve our problems by denying their existence and only treating the symptoms. We have to find a new way to look at these problems and start the long process to find solutions. To this end, nothing is more important than dealing with the negative public mindset that becomes more entrenched daily. Therefore I strongly recommend that you approve the use of Federal funds for the Hilton Hotel Project by Joe Morrier. Though many of you sit in the position of power, today, all of us should look back and realize that 20 years ago while most of us were neophytes, Joe Morrier was the driving force that put downtown Yakima on the map. Over the years he bucked regional 1 FOR COUNCIL INFO ONLY DATE aZ - X`f-O`f and national trends of retail flight to the suburbs and changing shopping patterns toward large box stores and discount type retailers. He has used his energy and resources to the benefit of Yakima and its citizens. If mistekes were made in recent years, they are only identified in hindsight. Who among us have managed a 40 million dollar mall or have 1:ived our lives without making business or personal calculations that might be questioned in hindsight. This is not the time for you, our leaders, to be part of the broader negative mind- set. Mr. Morrier is the main person who is in a position to help recreate a new vision for the mall property. It's up to all of us to help him and in doing so; help the city of Yakima begin the doable climb back. Since Thank you for your consideration and attention to my position. George E. t-oson 111 9/ S A So00) ya LIP &9c)i 2 3513 Highview Drive akima, WA 98902 CITY OF YAKIMA FEB 2 2004 OFFICE OF CITY COUNCIL Mayor Paul George and Members of the Yakima City Council Council Office Yakima City Hall 129 N. 2nd Street Yakima, WA 98901 Dear Mayor George and Members of the Council: It has come to my attention that there is some opposition to the current application by JEM Development for Section 108 financing of the proposed hotel redevelopment at the former Mervyn's Department Store. Although I understand some of the concerns expressed, it seems to me that attention should be focused on the potential long-term benefits of the project. At the current time, downtown Yakima has an opportunity (and need) to re -invent itself. Smaller businesses, such as the new Essencia Bakery; the Capitol Theatre renovations and possible expansion; and the development of the new green space on 2nd and Yakima are just a few examples of a direction that will, I believe, ultimately return our city's core to the vibrant exciting place it once was. The designs and plans I have seen for the proposed new Hilton Garden Inn seem to mesh well with this future goal. And, frankly, it is investment of the scope and quality now being formulated by JEM Development that is required if the "re -invention" is to take firm hold. I urge you to encourage such an investment with every tool possible—including Section 108 financing support. Sincerely, John A. Baule FOR COUNCIL INFO ONLY C Cc. DATE — (O — 0 L( 1112-1/2 Tieton Drive Yakima, WA 98902 Ph: (509) 575-0852 Fax: (509) 853-0856 www.nwinfo.net 11 February 2004 City of Yakima Office of Neighborhood Development Services ATTN: Bill Cobabe, Manager of Neighborhood Development Services 112 S. 8th Street Yakima, WA 98901 Dear Mr. Cobabe, This is for the record regarding input on the HUD Section 108 loan funds. I have watched the use of these funds in the past and have witnessed their effectiveness. They have helped to build a hotel and support local businesses. Primarily they helped Clientlogic. These all have been positive steps that we as business owners are very fortunate to have as tools in assisting our growth. As you know, it is more difficult for business to succeed in Yakima than 'most communities as the general population is lower income and except for professional services such as legal and medical the return on investment is always going to be much lower than say in Seattle where a significant middle class resides. Yakima really doesn't have much of a middle class only lower and upper class income residents. From a tax return perspective for the city upper class certainly pay taxes but are frequently exempt at a higher percentage level while lower income does not produce significant tax flow. This is relevant is because loans for hotels provide for an abundance of lower income minimum wage jobs, and other than the return of hotel and property taxes and better access to the city the return is low. Clientlogic, on the other hand, provides mostly middle class income jobs and technical training, something this city desperately needs. I run NWInfo Net, the local Internet Company. Prior to Clientlogic coming to Yakima, my pool of available employees was minimal and I had to train everyone. Now that Clientlogic is here I hire most of my new employees from them and have enjoyed a more professional, better trained work force. In addition more businesses can be courted because we now have a pool of technically trained people. In summation, the HUD Section 108 funds should be used to promote an increase in middle class income jobs. Offering them to Microsoft to open a branch in Yakima, or even to a local company in order to help them expand to a larger operation paying middle income jobs will far outweigh the benefits of building more low income jobs in Yakima. Your loans help Yakima become a professional city where people want to stay and call home. Using them for short term gains for low income projects will not help. Than'.�� -1110-1 Forbes H. iercy Owner, winfo Net February 16, 2004 Yakima City Council 129 S. Third Street Yakima, WA 98901 RECEIVED CITY OF YAKIMA FEB 1 7 2004 OFFICE OF CITY COUNCIL RECEIVED '01 FEB 17 A11 :56 YAKIMA CITY CLERK For most of us who call Yakima home, the changes taking place in the area we've traditionally thought of as "down town" have been painful to watch. While it may no longer be the hub for large retail stores, the potential is there to redefine the area and renew community optimism. GEM Development's proposed Hilton Gardens could be the first step in meeting the challenge of down town revitalization. As a long-time resident of the city of Yakima, and as a parent who doesn't want to see another daughter move to Seattle, I ask for the Council's support of GEM Development's request for funding. As discussed at a recent Council meeting, Hilton Garden's would not be willing to invest their money in our community if an extensive marketing study hadn't already indicated that Yakima would be a good investment for them. Equally important is the sense of optimism and infusion of positive energy for people as they drive down Yakima Avenue and see a beautiful new building taking shape. Hopefully that energy will encourage others to "re -discover" down town and generate a sense of community pride. If you go on-line and check out Sedona, Arizona, or Appleton, Wisconsin, or Ashford, North Carolina, you'll see that these communities, and many others, experienced the same economic downturn as Yakima. You'll see also that by having the vision to re- invent themselves, their down town cores became centers for arts and entertainment, medical facilities, higher education sites, and downtown residential hubs. We all agree that partnerships will be the key component to down town growth. I believe the GEM project offers an opportunity for our city government to take the lead in support of local development by investing in the local economy. Thank you for your consideration of this project. Yours very truly, Barbara Greco 6501 Westridge Court, Yakima, WA 98901 cDY Committee for Downtown Yaldmmn January 30, 2004 Honorable Mayor and City Councilmembers City of Yakima 129 N. Second St. Yakima, WA 98901 Dear Councilmembers: .ct,,CIV CI OF YVA DMA FEB 6 2004 OFFICE OF CITY COUNCIL We are writing to express our support for the hotel project proposed for Naches and Yakima avenues. The project would create 81 new F 1'h jobs. It would bring the return of a national tenant to our downtown—Hilton—to say nothing of the new first class accommodations for our growing tourist -driven economy. Likewise, ancillary businesses would provide conventioneers with new retail options within walking distance to the Convention Center. John Finke of the National Development Council has thoroughly analyzed this project on its merits_ Finke, who has financed and built client -government projects exceeding $600 million in direct development costs, is an expert. In this case, he's our expert. Let's move forward with this plan for a $7 million capital improvement to the center of the city. Sincerely, Committee for Downtown Yakima (formerly known as Yakima Downtown Partnership) FOR COUNCIL INFO ONLY C c DATE 2-10-0`f IR"YAKIMA CONVENTION CENTER 10 North 8th Street, Yakima, WA 98901-2515 e-mail:meetings@yakimacenter.com' TEL: 509/575.6062 • 800/221.0751 • FAX: 509/575.6252 October 8, 2004 Mayor Paul George City Of Yakima 129 N. 2nd Street Yakima, WA 98901 ocr 0 8 j.:04 Dear Mayor George: The Yakima Regional Public Facilities Districts supports the Downtown Hotel/Low Interest 108 Project proposed to be in downtown Yakima. With the expansion of the Convention Center completed, additional sleeping rooms within walking distance of the Convention Center are becoming a necessity for our convention groups. During the Strategic Planning session held by the Public Facilities District, the Board of Directors spent extensive time discussing the downtown area and how it directly impacts our Convention Center. The Downtown Hotel/Low Interest 108 Project could be the first step towards revitalization of this area. Therefore, the Board of Directors supports this economic development as an asset to the Convention Center and the entire community for the tourism dollars it will generate and the jobs it would provide. The Public Facility District will be a supporting partner in any capacity possible. Sincerely, Kathy Co General Manager Yakima Convention Center VISITORS & CONVENTION BUREAU October 8, 2004 Mayor Paul George City of Yakima 129 North 2nd Street Yakima, WA 98901 Dear Mayor George: RECEIVED OCT 082004 CITY OF YAKIMA COMMUNITY DEVELOPMENT The Yakima Valley Visitors and Convention Bureau supports the Downtown Hotel/Low Interest 108 Project proposed to be located in downtown Yakima. The travel and tourism industry has become one of the largest and most rapidly growing segments of Washington State's economy. The industry provides business opportunities and employment, while generating government revenue. Travel and tourism plays a particularly important role in many rural areas of the state, like the City of Yakima, where significant convention and visitor resources are located. The Downtown Hotel/Low Interest 108 Project will serve as an important facility that will benefit the entire community. Its location in downtown Yakima will provide amenities to our city while offering additional services for tourists from our major markets such as Seattle, Spokane, and Portland. The Yakima Valley Visitors and Convention Bureau will be a supporting partner of the Downtown Hotel/Low Interest 108 Project in any capacity possible. Sincerely, Ka - Cof ey President CEO Yakima Valley Visitors and Convention Bureau Representing the Cities of • Grandview • Granger • Harrah • Mabton • Moxee • Naches • Selah Sunnyside • Tieton • Toppenish • Union Gap • Wapato • White Swan • Yakima • Zillah 509.575.3010 • 800.221.0751 • fax 509.575.6252 • 10 North Eighth Street • Yakima, WA 98901 • yvvcb@visityakima.com • www.visityakima.com (K1.43.4004 3:J3PM YAK-HERPLD DISPLAY ADVERTISING To The City Couuncal: NO.205 P.2 In November , you will make a very importer' decision, a decision that will dramatically affect our community. The heart and soul of our community is dying. vacant buildings and "for lease" signs. Where vied for parking, litter now collects and wine greenery or bare soil. Yakima bas no town ce of economic distress. Years ago downtown Seattle was in the same leap of faith and supported development proj owntown has become a sea of trims once walked and drivers planters showcase dying . Our main street is now a symbol Few developers have stepped forward to laves willing to take a risk and invest in our downto hotel project. The project will transform an e The hotel project can become the cornerstone can sped further revitalization and help r days of prosperity. tuataon, yet their city leaders took a is like Westlake Center. in downtown Yakima. Someone is Please vote to support the new ng eyesore into a viable business, f downtown. More importantly, it turn Yakima Avenue to bygone Regardless of your personal opinion of the de INTO YA.IKIMA!) is willing to invest in our facilitating the venture with a loan. Please tak stimulate economic growth. Don't waste the o Mic i lle Smith 806 S ' 1* Avenue Yakima,WA 98902 (509) 469-2139 toper, a local company (BUY immunity. The City is simply pride in our community and vote to pornmity to make a difference, RECEI'ti ; CITY OF YA:� Yakima Valley Lodging, As cc: FA HHieoi;4 12 East Valley Mall Blvd. Yakima, WA 98903 Sammie Huggins, Secretary October 24, 2004 Yakima City Council 129 North Second Street Yakima, WA 98901 Dear Council Members: OFFICE OF CITY COUNCIL Tel: (509) 248-6924 We are writing as a members of the Yakima Valley Lodging Association. We would like to address Mr. Morrier's recent request for a Section 108 loan to build the Hilton Gardens hotel in downtown Yakima. We do not support Mr. Morrier's request for a lower interest government loan. There are - over 15 name brand properties in the requested area already, and We feel that Mr. Morrier would be given an unfair advantage over the rest of the hoteliers in Yakima by receiving a government - funded loan. There are at least "eight commercial banks" in Yakima with loan programs that offer financing ranging from $10,000-$10,000,000 (information obtained from http://www.yakima.org/DemoRraphics.htm). Financing is available to him, without needing to tap into Section 108 funds. The City of Yakima is approximately 20 square miles. There are currently approximately one hotel for every square mile in the city limits. According to Smith Travel Research, hotel occupancy went down 15.2% over last year in the month of August alone. How will investing Section 108 funds in Mr. Morrier's hotel help to boost these numbers? We understand that Mr. Morrier's proposal does include retail shops, jobs and housing and we do not object to the project itself, we just don't feel that as taxpayers we should have to subsidize it. According to the City of Yakima website, "Yakima takes pride in its on-going commitment to assist start-up businesses, grow local companies, and attract new developments to locate in our city." Doesn't it make sense to develop the businesses currently located in Yakima rather than expecting these businesses to help support their competition? We believe that the answer to this issue can be found in the Mission and Vision statements for the City of Yakima. It is a City Council priority to "Examine alternate ways to contain costs, maximize existing resources and identify alternative revenues to maintain future financial stability" (http://www.ci.yakima.wa.us/council/mission). This priority cannot be met by giving unfair business advantage to Mr. Morrier, through a lower interest rate, or by expecting existing businesses, as taxpayers, to support him. Sincerely, President Yakima Valley Lodging Association Ron's Coin & Serving Yakima For More Than 20 Years :\„3,\-0 \*.c. rR�e TY v` FEyAitrd'�iq �.i OCT 2 8 2r.ln4 OFFICE Downtown needs your help. I am convinc-•! the hotel project is the first big step that needs to and should be taken. I have never written to City Council before but because of the grave nature of the downtown, I felt I should. I have been working downtown for 29 years and things right now are slow, very slow. As a downtown business owner and as an owner of seven downtown properties, I am scared. I have never walked outside and not seen people on the sidewalks nor cars park on the street. I have always had customers La my store but now it's commonplace to go 1/2 hour to an hour without one customer walking in the door. My sales are low compared to past years and :L personally know of five or six small businesses that are having similar or worse problems. Things could get worse and if they do, I will be forced to close. I am one of the lucky ones. I have two other locations. Many others rely on a downtown for their sole livelihood. Help us now because we can't hold on much longer. Someone is willing to make a huge capital investment in downtown Yakima Let's help them,. I hope you and the rest of the council can see the good that -his project can bring and how it can start to create a turnaround for downtown. Thank you, (-9j1: Joe Mann Owner, Ron's Coin & Book 6 North 3'd Street Yakima, WA 98901 (509) 248-1117 48' Avenue & Tieton Drive Yakima, WA 98908 (509) %5-0500 Valley Mali Union Gap, WA 98903 (509) 575-1180 To The City Council: RECEIVED CITY OF YAKIMA OCT 2 9 2004 OFF" CITY COUNCIL In November , you will make a very important decision, a decision that will dramatically affect our community. The heart and soul of our community is dying. Downtown has become a sea of vacant buildings and `for lease" signs. Where pedestrians once walked and drivers vied for parking, litter now collects and wine barrel planters showcase dying greenery or bare soil. Yakima has no town center. Our main street is now a symbol of economic distress. Years ago downtown Seattle was in the same situation, yet their city leaders took a leap of faith and supported development projects like Westlake Center. Few developers have stepped forward to invest in downtown Yakima. Someone is willing to take a risk and invest in our downtown. Please vote to support the new hotel project. The project will transform an existing eyesore into a viable business. The hotel project can become the cornerstone of downtown. More importantly, it can spearhead further revitalization and help return Yakima Avenue to bygone days of prosperity. Regardless of your personal opinion of the developer, a local company (BUY INTO YAKIMA!) is willing to invest in our community. The City is simply facilitating the venture with a loan. Please take pride in our community and vote to stimulate economic growth. Don't waste the opportunity to make a difference. Sin rely, Mich4lle Smith 806 S la Avenue Yakima, WA 98902 (509) 469-2139 Yaka Bears Professional Base Northwest League Affiliate of the Arizona Dear Yakima City Council Members, RECEIVED -- CITY OF YAKIMA OCT 2 7 2004 all T COUNCIL October 26, 2004 The Yakima ]3ears Professional Baseball Team moved their administrative offices to Downtown Yakima in 2000. Our goal in relocating was to give our organization a higher physical profile in the community while showing our confidence in Downtown. We wanted to be a part of Downtown Yakima's future. Unfortunately, developments subsequent to our relocation have put that future in question. We strongly believe that the proposed Downtown hotel project is an important opportunity to reverse a negative trend. This private -public sector partnership can be a critical element in promoting Downtown Yakima as a destination point. After many months of agonizing over the fate of Downtown, we now have the opportunity to act on a proposal that will ultimately benefit the public and other Downtown businesses (possibly more so than the hotel developer). Please d� not let this opportunity pass. We hope that you all share our enthusiasm for this project. We urge you to give it favorable consideration. Thank you for your attention. Michael McMurray President 8 North 2nd Street P.O. Box 483 Yakima, WA 98901Yakima, WA 98907 509-457-5151 -www.yakimabears.007131 Pax 509-457-9909 Owned & Operated by Short Season, LLC Brandt, Sonya From: homeplate57@hotmail.com Sent: 'Monday, November 01, 2004 10.15 AM To: ccouncil@ci.yakima.wa.us Subject: re: Downtown Yakima and Adaptis Importance: High I am one of the start up employees for Adaptis which recently opened in Yakima. Currently, ten of us our spending our final (of three) weeks training in Seattle. As you know , Adaptis is leasing space from Client Logic. We are excited about our new employers and the potential for growth. I believe that with a sudden influx of 20 workers and soon more, this could be a small shot in the arm for downtown merchants. However, Mr. Joe Morier (probably misspelled) refuses to accomodate the Adaptis employees to have an exit out of the Mall except through mall parking. I am not speaking for or representing Adaptis in any way or form but writing this as a Yakima city citizen. If Morier has such little consideration for the local downtown merchants and vendors why in Gods name should the city of Yakima support his request for loan money for his hotel??? I believe if Hilton thought a hotel in downtown Yakima would be a good idea they would do it on their own! Whatever seed, loan or grant money should be made available to businesses that would actually care about Yakima. Thank You, John Hope John Hope - 316 N. 40 th Ave - Yakima Wa. Morales, Michael To: Subject: All City Clerks FW: Downtown Yakima and Adaptis FYI: This is being resent with spelling errors corrected, since my original reply was made from a Blackberry handheld. Original Message From: Morales, Michael Sent: Monday, November 01, 2004 10:47 AM To: City Council; 'jaringto@ci.yakima.wa.us'; Cook, Bill; 'bcook@ci.yakima.wa.us' Subject: Re: Downtown Yakima and Adaptis I spoke with an Adaptis rep on Friday about our CDBG contract, and I took the time to ask how their accommodations were working. Adaptis stated that their access issue had been resolved with Client Logic (from whom they actually lease the space) by providing entry/exit through the Great Western Building. Apparently this new employee hasn't received the memo. Michael Morales Original Message From: Brandt, Sonya<sbrandt@yakmail.ci.yakima.wa.us> To: Morales, Michael <mmorales@yakmail.ci.yakima.wa.us>; Cook, Bill <bcook@yakmail.ci.yakima.wa.us>; Maples, Doug <dmaples@yakmail.ci.yakima.wa.us> Sent: Mon Nov 01 10:32:09 2004 Subject: FW: Downtown Yakima and Adaptis Original Message From: homeplate57@hotmail.com[mailto:homeplate57@hotmail.com] Sent: Monday, November 01, 2004 10:15 AM To: ccouncil@ci.yakima.wa.us Subject: re: Downtown Yakima and Adaptis Importance: High I am one of the start Yakima. Currently, ten training in Seattle. As you know , Adaptis about our new employers and the potential for growth. I believe that with a sudden influx of 20 workers and soon more, this could be a small shot in the arm for downtown merchants. However, Mr. Joe Morier (probably misspelled) refuses to accomodate the Adaptis employees to have an exit out of the Mall except through mall parking. I am not speaking for or representing Adaptis in any way or form but writing this as a Yakima city citizen. If Morier has such little consideration for the local downtown merchants and vendors why in Gods name should the city of Yakima support his request for loan money for his hotel??? I believe if Hilton thought a hotel in downtown Yakima would be a good idea they would do it on their own! Whatever seed, loan or grant money should be made available to businesses that would actually care about Yakima. Thank You, John Hope up employees for Adaptis which recently opened in of us our spending our final (of three) weeks is leasing space from Client Logic. We are excited 1 YAKIMA LOPMENt MATION aCt ••00;;;Or,,,Oe'' 4400 , ••North Scbndi006t• 1 I • urna, WA '8902, 1 • • • • • REcFNED NOV 0 5 2004 CITY OF YAKIMA COMMUNITY DEVELOPMENT 'Otober 29; 2004. Ory. OF YARIA 7 2004. oOttg..0#,,pTy tO JNCIL en MEMORANDUM November 15, 2004 TO: Honorable Mayor Paul George Members of City Council FR: 1 ick Zais, City Manager 1: ook, Director of Community & Economic Development ielifkhael Morales, Economic & Community Affairs Specialist RE: JEM Development Application for Department of Housing & Urban Development Section 108 Loan Funds - Yakima Hilton Garden Inn Enclosed are documents related to tomorrow's study session and action item for the Hilton Garden Inn Section 108 loan. 1. Updated draft Conditional Approval letter from City of Yakima to Mr. Morrier for Section 108 financing. The letter was amended to include a deadline for closing of April 15, 2005; and to clarify Mr. Morrier's responsibility to pay for the costs of an environmental review and monitoring for Davis Bacon Act compliance. 2. Matrix Bank's Conditional Loan Approval letter signed by Mr. Morrier. Mrs. Morrier will be available to sign the letter on Wednesday, November 17. 3. Print out of e-mail from Dave Painter of Matrix Bank, who will be available to answer questions at tomorrow's meeting. The e-mail explains the changes to the personal guaranty that Mr. Morrier has negotiated with the bank. 4. Letter from Don Boyd explaining the default remedy process for the city as it relates to the personal guaranty. Mr. Joseph R. Morrier, Sr. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn, Yakima, Washington 402 East Yakima Avenue, Suite 1400 Yakima, WA 98901 Re: Conditional Approval Letter Dear Mr. Morrier: The City of Yakima will proceed with a formal application to the United States Department of Housing and Urban Development for a Section 108 loan guarantee in the amount of $3,560,000 subject to the following conditions. If approved the proceeds of the Section 108 loan will be lent to an investment fund for investing in a New Markets Tax Credit fund ("Fund"). That fund will lend the Section 108 proceeds to the Borrower. Borrower: JEM Properties, LLC and Morrier Hotel, LLC (collectively, "Borrower") Guarantors: Joseph R. Monier, Sr., Elizabeth L. Morrier Business Location: 401 East Yakima Avenue, Yakima, WA Purpose: The purpose of the Loan is to provide a portion of the interim and permanent financing for the proposed Hilton Garden Inn in Yakima, Washington. Estimated Sources/Uses of Funds: USES Land/Construction/Contingency FFE/Property Management Systems Interest Reserves/Loan Fee Closing Costs/Franchise Fees/WC TOTAL AMOUNT $ 8,001,000 1,020,000 208,000 297,000 SOURCES Matrix Bancorp Conventional HUD Section 108 New Markets Tax Credit Equity Owner Equity $ 9,526,000 TOTAL AMOUNT $ 3,000,000 3,560,000 750,000 2,216,000 $ 9,526,000 Equity: The Borrower will contribute $2,216,000 of the total project costs in equity. Of that amount, $1,500,000 is allocated toward the contribution of the existing land and building, $244,000 is allocated toward payment of the construction soft costs, $22,000 is allocated toward payment of the cost of the .TEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 2 of 5 appraisal, Phase I Report, and survey, $20,000 is allocated toward payment of legal fees, S24,000 is allocated toward payment of estvnated closing costs, $76,000 is allocated toward payment of the loan origination fee, $20,000 is allocated toward payment of the pre -opening expenses associated with the hotel, and $60,000 is allocated toward payment of the franchise five. Proof of the equity injection and the source of these funds must be provided prior to the closing of the Section 108 Loan. Closing costs related to the Interim Loan, the Conventional Loan, and the Section 108 Loan will be paid at or prior to closing. Any changes to this allocation of the equity injection will require approval by the Ci# of Yakima. Proof of equity must be provided five days prior to the estimated closing date. Proof of equity must be supported by, but not limited to, cancelled checks (or a copy of the check and supporting bank statements reflecting the cancelled check), paid invoices, a cashier's check for funds not yet spent, or other means as determined only by Lender. Fees: A City of Yakima loan fee of $35,600 is due at closing. In addition to the loan fee the Borrower shall be responsible for all legal fees, closing costs and trustee fees associated with preparing loan documents, closing the Section 108 Loan (including environmental review) and administering the loan (including monitoring for Davis Bacon compliance). In the event that the Section 108 Loan does not close, all costs and fees, to the extent they have been incurred, will be the responsibility of the Borrower. SECTION 108 LOAN Amount: The amount of the Loan will be $3,560,000. Term: The Section 108 Loan will be due on July 15, 2024. The Loan will be amortized over a twenty (18) year term after expiration of the first seven (7) years of interest -only payments. Payment terms are interest -only for the first seven years, then principal and interest payments due monthly based upon a twenty (18) year amortization period. Interest Rate (Loan): The interest rate on the Loan will fluctuate based on the City of Yakima's cost of funds under the Section 108 Loan Program. The City of Yakima may fix the interest rate on the Loan once a year. The Borrower will be responsible for the costs of fixing the rate if the City chooses to do so. Payment: The first payment will be due on the fifteenth day of the month the Loan is closed and on the same day each month thereafter until paid in full Prepayment (Penalty: Once the Loan is converted to a fixed rate it is subject to a ten (10) year lockout in which no prepayment is allowed. Late Fee: if a payment on the Loan is more than 10 days late, City may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. Amount: The amount of the HUD Loan will be $3,560,000. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 3 of 5 LOAN CONDITIONS: The Loans are subject to and contingent upon the following: • The Fund being able to secure a Second Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 401 East Yakima Avenue, Yakima, WA, subject only to the First Deed of Trust in favor of Lender in the amount of $3,000,000. • Receipt, review, and approval, by the Fund and City of Yakima at their sole discretion, of the real estate appraisal ordered by Matrix Bancorp, reflecting a loan to value of not more than seventy (70%) percent by a Lender approved appraiser for the real property and FF&E. • Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to the Fund and the City in their sole discretion, insuring the Fund as to its second priority lien on the subject property at 401 East Yakima Avenue, Yakima, WA, subject only to Matrix Bancorp's first lien position. • The Fund being able to secure a UCC -1 and Security Agreement perfecting a second lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter for the proposed Hilton Garden Inn. • Review and approval by the Fund and City of Yakima of a satisfactory Phase I Environmental Site Assessment for the property located at 401 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R. Morrier, Sr. • Personal guaranty of Elizabeth L. Monier. • Evidence that Morrier Hotel, LLC has unencumbered site control of the subject property at 401 East Yakima Avenue. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional A.Mproval Letter Page 4 of 5 Insurance: • Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. If the proposed hotel is not managed by Hilton Hotels, the management company must have extensive experience in hotel management and be acceptable to the Fund, the City of Yakima and Matrix Bancorp. The management agreement must have a termination :provision allowing either Lender to terminate the contract if the loan were in default. • Review and Approval by the Fund and the City of Yakima of the final construction contract. The contract shall require the contractor to obtained a payment and performance bond in the amount of the construction contact. • The Borrower obtaining and providing proof of Workers' Compensation Insurance in an amount meeting state law :requirements and with an insurance company satisfactory to HUD Loan Lender. • The Fund receiving a copy, satisfactory in its own discretion, of the fire and extended coverage insurance on the business real property in the amount of full replacement cost with the Fund named as second mortgagee for the property at 401 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage in the amount of full replacement cost, or for the maximum insurable value if full replacement cost cannot be obtained, for the personal property located owned by JEM Properties, LLC and/or Morrier Hotel, LLC dba Hilton Garden Inn. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • The Borrower obtaining Flood insurance covering the Loan collateral if required by the Fund. JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 5 of 5 Financials: Receipt, review and approval of fmancial statements and all supporting schedules, as requested, are to be within 120 days of closing the HUD Loan. Other Conditions: This loan is subject to evidence of fmal commitment and acceptance by the Borrower and approval by the City of Yakima of a conventional loan from Matrix Bancorp to the borrower in the amount of $3,000,000. This loan is subject to any and all other conditions required by the Fund and City of Yakima and their counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the Section 108 Loan. GENERAL NOTES: Conditional Approval: Please be aware that the final terms and conditions of the proposed financing are subject to approval by the City of Yakima and the US Department of HUD. Also, all legal and financial documents deemed necessary by the City in order to close the Loan must be provided and executed to the satisfaction of any or all of the parties listed above no later than April 15, 2005. No verbal statements to Borrower concerning this application by any employee or agent of Lender shall have binding effect. Morales, Michael From: Dave Painter [jdpainter.matrix@verizon.net] Sent: Tuesday, November 09, 2004 3:39 PM To: John Finke Subject: Morrier - Hilton Garden Inn, Yakima John, I have received a signed copy of the Commitment Letter dated October 1, 2004. Since that time, Matrix has accepted a request from Joe Morrier to vest title of the real estate in an LLC which would be completely owned and controlled by Joe and his wife. The children would hold no interest in the real estate nor the operating company and thereby would not be required to guaranty the loan. A revised commitment letter will not be issued until the formation of the vesting entity and final action by our board after approval by the city, and equity participant(s) verified. Regards, Dave Painter Nunn BANCORP IN INN October 1, 2004 Mr. Joseph R. Monier, Sr. JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn, Yakima, Washington 402 East Yakima Avenue, Suite 1400 Yakima, WA 98901 Re: Conditional Approval Letter Dear Mr. Morrier: We are pleased to inform you that the Loan Committee of Matrix Capital Bank ("Lender") has granted Conditional Approval of a financing package that will meet your company's needs. The package is presented to you in three separate loans: (1) Lender's conventional permanent loan in the amount of $3,000,000 ("Loan"), and (2) $3,560,000 HUD Section 108 loan ("HUD Loan"), offered through the City of Yakima, WA ("HUD Loan Lender"), and (3) a $3,000,000 interim construction loan ("Interim Loan") offered through Lender, which will convert to the $3,000,000 permanent loan mentioned above upon completion of construction. Borrower: JEM Properties, LLC and Morrier Hotel, LLC (collectively, `Borrower") Guarantors: Joseph R. Morrier, Sr., Elizabeth L. Morrier, Joseph R. Morrier, Jr., Michael D. Monier, and Elizabeth A McGree. Business Location: 339 East Yakima Avenue, Yakima, WA Purpose: The purpose of the Loan is to provide a portion of the interim and permanent financing for the proposed Hilton Garden Inn in Yakima, Washington. Estimated Sources/Uses of Funds: USES AMOUNT SOURCES AMOUNT Matrix Land/Construction/Contingency $ 8,001,000 Conventional $ 3,000,000 FFE/Property Management Systems 1,020,000 HUD Section 108 3,560,000 Interest Reserves/Loan Fee 208,000 Equity Injection 2,966,000 Closing Costs/Franchise Fees/WC 297,000 JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 2 of 14 TOTAL $ 9,526,000 TOTAL $ 9,526,000 Equity: The Borrower will contribute $2,966,000 of the total project costs in equity. Of that amount, $2,500,000 is allocated toward the contribution of the existing land and building, $244,000 is allocated toward payment of the construction soft costs, $22,000 is allocated toward payment of the cost of the appraisal, Phase I Report, and survey, $20,000 is allocated toward payment of legal fees, $24,000 is allocated toward payment of estimated closing costs, $76,000 is allocated toward payment of the loan origination fee, $20,000 is allocated toward payment of the pre -opening expenses associated with the hotel, and $60;000 is allocated toward payment of the franchise fee. Proof of the equity injection and the source of these funds must be provided prior to the closing of the Interim Loan. Closing costs related to the :Interim Loan, the Loan, and the HUD Loan will be paid at or prior to closing of the Interim Loan. Any changes to this allocation of the equity injection will require Lender approval and could delay closing of the Interim Loan. Proof of equity must be provided five days prior to estimated closing date. Proof of equity must be supported by, but not limited to, cancelled checks (or a copy of the check and supporting bank statements reflecting the cancelled check), paid invoices, a cashier's check for funds not yet spent, or other means as determined only by Lender. Fees: Fees and closing costs for all the above-mentioned loans approximating $161,000 are part of the total project. That consists of estimated closing costs of $25,000, a loan origination fee of $76,000, and the franchise fee of $60,000. This is only an estimate of fees and may not be inclusive of all fees charged for the Interim Loan and the Loan. Portions of these fees are due at the time this Conditional Approval letter is signed. The remaining closing costs will be due at closing and are the responsibility of the Borrowers. If the Interim Loan and/or the Loan are prepared for closing and does not close, a portion of these fees may still be due and payable to Lender or there may be amounts that have not been spent and which would be refunded. In the event that the Loan does not close, all costs and fees, to the extent they have been incurred, will be the responsibility of the Borrower. LENDER (MATRIX) CONVENTIONAL LOAN Amount: The amount of the Loan will be $3,000,000. Term: The maturity of the Loan will be twenty-five (25) years from the closing of the Loan. The Loan will be amortized over a twenty-five (25) year term after completion of 12 months of interest -only payments. Payment terms are interest -only for the first 12 months and then principal and interest payments due monthly based upon a twenty-five (25) year amortization period. Interest Rate (Loan): The interest rate on the Loan will fluctuate based on the "Prime Rate", as published :in the Wall Street Journal, plus 1.25%. The interest rate at the current prime rate of 4.75% would be 6.00% per year. The initial prime rate is set five (5) days prior to closing of the Loan. Rate Adjustment Period: Lender will adjust the interest rate for the first time on the first day of the calendar quarter following the initial disbursement of the Loan and on the first day of each calendar quarter thereafter. All dates of adjustment become effective on the first day of JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 3 of 14 the calendar quarter, based on the prime rate in effect for the first business day of the adjustment period. The change in interest rate is effective on that day whether or not Lender gives Borrower notice of the change. Payment: The payments are estimated at $19,472 per month during the amortized period. The principal and interest payments on the Loan will be calculated based upon the prevailing Prime Rate + 1.25% at the time the Loan's amortization period begins (12 months after closing of the Loan). The payment may go up or down, no more frequently than quarterly, based on the remaining principal balance and the interest rate, as needed to amortize principal over the remaining term of the Loan. The first payment will be due on the fifth day of the month after the Loan is closed and on the same day each month thereafter until paid in full. Lender will apply each installment payment first to pay interest accrued to the day Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal. Prepayment Penalty: The Loan is subject to a five (5) year flat prepayment penalty of five percent. (5%) Late Fee: If a payment on the Loan is more than 10 days late, Lender may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. HUD SECTION 108 LOAN NOTE: The following information regarding the HUD Loan is provided for informational purposes only. The terms and conditions associated with the HUD Loan will be disclosed at the time the HUD Loan is approved by the appropriate approval authority for HUD and funding is committed. Amount: The amount of the HUD Loan will be $3,560,000. Term: The maturity of the HUD Loan will be twenty-five (25) years from the closing of the HUD Loan. The HUD Loan will be amortized over a twenty-five (25) year term. Interest Rate (Loan): The interest rate on the Loan will be disclosed upon approval by the appropriate approval authority for HUD. For purposes of analysis, a fixed rate of 5.50% has been assumed. Rate Adjustment Period: The interest rate for the HUD Loan is estimated to be a fixed rate for the full term of the HUD Loan. The fixed rate will be determined when the funds for the HUD Loan have been committed. Payment: The principal and interest payment on the Loan is estimated to be $16,317 per month on an interest -only basis. The payment terms on the HUD Loan are anticipated to be interest -only for at least the first two years, after which the HUD Loan will begin monthly principal and interest payments based upon the amortization period set for the HUD Loan JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 4 of 14 (anticipated at this time to be twenty-five (25) years). The payment may go up or down based on the remaining principal balance and the interest rate, as needed to amortize principal over the remaining term of the HUD Loan. The first payment will be due on the fifth day of the month after ir._terest-only period has matured and will continue thereafter on the same day each month thereafter until paid in full. The HUD Loan Lender will apply each installment payment first to pay interest accrued to the day HUD Loan Lender receives the payment, then to bring principal current, then to pay any late fees, and will apply any remaining balance to reduce principal. Prepayment Penalty: To be determined by the HUD Loan Lender. Late Fee: Tc be determined by the HUD Loan Lender. LOAN CONDITIONS: The Loans are subject to and contingent upon the following: Collateral: LENDER CONVENTIONAL LOAN • Lender being able to secure a First Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 339 East Yakima Avenue, Yakima, WA. • Receipt, review, and approval, by Lender, at its sole discretion, of the real estate appraisal reflecting a value of at least $9,000,000 (+I-5%) by a Lender -approved appraiser for the :real property and FF&E located at 339 East Yakima Avenue, Yakima, WA. • Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to Lender its sole discretion, insuring Lender as to its first priority lien on the subject property at 339 East Yakima Avenue, Yakima, WA. • Lender being able to secure a UCC -1 and Security Agreement perfecting a 1st lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter acquired for the business assets of the Hilton Garden Inn. • Review and approval by Lender of a satisfactory Phase I Environmental Site Assessment for the property located at 339 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R. Morrier, Sr. • Personal guaranty of Elizabeth L. Morrier. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 5 of 14 Insurance: • Personal guaranty of Joseph R. Morrier, Jr. • Personal guaranty of Michael D. Morrier. • Personal guaranty of Elizabeth A. McGree. • Personal guaranties of the spouses, if any, of Joseph R. Monier, Jr., Michael D. Morrier, and Elizabeth A. McGree if required by legal counsel since Washington is a community property state. • Assignment of the leases and rents between JEM Properties, LLC, as Lessor, and Morrier Hotel, LLC, as Lessee. The lease must be for at least the term of the loan, including options exercisable by Morrier Hotel, LLC. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. • Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. The management agreement must have a termination provision allowing Lender to terminate the contract if the loan were in default. • The Borrower obtaining and providing proof of Workers' Compensation Insurance in an amount meeting state law requirements and with an insurance company satisfactory to Lender. • Lender receiving a copy, satisfactory in its own discretion, of the fire and extended coverage on the business real property is required in the amount of full replacement cost with Lender named as first mortgagee for the property at 339 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage is required in the amount of full replacement cost, or for the maximum insurable amount if full replacement value cannot be obtained, for the personal property located at 339 East Yakima Avenue, Yakima, WA. JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 6 of 14 Financials: Documentation: • Lender receiving proof of Dram Shop/Host liquor liability insurance in an amount and from an insurance company acceptable to Lender. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • Lender will advise you as to whether the business property or personal residences are in a Flood Plain. If so, then Flood insurance covering the Loan collateral will be :required prior to closing of the Loan. • Receipt, review and approval of financial statements and all supporting schedules, as requested, are to be within 120 days of closing the Loan. The approval[ for all loans addressed in this Conditional Approval Letter is contingent upon receipt and review of the 2003 tax returns :for all entities involved, as well as the fiscal year end statements for those entities having September 30 fiscal year end. • Lender being supplied with proof of purchase of the required liquor license prior to closing. • Lender will require that all payments on the Loan to be made through Automatic Funds Transfer (ACH debit). • Franchise approval from the Franchisor. • Copy of the lease between JEM Properties, JJC and Morrier Hotel, LLC for the real property to e occupied by the proposed Hilton Garden Inn. Lease must be fo:r at least the term of the Loan, including options exercisable by Morrier Hotel, LLC. • Landlord's consent and/or landlord's consent to improvements. • Copy of the parking agreement providing parking rights to JEM Properties, LLC and/or Monier Hotel, LLC for the parking to meet the requirements set forth by the City of Yakima. • If applicable, copies of the A/R and A/P listings and agings for all entities. The A/R and AJP listings and agings must be of even date with the most recent financial statements provided to Lender. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 7 of 14 Other Conditions: • Copy of the HUD commitment to fund $3,560,000 of the project cost at the origination of construction. • Review and approval of the $2,966,000 equity injection by the principals to the proposed transaction. • Copies of the restructured notes extended by Key Bank to Yakima Mall Shopping Center Corporation showing the actual terms of the debt restructuring are substantially the same as provided verbally by the Key Bank Loan Office handling the transaction. The Loan is subject to any and all other conditions required by HUD, HUD Loan Lender, and Lender and its counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the Loan. Special Condition: The Loan is subject to Lender obtaining tax credits under the New Markets Tax Credits Program. If the tax credits are not obtainable by Lender, this Conditional Approval Letter is null and void. HUD SECTION 108 LOAN NOTE: This information is provided for informational purposes only. Lender assumes that the HUD Loan Lender will require a second lien position in the real property and business assets of JEM Properties, LLC and Morrier Hotel, LLC, which may not be the case. The HUD Loan Lender will advise you of the conditions of approval for the HUD Loan in a separate Conditional Approval Letter upon approval by them. • HUD Loan Lender being able to secure a Second Deed of Trust (or its equivalent) in the real property, including furniture and fixtures, located at 339 East Yakima Avenue, Yakima, WA, subject only to the First Deed of Trust in favor of Lender in the amount of $3,000,000. • Receipt, review, and approval, by HUD Loan Lender a at its sole discretion, of the real estate appraisal ordered by Lender, reflecting a value of at least $9,000,000 by a Lender -approved appraiser for the real property and FF&E located at 339 East Yakima Avenue, Yakima, WA. • Receipt, review and approval of an ALTA title pohcy (or its equivalent) in form and substance satisfactory to HUD Loan Lender in its sole discretion, insuring HUD Loan Lender as to its JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 8of14 Insurance: second priority lien on the subject property at 339 East Yakima Avenue, Yakima, WA, subject only to Lender's first lien position. • I -IUD Loan Lender being able to secure a UCC -1 and Security Agreement perfecting a second lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter for the proposed Hilton Garden Inn. • Review and approval by HUD Loan Lender of a satisfactory Phase I Environmental Site Assessment for the property located at 339 East Yakima Avenue, Yakima, WA. • Personal guaranty of Joseph R. Monier, Sr. • Personal guaranty of Elizabeth L. Morrier. • Personal guaranty of Joseph R. Monier, Jr. • Personal guaranty of Michael D. Morrier. • Personal guaranty of Elizabeth A. McGree. • Personal guaranties of the spouses, if any, of Joseph R. Morrier, Jr., Michael D. Morrier, and Elizabeth A. McGree if required by legal counsel since Washington is a community property state. • Assignment of the leases and rents between JEM Properties, LLC, as Lessor, and Morrier Hotel, LLC, as Lessee. The lease must be for at least the term of the loan, including options exercisable by Monier Hotel, LLC. • Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. • Assignment of the management contract between Monier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. The management agreement must have a termination provision allowing Lender to terminate the contract if the loan were in default. • The Borrower obtaining and providing proof of Workers' Compensation Insurance in an amount meeting state law JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 9 of 14 Financials: Documentation: Other Conditions: requirements and with an insurance company satisfactory to HUD Loan Lender. • HUD Loan Lender receiving a copy, satisfactory in its own discretion, of the fire and extended coverage on the business real property is required in the amount of full replacement cost with HUD Loan Lender named as second mortgagee for the property at 339 East Yakima Avenue, Yakima, WA. • The Borrower obtaining and providing proof of Business/Personal property insurance coverage is required in the amount of full replacement cost, or for the maximum insurable value if full replacement cost cannot be obtained, for the personal property located owned by JEM Properties, LLC and/or Morrier Hotel, LLC dba Hilton Garden Inn. • The Borrower obtaining and providing proof of Business Interruption and Extra Expense coverage. • HUD Loan Lender will advise you as to whether the business property or personal residences are in a Flood Plain. If so, then Flood insurance covering the Loan collateral will be required prior to closing of the HUD Loan. • Receipt, review and approval of financial statements and all supporting schedules, as requested, are to be within 120 days of closing the HUD Loan. The approval for all loans addressed in this Conditional Approval Letter is contingent upon receipt and review of the 2003 tax returns for all entities involved, as well as the fiscal year end statements for those entities having a September 30 fiscal year end. • As determined by HUD Loan Lender. This loan is subject to any and all other conditions required by the HUD, HUD Loan Lender, Lender and its counsel to document, secure, and close the proposed financing request. All conditions are required to be satisfied prior to funding of the HUD Loan. (3) INTERIM LOAN: Lender proposes to provide to JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers ("Borrower") an Interim Loan to fund the project through Certificate of Occupancy. Terms are provided below: Loan Amount: $3,000,000 broken down as follows: JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 10 of 14 Interest Rate: Payments: Term: Prepayment and Exit Fee: Collateral: Land and existing building Construction, including contingency FF&E Construction Softcosts Interest Reserves Appraisal, Environmental, Survey Origination/Monitoring/Closing Costs Bonding Estimate Property Management Systems Working Capital, Franchise Fee, Legal Total Less: HUD Loan &Equity Injection * Total $ 1,500,000 6,172,000 945,000 244,000 132,000 22,000 126,000 60,000 75,000 250,000 $9,526,000 6,526,000 $3,000,000 *See "Equity Injection" section page 1 for additional information regarding equity injection. Prime plus 1.25%, currently 6.00%, variable rate adjustable daily. Interest will be computed on the basis of a 360 -day year for the actual number of days elapsed. Interest only payments due monthly during construction through an interest reserve account. 12 months. The :Borrower may prepay the Interim Loan at anytime subject to an exit fee of $150,000 (5% of the loan amount) Should the Borrower accept the permanent financing offered through Lender as substantially contemplated in this letter, this exit fee will be waived. The loan is subject to the Lender securing its loan with a First Deed of Trust on Borrower's interest in the land and buildings to be constructed at 339 East Yakima. Avenue, Yakima, WA. Receipt, review and approval of an ALTA title policy (or its equivalent) in form and substance satisfactory to Lender its sole discretion, insuring Lender as to its first priority lien on the subject property at 339 East Yakima Avenue, Yakima, WA. Lender being able to secure a UCC -1 and Security Agreement perfecting a 1st lien position in all fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, and instruments now owned and hereafter acquired for the business assets of the Hilton Garden Inn. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 11 of 14 UCC -1 and Security Agreement perfecting a 1st lien position in all collateral - fixtures, equipment, inventory, accounts, general intangibles, chattel paper, documents, materials, work in progress, and instruments now owned and hereafter acquired. Receipt, review, and approval, by Lender, at its sole discretion, of the real estate appraisal reflecting a value of at least $9,000,000 (+/-5%) by a Lender -approved appraiser for the real property and FF&E located at 339 East Yakima Avenue, Yakima, WA. Review and approval by Lender of a satisfactory Phase I Environmental Site Assessment for the property located at 339 East Yakima Avenue, Yakima, WA. Personal guaranty of Joseph R. Morrier, Sr. Personal guaranty of Elizabeth L. Morrier. Personal guaranty of Joseph R. Morrier, Jr. Personal guaranty of Michael D. Morrier. Personal guaranty of Elizabeth A. McGree. Personal guaranties of the spouses, if any, of Joseph R. Morrier, Jr., Michael D. Morrier, and Elizabeth A. McGree if required by legal counsel since Washington is a community property state. Assignment of the leases and rents between JEM Properties, LLC, as Lessor, and Morrier Hotel, LLC, as Lessee. The lease must be for at least the term of the loan, including options exercisable by Morrier Hotel, LLC. Assignment of the parking rights for the proposed Hilton Garden Inn held by JEM Properties, LLC and/or Morrier Hotel, LLC. The number of parking spaces and the parking rights must comply with the requirements set forth by the City of Yakima. Assignment of the management contract between Morrier Hotel, LLC and Hilton Hotels (or its designated affiliated company) for the management of the proposed Hilton Garden Inn. The management agreement must have a termination provision allowing Lender to terminate the contract if the loan were in default. Monitoring Fee: $25,000 (estimated) Construction Bonding: $60,000 (estimated) Origination Fee: $76,000 JEM Properties, LLC and Monier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 1.2 of 14 Contractor Information: 1) AIA Qualification Statement 2) Final detail cost information fo:r the construction on the subject property. 3) Contractor financial statements 4) Other information as required on attached closing needs list Survey: A copy of the property Survey for 339 East Yakima Avenue, Yakima, WA. The final terms of the Interim Loan are subject to approval by Lender and. HUD. The Interim Loan must be closed in compliance with all requirements set forth by HUD. All legal and financial documents deemed necessary by Lender in order to close the Interim Loan must be provided and executed to the satisfaction of any or all of the parties listed above prior to closing of the Interim Loan. GENERAL NOTES: Required Documents: As mentioned above, Lender's Loan Committee has granted its Conditional Approval of the Interim Loan and the Loan. The final approval of the Loan Committee and Lender's commitment to extend credit and advance funds under the Interim Loan and the Loan will be contingent upon, among other things, Lender's review and approval of each and every one of the items detailed herein, none of which may be waived except in wn.ting from an authorized representative of Lender, specifically referring to this letter and the particular item being waived. This letter is not intended to set forth all of the material terms and conditions for the Interim Loan and the Loan, all of which will be set forth in formal loan documents to be executed and delivered by Borrower, Lender, HUB (if necessary), third party guarantors and others, as applicable. In addition, if (and only if) the Interim Loan and the Loan are approved by Lender, the funding of the Interim Loan and the Loan will be contingent upon Lender's receipt (some if not all of which Lender will require) of the following: (a) evidence of no environmental hazards on the property through a Phase 1 or other means acceptable to Lender, and (b) title insurance with endorsements required by Lender. All of the aforementioned items shall be provided Ito Lender in a reasonably prompt manner. Lender will have the right to terminate this Conditional Approval in the event that any of the above items are unsatisfactory to Lender. Conditional Approval: Please be aware that the final terms and conditions of the proposed financing are subject to approval by the Lender and HUD. Also, all legal and financial documents deemed necessary by Lender in order to close the Interim Loan and the Loan must be provided and executed to the satisfaction of any or all of the parties listed above. No verbal statements to Borrower concerning this application by any employee or agent of Lender shall have binding effect. Lender's Conditional Approval is only applicable if the HUD Section 108 Loan materializes and the Interim Loan and the Loan quality for the New Markets Tax Credits. In the absence of either of the above-mentioned conditions materializi&, Lender's Conditional Approval of the Loan is null and void. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn Conditional Approval Letter Page 13 of 14 The Borrower provided the information used in granting this Conditional Approval in majority. If such information is found to be a misrepresentation, intentional or unintentional, this Conditional Approval shall become null and void. Any legal description, encumbrances and ownership are subject to verification and should not be relied upon as accurate in this Conditional Approval. Material Adverse Change: If at any time there is a material adverse change in the financial or any other condition, or the business prospects, of Borrower or any Guarantor, Lender will have no obligation to advance any funds whatsoever. To indicate your understanding and agreement with the terms and conditions contained in this Conditional Approval, please return an executed copy of this Conditional Approval to Lender, along with your check for $23,000 for payment of the $1,000 Lender Loan Packaging Fee, which is earned upon issuance of this Conditional Approval Letter, and a $22,000 deposit toward payment of the estimated costs of an appraisal, environmental report, and survey for the Interim Loan and the Loan. Upon execution of this Conditional Approval Letter and by signing below, Borrower acknowledges and agrees that this Conditional Approval Letter shall also constitute an authenticated record pursuant to the Uniform Commercial Code authorizing Lender to file a UCC -1 financing statement covering the following collateral: furniture, fixtures, equipment, machinery, inventory, accounts, general intangibles, chattel paper, documents, materials, work in progress, and instruments now owned and hereafter acquired. Lender further agrees to terminate such financing statement in the event the Loan is not closed and funded This Conditional Approval is valid until October 15, 2004. If this acknowledged letter is not received by October 15, 2004 Matrix will have no further obligation or responsibility in connection with the Loans, and the Conditional Approval will be considered null and void. Furthermore, if the Interim Loan does not close by January 15, 2005, this Conditional Approval Letter will be considered null and void, unless extended in writing by Lender. If you have any questions, please contact us. We look forward to working with you further and thank you for the opportunity to be of service to your business. Respectfully, yOR: Craig Kaffenberger SBA Chief Operations Officer Matrix Capital Bank THIS COMMITMENT SUPERCEDES AND VOIDS ANY PRIOR LOAN APPROVALS, COMMITMENTS OR PROPOSALS. JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden inn Conditional Approval Letter Page 14 of 14 ACKNOWLEDGED AND AGREED BY: JEM Properties, LLC Managing Member ()10r7 Hotel, LLC Date (o-/3 a ��' 4g � /0 / - 0 C . el Merging Membey/ Date Guarantors J septa R Morrier Date Elizabeth L. Monier Date Joseph R. Morrier, Jr. Date Michael D. Monier Date Elizabeth .A.141cGree Date DO DRESS: 3. 2N° STREET .MA, WASHINGTON ,a901 TELEPHONE: 509.834-6611 FACSIMILE: 509.834.6610 WEB SITE: www.cbblawfirm.com 1111 Carlson Boyd. & Bailey PLLC Attorneys at Law November 8, 2004 Mr. Bill Cook, Director City of Yakima Dept. of Economic and Community Development 129 N. Second Street Yakima, WA 98901 Re: City of Yakima HUD 108 Loan with Morrier Hotel, L.L.C. Dear Bill: DONALD A. BOYD E -Mail: dbovd@cbblawfirm.com You asked that I summarize the collection remedies against the personal guaranty of Joe Morrier that will be available to the City of Yakima in the event the Morrier Hotel, L.L.C. defaults on its payments and/or other obligations under the proposed Section 108 loan. I attach a copy of the Guaranty form that was provided to you earlier as a form document. Upon a default by the borrower, the City should notify Joe Morrier and his wife of the default, and can, if it chooses, make an immediate demand on Joe and Mrs. Morrier to pay on the guaranty. If an installment payment is not made, then during the 10 -day cure period the City could only demand that the installment payment be made. If after the 10 -day cure period, and after notice to the borrower and to the Morriers of acceleration of the entire debt, then the entire balance would be due. If the Morriers do not voluntarily write a check to the City to cover the debt owed, then the City would have to file a law suit against the Morriers. The suit could be joined with a suit against the borrower so that all claims are included in one action. However, the City could decide to start an action against the Morriers only, and leave the claim against the borrower to be handled separately. Because of a statutory prohibition against having multiple actions running to collect on a debt, it would be best to use this action only if the City uses the Mr. Bill Cook November 8, 2004 Page 2 of 2 judicial foreclosure action against the Hotel, and joins this claim in the same suit. The relief requested from the Court would be to have the Morriers found to be personally liable for the full debt, and allow the City to pursue their other assets for payment of the debt. As with any lawsuit, the Morriers would both have to be personally served with the Summons and Complaint. They would then have 20 days within which to file an answer to -the Complaint. Then, the City could file for summary judgment if there are no material issues of fact as to why the Morriers are not liable on the debt. The summary judgment hearing would occur within about 60 days after the motion for summary judgment is filed. If the court grants the City's motion, then a Judgment against the Morriers will be signed by the Judge. The Judgment immediately becomes a lien against their non-residential real property, and upon recording the Judgment with the Yakima County Auditor it becomes a lien upon their residence. The City can then start going after the Morrier's property. This would include having the Sheriff conduct a sale of the real property. For bank accounts, a garnishment proceeding can be commenced. For other forms of personal property, an attachment proceeding can be commenced. With regard to all of the Morriers assets, it will be important to have the Morriers complete a personal financial statement that will be attached to the guaranty and that will form the basis of what the City understands to be the assets that support the guaranty. Please let me know if you need any additional information. Ve truly urs on : oyd Encl. UNCONDITIONAL GUARANTY PARTIES: City: The City of Yakima, a Washington municipal corporation Borrower: , a Guarantor: Joseph _ . Morrier and Morrier, husband and wife RECITALS: Concurrent with this Guaranty, City and Borrower have entered into a Loan Agreement and Promissory Note to borrow Three Million Five Hundred and Sixty Thousand Dollars ($3,560,000.00). Borrower is using the funds to pay construction costs, purchase equipment and start-up supplies, inventory and other goods, for start-up working capital to construct, equip and commence operations of a hotel business to be located at Yakima Avenue, Yakima, Yakima County, Washington, pay the closing costs for this advance under the loan agreement. The undersigned has agreed to enter into this Unconditional Guaranty of all Borrower's obligations thereunder. The Personal Financial Statement appended hereto as Attachment "A" supplements this Guaranty and is provided to the City as an integral part of this Guaranty. Guarantor acknowledges that the City has specifically relied upon the Personal Financial Statement in agreeing to provide the loan to Borrower and Guarantor represents and warrants under penalty of perjury that the Personal Financial Statement contains full and complete information regarding the Guarantors financial status as of the date hereofd. AGREEMENT: As an inducement and in consideration of any and all contemporaneous or future financial accommodations by City to Borrower, the undersigned Guarantor, unconditionally guarantees the prompt payment when due and at all times thereafter of any and all existing, contemporaneously incurred and future indebtedness and liability of every kind (including all extensions, renewals and modifications thereof), absolute or contingent, however created or evidenced, owing from Borrower to City plus Guaranty Page 1 such interest as may accrue thereon. Credit may be granted by City to Borrower from time to time w:ithout further authorization of or notice to Guarantor. Guarantor agrees to pay City all expenses of every kind including, without limitation, any and all fees and expenses incurred by it on account of the serv:ices of any attorney employed or retained by it, including in-house counsel, in protecting or defending City's interest and in attempting to collect all or any part of such indebtedness and in enforcing this guaranty, with or without suit. Every immediate and successive assignee of any part of such indebtedness guaranteed hereby shall have the right to enforce all agreements and obligations contained in this guaranty for its own benefit as fully as if named herein, but City shall nevertheless have the right to enforce this guaranty for its own benefit as to so much of the liability guaranteed as has not been assigned. Guarantor waives notice of (a) the acceptance of this guaranty; (b) any and all indebtedness of any kind covered by the guaranty; and (c) any and all demands, nonpayments or other defaults in respect of such indebtedness. If more than one person or legal entity signs this Unconditional Guaranty, all references to ''Guarantor" herein shall bind each of the undersigned jointly and severally. The liability of Guarantor under this guaranty shall be continuing and shall remain in full force and effect as long as Borrower is or may be indebted to City on account of any indebtedness covered by the guaranty. It shall not be affected in any way by (and the City is hereby expressly authorized to make without notice to anyone) any sale, pledge, surrender, compromise, release, acceleration, discharge, renewal, extension, substitution, exchange or modification of any kind whatsoever of all or any part of the indebtedness covered by the guaranty, or of all or any part of the security or collateral given to secure such indebtedness, including the release or addition of other guarantors. I:ri addition, such liability of Guarantor shall not be affected in any way by the failure or :invalidity of or any defect in any security or collateral given to secure such indebtedness. No exercise or non -exercise, waiver, change, impairment or suspension by City of any right or remedy given it by this Unconditional Guaranty or by Borrower and no dealings by City with Borrower or any other person shall in any way affect any of the obligations of Guarantor hereunder or any security furnished by Guarantor, now or hereafter, or give Guarantor any recourse against City. The obligations of Guarantor to City hereunder are independent of Borrower's obligations and a separate action or actions may be brought and prosecuted by City against Guarantor, whether or not such action or actions are also brought against Borrower, other guarantors or any security granted to City. Guarantor waives and agrees not to assert or otherwise take advantage of (a) any right which it may have to require City to proceed against Borrower or any other person, firm or corporation or to proceed against or exhaust any security held by it at any time Guaranty Page 2 or to pursue any other remedy in its power; (b) any defense which it may have in the nature of statute of limitations in any action hereunder or for the collection of any indebtedness or the performance of any obligation guaranteed hereby; (c) any defense which it may have by reason of incapacity, lack of authority, or lack of shareholder or other approvals relating either to Borrower or Guarantor or the failure of City to file or enforce a claim against the estate (either in administration, bankruptcy, or other proceeding) of Borrower or of any other or others; (d) any lack of demand, protest and notice of any kind including, without limitation, notice of the existence, creation or incurring of new or additional indebtedness or of any action or non -action on the part of Borrower, City, any endorser, creditor of Borrower or Guarantor under this or any other agreement, or any person whomsoever, in connection with any obligation or evidence of indebtedness held by City as collateral or in connection with any indebtedness guaranteed hereby; (e) any defense which is may have based upon an election of remedies by City; and (f) any duty which City may have to disclose to Guarantor any facts which it may now or hereafter know about Borrower, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Borrower and of all circumstances bearing on the risk of non-payment of any indebtedness guaranteed hereby. Until all indebtedness of Borrower to City is paid in full, Guarantor shall have no right of subrogation and waives any right which it may otherwise have to enforce any remedy whatsoever which City may have against Borrower and any benefit of or right to participate in realization or any security now or hereafter granted to City. With or without notice to Guarantor, City may, in its sole discretion and at any time and from time to time and in such manner and upon such terms as it considers fit, apply any or all payments or recoveries from Borrower, Guarantor, any other guarantor or source, or from any security granted to City, under this or any other agreement, in such manner and order or priority as City may determine, to any indebtedness of Borrower to City, whether or not such indebtedness is guaranteed hereby or is otherwise secured or is due at the time of such application. For consideration as recited above, Guarantor subordinates any and all indebtedness of Borrower to Guarantor to any and all indebtedness of Borrower to City. If City so requests, any such indebtedness of Borrower to Guarantor shall be collected and received by Guarantor as trustee for City and paid to City on account of Borrower's indebtedness to it, without reducing or affecting Guarantor's liability under any of the provisions of this guaranty. This guaranty is in addition to and independent of any other guaranties at any time in effect with respect to all or any part of Borrower's indebtedness to City and may be enforced regardless of the existence of any such other guaranties which shall continue to remain in full force and effect. Guaranty Page 3 No provision of this guaranty or any right or remedy of City hereunder can be waived nor can Guarantor be released from its obligations hereunder except in writing duly executed by an authorized) officer of City. Should any one or more provisions of this guaranty be determined to be illegal or unenforceable, all other provisions shall nevertheless be effective. This guaranty shall be construed and performed according to the laws of the State of Washington. Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in Yakima County, Washington, in any action or proceeding brought to enforce or otherwise arising out of or relating to this guaranty and irrevocably waives to the fullest extent permitted by law any objection which it may have now or hereafter to venue or any claim that such forum is an inconvenient forum. EXECUTED this day of , 2004. STATE OF WASHINGTON ) ss: County of Yakima Joseph _ . Morrier Morrier On this day personally appeared before me Joseph — . Morrier, to me known to be the individual described in and who executed the within and foregoing :instrument, and acknowledged that he signed the same as his free and voluntary act and deed, for the uses and purposes therein mentioned. 2004. GIVEN under my hand and official seal this day of NOTARY PUBLIC in and for the State of Washington Residing at My Commission Expires: Guaranty Page 4 STATE OF WASHINGTON ) ) ss: County of Yakima ) On this day personally appeared before me . Morrier, to me known to be the individual described in and who executed the within and foregoing instrument, and acknowledged that she signed the same as her free and voluntary act and deed, for the uses and purposes therein mentioned. 2004. GIVEN under my hand and official seal this day of NOTARY PUBLIC in and for the State of Washington Residing at My Commission Expires: Guaranty Page 5 Original Message From: ronanderson[mailto:ron@heritagebrokers.com] Sent: Monday, November 15, 2004 8:17 AM To: Dick Zais Subject: Hotel Dick , I am submitting this to the Yakima City Council to express my support for Joe Morrier and the proposed project for the hotel in downtown Yakima. The hotel will serve as a new hub in attracting business back to the city center and will increase shopping traffic for exisiting businesses, of which, several are struggling at this point. I urge the council to approve the funds and the project as soon as possible so as to lessen the impact any delays in timing with the various agencies and private investors will have on the success of this venture. Thank you Ron Anderson 1400 Lakesie Ct #105 Yakima, WA 98902 248-9400 BUSINESS MEETING NOVEMBER 16, 2004 - 2:00 P.M. COUNCIL CHAMBERS - CITY HALL 1. Roll Call 2. Invocation/Pledge of Allegiance 3. Open Discussion for the Good of The Order/Special Presentations A. Proclamations B. Appointments to Boards and Commissions (if any) C. Status report on prior meeting's citizen service request (if any) 4. Consent Agenda *All items listed with an asterisk (*) are considered routine by the City Council and will be enacted by one motion without discussion. A citizen may request Council to remove an item from the Consent Agenda, and if approved, it will be considered in its normal sequence on the Agenda. *A. Approval of the minutes of the September 11, 2004 Adjourned Meeting, October 12, 2004 Adjourned meetings (2), and October 19, 2004 Business meeting 5. Audience Participation (Up to 30 minutes. Additional time may be devoted under Other Business if needed) Note: Audience Participation is an opportunity for citizens to come forward and discuss any item that is not listed on the Agenda. Speakers will be provided 3 minutes each to address the Council; written communication is also encouraged. The speaker's timing light will flash green when one minute remains and turn yellow to indicate 30 seconds remain to conclude your remarks before the red light and beep signals time is up. For the record, please state your name and address clearly. Please be advised that your appearance is being televised. PUBLIC HEARINGS 6. Public Hearing to consider JEM Development Application for Department of Housing & Urban Development Section 108 Loan Funds — Yakima Hilton Garden Inn (For background information, please bring material previously provided) 7. Public Hearing on the Five -Year (2005-2009) Community Development Block Grant Consolidated Plan and 2005 Annual Action Plan 8. Public Hearing on the 2005 Preliminary Budget Outside Agency Requests (Budget Page 1-1; Policy Issue Page PI -85) Intergovernmental Services (Budget Page 1-1) *9. CITY MANAGER'S REPORTS Consideration of Resolutions authorizing execution of professional services agreement with MBG Surveying for: A. Nob Hill Blvd. widening and reconstruction project, 68th to 80th Avenues B. Sidewalk construction project on the north side of Lincoln Avenue between 18- 29th Avenues *10. Consideration of Resolution authorizing execution of contract with Andreotti and Associates for professional engineering services related to the River Road widening for bridge and culvert design *11. Consideration of Resolution authorizing execution of agreement with PLSA Engineering and Surveying for professional services relating to the Englewood Terrace Sewer LID project *12. Consideration of Resolution authorizing execution of Letter of Understanding with Yakima County and the Yakima Air Terminal regarding relocation of a portion of West Washington Avenue *13. Consideration of Resolution authorizing execution of amendment to contract with Shockey Brent for environmental review services relating to the Wal-Mart land use application *14. Consideration of Resolution declaring used police vehicles as surplus and authorizing their sale/transfer to the Washington State Surplus *15. Consideration of adoption of Standard Motions A & B to initiate the annexation of property located within the Englewood Annexation area *16. Approval of Final Contract Payments for: A. 16th Avenue & Englewood/Cherry Avenue Intersection Signalization Project No. 1964 performed by Knobels Electric B. Irrigation System Improvement Projects Nos. 2008 & 2009 performed by Trenchless Construction ORDINANCES 17. Consideration of Legislation relating to the Wastewater Connection Charge: A. Resolution adopting the 2004 Wastewater Connection Charge Study Update B. Ordinance amending the Wastewater Connection Rates and Charges *18. Consideration of Ordinance amending Yakima Municipal Code 9.50 regarding assignment of citation numbers in the Municipal Code pertaining to parking restrictions *19. Consideration of Ordinance accepting the Hearing Examiner's recommendation to approve the rezone of property located at 711 West Walnut Avenue, requested by Next Step Housing *20. Consideration of Ordinance accepting the Hearing Examiner's recommendation to approve the right-of-way vacation of portions of North 31st, North 32"d and Hathaway Avenues, as requested by the City Office of Neighborhood Development Services 21. Other Business 22. Executive Session regarding pending litigation (Please allow approximately 30 minutes) 23. Adjournment to November 23, 2004 at 8:30 a.m. for budget review study session (Community and Economic Development); then to November 30, 2004 at 8:30 a.m. for budget review study session (Utilities, Library, Legal, Administration); then to December 7, 2004 at 8:30 a.m. for Budget Wrap Up ********** A Council packet is available for review at the City Clerk's Office, Library, and Police Dept. An abbreviated packet is also available on-line at www ci.yakima.wa.us under Quick Picks THE NEXT COUNCIL BUSINESS MEETING IS DECEMBER 7, 2004 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 62 For Meeting Of: November 16, 2004 ITEM TITLE: Public Hearing and consideration of a resolution authorizing the City Manager to execute and submit a Section 108 loan application and all related documents to the United States Department of Housing and Urban Development in the amount of $3,560,000 for Yakima Hotel, LLC. SUBMITTED BY: Michael Morales, Grants Officer CONTACT: Michael Morales, 575-3533 SUMMARY EXPLANATION: Yakima Hotel, LLC, represented by Joseph R. Morrier, Sr., has applied for $3,560,000 in federal Section 108 loan funds to partially finance the construction of a Hilton Garden Inn Hotel at the site of the former Mervyn's department store in downtown Yakima. A Council Study Session on the project was held October 12, 2004 to provide analysis and discussion of the project with the developer, the City's consultant, and staff prior to public hearing and council action. Written public comments have been submitted to the Council and staff, and today's public hearing is the final opportunity for verbal comment in support of or opposition to the project prior to council action. Upon council approval of the request, the attached conditional approval letter would be transmitted from the City to Mr. Morrier. Provided that the applicant satisfies all of the conditions outlined in the letter, the City Manager would be authorized to execute all closing documents upon receipt from HUD. Matrix Bank's Conditional Loan Approval letter will be signed and submitted to the City on Monday, November 15. Staff will distribute the letter to council members as soon as it is received. Resolution _X Ordinance Contract _ Other: Application for loan funds Funding Source: U.S. Department of Housing and Urban Development Approval for Submittal: Cit anager STAFF RECOMMENDATION: Staff recommends approval of the resolution. BOARD RECOMMENDATION: Council Economic Development Committee recommends approval. COUNCIL ACTION: 1 Deborah A. Krautwurm George E. Coson III John A. Baule Marsh 801 Country Club Dr. 3513 Highview Drive P. 0. Box 2547 Yakima, WA 98901 Yakima, WA 98902 Yakima, WA 98907 Forbes H. Mercy Nwinfo Net 1112 1 Tieton Drive Yakima, WA 98902 Michelle Smith 806 S. 31st Avenue Yakima, WA 98902 Michael McMurray Yakima Bears P. 0. Box 483 Yakima, WA 98907 Barbara Greco 6501 Westridge Court Yakima, WA 98901 Jay Wildgen Yakima Valley Lodging Association 12 E. Valley Mall Blvd. Yakima, WA 98903 John Hope 316 N. 40`" Avenue Yakima, WA 98908 Committee for Downtown Yakima James E. Stickel, Chair Joe Mann Ron's Coin & Book 6 North 3rd Street Yakima, WA 98901 David McFadden New Vision/YCDA P. 0. Box 1387 Yakima, WA 98907 LAW OFFICES OF 230 S. 2"' SmEE r, SUITE 202 YAKIMA, WASHING FON 989074189 TELEPHONE: 509-834-6611 FACSIMILE: 509-834-6610 Date: ATTORNEY MESSENGER SERVICE October 30, 2012 PLEASE DELIVER TO: Thank yo Mr. Jeff Cutter, City Attorney City of Yakima Legal Dept. 200 South Third Street Yakima, WA 98901-2830 "oelker Legal Assistant District Court Clerk Return Conformed Copy/Copies Federal Court Clerk Return Conformed Copy/Copies Yakima County Auditor's Office Return Conformed Copy/Copies ,EIVED OCT 302012 CITY LEGAL DEPT. TIMOTHY J. CARLSON DONALD A. BOYD ZACHARY P HUMMER f-tgA!14,, v � pop 1-4 R.1004-1 -73 0 ,g--2bc3_ o t LAW OFFICES OF CARISON Born PLLC 230 S. 2"° STREET, SUI FE 202 YAKIMA, WASHINGTON 98901 TELEPHONE 509-8346611 FAcsnsn E: 509-8346610 RFCEIVED OCT 342012 CITY LEGAL DEPT. October 29, 2012 Mr. Jeff Cutter, City Attorney City of Yakima Legal Department 200 South Third Street Yakima, WA 98901-2830 Re: City of Yakima — Morrier Hotel. Dear Jeff: Via AMS I enclose with this letter the originals of the following recorded documents. Please retain these in the closing book of original documents as the City will need to deliver the original documents to Morrier Hotel, LLC when it fully pays the underlying Note in full: 1. Assignment of Morrier Hotel, LLC Deed of Trust (AFN 7456674) — NDC New Markets Investment V, L.P. to Yakima Investment Fund (YIF); 2. Assignment of Rents (AFN 7456675) — NDC New Markets Investments V, L.P to YIF. 3. Assignment of Lease for Security Purposes (Garage Property - AFN 7456676) — NDC New Markets Investment V, L.P. to YIF; 4. Assignment of Morrier Hotel, LLC Deed of Trust (AFN 7456674) — YIF to City of Yakima; 5. Assignment of Rents (AFN 7456675) — YIF to City of Yakima; and, 6. Assignment of Lease for Security Purposes (Garage Property - AFN 7456676) — YIF to City of Yakima; Mr. Jeff Cutter, City Attorney October 29, 2012 Page 1 2 Please let me know if you have any questions regarding this matter. Very Truly Yours, Donald A. Boyd Encl. cc. Mark Foster w/encl. via email Eric Tejada w/encl. via email John Finke w/encl. via email Evelyn Wrin (HUD) w/encl. via email x:\city of yakima-20009\worrier hotel project-2004018\2012\correspondence\cutter 102912 (lir w original recorded assignment docs).docx IIffl II II uiiiuu um m Return Address: Donald A. Boyd Carlson, Boyd, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 ASSIGNMENT OF DEED OF TRUST Reference No.: 74566764 Grantor(s): 1. NDC NEW MARKETS INVESTMENTS V, L.P. Grantee(s): 1. YAKIMA INVESTMENT FUND, LLC * 7 7 7 8 2 5 5 FILE# 7778255 YAKIMA COUNTY, WA 10/09/2012 12:09:43PM ASSIGNMENT PAGES: 3 CARLSON BOYD PLLC Recording Fee: 16.00 Legal Description: 1. Lots 1, 2, 3, 4, 7 and 8, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A — 10", re-record "E — 1". 2. Lots 5 and 6, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A — 10", re-record "E — 1". 3. Lots 9, 10, 11 and 12, BI. 90, TOWN OF NORTH YAKIMA, now Yakima, "A — 10", re-record "E — 1". 4. Full legal description on Exhibit "A", page 3 hereof. Assessor's Property Tax Parcel Number(s): 191319-21449, 191319-21451, 191319-21450 and 191319-21452 NDC NEW MARKETS INVESTMENTS V, L.P. ("Assignor"), having an address of 708 Third Avenue, Suite 710, New York, New York 10017, hereby assigns to YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company ("Assignee") with an address of 708 Third Avenue, Suite 710, New 1111 ORIGINAL York, New York 10017, that certain DEED OF TRUST from MORRIER HOTEL, LLC, Grantor, whose address is 402 E. Yakima Avenue, Suite 1400, Yakima, Washington, 98901; Fidelity Title Company, Trustee; and NDC NEW MARKETS INVESTMENT V, L.P., Beneficiary dated May 25, 2005 and recorded with the County Recorder in and for Yakima County, Washington as Document No. 7456674 (Pages 1 thru 8) on June 2, 2005, together with any amendments, renewals, extensions, or modifications thereto (the "Deed of Trust"), and the obligations and claims secured thereby. This assignment is made without recourse, representation, or warranty of any kind except as set forth in the Assignment Of Loan Documents dated September 2 7 , 2012 between Assignor and Assignee. Executed under the seal as of the 27 day of September, 2012. NDC New Markets Investments V, L.P. By: HEDC New Mark . Inc. Its: General Partner By: STATE OF N eta., 1O' k- ) ) ss. COUNTY OF 0144-1 /Of k ) The foregoing instrument was acknowledged before me this say of September, 2012 by Robert W. Davenport, Chairman of HEDC New Markets, Inc., a Delaware corporation, Managing Member of NDC New Markets Investments V, L.P., a Delaware limited partnership. Rob W. Daven r ort, Chairman 171/L -e10',, 4.-A" Notary Public State of Residing At: I �JPU�X x:'.city of yaldma-20009\morrier hotel project -2004018 \ 2012 \ ndc - yif does\assignment of deed of trust - ode to yif doc WENDOLY'CASTRO Notary Public-- State of New York NO. 01CA6188055 Qualified in Bronx Co My Commission Expires i� • Exhibit A • ‘z'- 7F.6 PARC1;L A Lots 1, 2, 1, 4, 7 *nd.S, Block 90, TOWN OF N a ' ; YAF:1554, vow•Yakhoa, accpxding to .the plat. thereof retcrdeiiIin Volmme "Al! of Flats, Page 1:0, and re recorded in iz plun a rt !z Of Plats, -Wage 1, Siivated itaakinia County, State of -Washington. P ACEI B •- Lots 5 and 6, Block 90, TOWN ac .ording to the official plat thereof, recordedIn Wow "V' of Plats, Page 10, anll r-e_recorrled in' -0lume nti a{1 is .Pace. L. weeordwo aislma=tsot►piy sishoya _ .Situated ltrYolcinla •Co. y, State ,of FWWashington. PA1tCEL :C Lots 9, 10, 11 sad 12, $lock -90; )? Y. Ola AM:O.e ,. -naw .4Id a,. aeeDrtl pg to the olficaalI plat thereof xeeordea.m V'al ." 40. of Plats, Page 10 and re. -recorded iu Vo1u e"VL-of • Plais, Pagel ecords ' . -.• a Cowin ` ashin'_ o •.. - • v n Situated. is Yaltima C*unty, State of Washington. 2. • Return Address: Donald A. Boyd Carlson, Boyd, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 ASSIGNMENT OF RENTS Reference No.: 7456675 IIH ii ii iii i i ii i i i of Grantor(s): 1. NDC NEW MARKETS INVESTMENTS V, L.P. Grantee(s): 1. YAKIMA INVESTMENT FUND, LLC FILE# 7778252 YAKIMA COUNTY, WA 10/09/2012 12:07:31PM ASSIGNMENT PAGES: 4 CARLSON BOYO PLLC Recording Fee: 75.00 Legal Description: 1. Lots 1 through 12, BL 90, TOWN OF NORTH YAKIMA, now Yakima, "A 10", re-record "E — 1". 2. Full legal description on Exhibit "A", pages 3 and 4 hereof. Assessor's Property Tax Parcel Number(s): 191319-21449, 191319-21451, 191319-21450, 191319-21452, 191319-21455 and 191319-21422 NDC NEW MARKETS INVESTMENTS V, L.P. a Delaware limited partnership ("Assignor"), having an address of 708 Third Avenue, Suite 710, New York, New York 10017, hereby assigns to YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company ("Assignee") with an address of 708 Third Avenue, Suite 710, New York, New York 10017, that certain ASSIGNMENT OF RENTS from MORRIER HOTEL, LLC, Grantor, whose address is 402 E. Yakima Avenue, Suite 1400, Yakima, Washington, 98901 and NDC NEW MARKETS INVESTMENTS V, L.P., Beneficiary dated May 25, 2005 and recorded with the County Recorder in and for Yakima County, Washington as ORIGINAL Document No. 7456675 (Pages 1 thru 8) on June 2, 2005, together with any amendments, renewals, extensions, or modifications thereto (the "Assignment of Rents") and the obligations and claims secured thereby. This assignment is made without recourse, representation, or warranty of any kind except as set forth in the Assignment Of Loan Documents dated September 2 7 , 2012 between Assignor and Assignee. Executed under the seal as of the 27 day of September, 2012. NDC New Markets Investments V, L.P. By: HEDC New Mark Its: General Partner STATE OF AktA) %4) COUNTY OF l/ (J � ss. The foregoing instrument was acknowledged before me this21 day of September, 2012 by Robert W. Davenport, Chairman of HEDC New Markets, Inc., a Delaware corporation, Managing ,,- Member of NDC New Markets Investments V, L.P., a Delaware limited partnership. ,�a4L`n� v .1. d aod. VIRGINIA .RULZ'BA,DILL4- NOTARY PUBLIC STATE OFNEWYORK BRONX'cOUNTX UC: #14907414 OMSt,EX 10-o5?., . - Notary Pu State of Residing At: x:lcity of yakima-200091mmrier hotel project -2004018 \201Zoic - yif docslassignment of rents - ndc to yi£docx • Exhibit A • 3PA1UJ L A Lots Z, 2, 1, 4, 7 and 8,131o* 90, TOWN OF NORTH'YUMA, now•Yakiuua, accoxOug to .the plat thereof recordecl'in Volume "-.A'! of Plats, Page 10, and rerecorded in Vpluoio r'E„ of Plats,lage Situated bit Yakima Connty, State ofWashto . n. PARCEL! • Lots $ and 6, Block 90, TOWN OF NOPTJi. YAKIMA" : uo _Yakima,• acFnxdiug to the WOO plat t iereof,.reC011e01. Volume"'A"" QfPlats, page 1G, and re-recorded ia_Y-0ltime i.E'r of. fats„ -Pane L. xeeords4ai nageu*9 sI g Situated to:Yakima Conoty, State of Wasbington. PARCEL.:C .• Lots 9, 10, 11 and IZ, meg .901:-1.08,v1kf QF riettiE 0.I014:.74iav-'i _4i ,. aeefrt g to the oZeial.plat thereof lecordet. in Volimte "4,r of Pats, Pogo_10ndy ire.-recorded-tn Ara xpe.—''E"-of Plats, Page -1, records•ofYalaWa County. Washington,,: $ituiated iia Yairima County, State *of Washington. • Exhibit A. PARCEL D Aa un0er10o110 settee;' cont►ined :by, the. horizontal' b0tmdariug •which .ore, ^�ertiOi. _tkl spas through the Metes And bouitdai'bd ' ��ry deser�edf�l�elo�v and-lyii� within-ivyoaveirieai-bonndavieg whick are horizontal Planes with a. lower elevation of 1046.9 feet above sea level and an neper elevation 1056,40. feet above -sea level; That portion of vacated Fourth, ,Street lying between' Bloeka 70 and 90,, TWW1V .pp NORZR YAiOi t , now Yaliuuia, according to theplat therepf recorded in Volnnae ".el" of •Pais• Rap 10, • and re-recorded in Volmne 'dE" of plats, Page 1, records Qf Yakima Comnty, Washington, described. • as follows: "Bcgmniq atttte.S. thmst-coriner-•ofLat1-ofsaid-Block90;-_-- . . thence South. 71.32'35" W efougthe South. line of said.Lot 1• extended, 89.00 feed. thence North 1$ 7'20i'. **.parallel with. the centerline of said vacated-Pflttitb. Street, 99.75.feet;. t3aencelNQrta 71°440!!.E °8.2Sfeet, . • • - . .. thence Nortb 18927T204 West $.0.24 feet to :tile:Nor. th line'of s*td:Lot'14ztended, *dike Molt 71°32'39"" East along.the Mkt iuie of eaid.L$1 extended, •80 7 feetto the't.iort#ovest corner of said•Lot 1 - ' • _ • • t enceSeIIi $f° r%.•f20".I+Iast,.aiongthe Westline bersa,,129:99 feet..t .Yhe:P t • • . &itimfeiiit^3ia ,-• t-ogen- r a..• An. easement for mgjress and egress to: favor of PareeT 1)" above through, ever, under and across_. the following described propeiety: A space, contained.by the horrizontril lioniadaries wbieliiare•kertiiealplanes.passiing'hroUgh.the.taetes and .bounds..lx un4ary 4esep ed.:below aid 1ping:' iknt two verfical:•:15oriaries wbiieb. 'ire horizontal pia es=*ti-a•1OW& elevation of 1046:9b•feet-above sea level and audn upper demi-Awe the eaistiniiiim— mttiro a .op.;. • • • • : minting at the Southwest corner of LOt 1 of saidBlock 90; ,• , thenee-South 7I°32T15" West, along•the South• line of said. Lot 1 es ended; Z;0; ;deet ostiie troe.point e:�; .: .i• n • ,.. ftlieneaaortfil8S 0 ,.I'.Wgtparael with t$ecenterlieof'saiiyaca€eiiPoir ldairee ,- 0ee v tbeetceSautk7235"' Wetit200•feet- -• thence!Snity1$"1720"East'4d.00•feetto-the Sim* line.ofsaflLot1etended;.- tieAeel4or#h 71'2.'35".East, along the.South line Of said:Lot 1 extended, 255400'feet to the trite point of beginning.. • •Sitnatedin. Yaltiina.Cotmty,State of Washington. ii111111,11111111811111111,1111,11111111111111J111II Return Address: Donald A. Boyd Carlson, Boyd, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 ASSIGNMENT OF LEASE FOR SECURITY PURPOSES Reference No.: 7456667 Grantor(s): 1. NDC NEW MARKETS INVESTMENTS V, L.P. Grantee(s): 1. YAKIMA INVESTMENT FUND, LLC FILE# 7778251 YAKIMA COUNTY, WA 10/09/2012 12:05:41PM ASSIGNMENT PAGES: 3 CARLSON BOYO PLLC Recording Fee: 74.00 Legal Description: 1. Lots 1 through 12, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A 10", re-record "E — 1". 2. Full legal description on Exhibit "A", page 3 hereof. Assessor's Property Tax Parcel Number(s): 191319-21452 and 191319-21455 NDC NEW MARKETS INVESTMENTS V, L.P. ("Assignor"), having an address of 708 Third Avenue, Suite 710, New York, New York 10017, hereby assigns to YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company ("Assignee") with an address of 708 Third Avenue, Suite 710, New York, New York 10017, that certain ASSIGNMENT OF LEASE FOR SECURITY PURPOSES from MORRIER HOTEL, LLC, Grantor, whose address is 402 E. Yakima Avenue, Suite 1400, Yakima, Washington, 98901 and NDC NEW MARKETS INVESTMENT V, L.P., Beneficiary dated May 25, 2005 and recorded with the County Recorder in and for Yakima County, Washington as Document No. 7456676 (Pages 1 thru 28) on June 2, 2005, together with any amendments, renewals, extensions, or modifications thereto (the "Assignment of Lease for Security Purposes") relating to that certain Lease ORIGINAL recorded under Yakima County Auditor's file Number 7456667, and the obligations and claims secured thereby. This assignment is made without recourse, representation, or warranty of any kind except as set forth in the Assignment Of Loan Documents dated September 27 , 2012 between Assignor and Assignee. Executed under the seal as of the 27 day of September, 2012. NDC New Markets Investments V, L.P. STATE OF AII?,.) 1O) Vot.A.,_, ss. /�1� COUNTY OF I V By: HEDC New Mar ets, Inc. Its: General Partner y. Ro . ert W. Dave port, Chairman The foregoing instrument was acknowledged before me thisP° day of September, 2012 by Robert W. Davenport, Chairman of HEDC New Markets, Inc., a Delaware corporation, Managing Member of NDC New Markets Investments V, L.P., a Delaware limited partnership. VIRGINIA RUIZ BADILLa NOTARY PUBLIC STATE OF NEW YORK BRONX COUNTY LIC. #4907414 COMM EXP. 10-05-2 ( 1 110001ig Notary State of 1c Ala() VOL/C. c Cs4q.:s r, i? : t'ed • f: .41 Residing At: x:\city of yakima-200091morrier hotel project-2004018\2012\ndc - yif docs\assignment of lease - ndc to yif.doc •rrw, "r,,t< . • • •ExhIbit PARCEL D • Au underground spani'-eontainjd .by. the horiz.onmrbonEciaile,s...which..are. :vertical:Slags-On:1M. through the *400.4nd bound i .hOsandary desert4helow and•tditg-WitbinAvire-vertical-bouorlaxdes whigh: are herinutal Planes With a. lower elevation of 1-046.90 fest above sea level and au aPPer eleVadort 1056,40. feetabovesaa level; . . . . That portion of vacated Volortit Street lying between- Blochs. .79 and 901. NPR= YAKIMA now Yaltbia, •according to the plat Hereof recoded n Volatile "A:" of•ptitisi Raga 10, • and re,recorded la Volume V" of ?iats, Page 1, records of Yakima County; Washingteu, described as inflows: —77-Bejptittiq.at-thelSoutimet...conler-cif:14t14ket#-Bleelt-90;- theme Seidl- 71.93T35" Wsf alongthe Stintli line of saKliot 1 -extended, 89.00 inek thence 1orth1872770* Weitl.paraliel with the centerline of said vacated-ytiqtk 4reit, 99.75 feet; thineeNortli 7112401- 4.0145•Iegq ! • thence North 18°20". *est 30.24 feat to the.11tirthlhie ofaicILgt•1,Wetided;. . • --• 'Settee Nott 71Ir35", aSt: along the Neth 1tac.0-.Sai8.tat•I extended, ,00.7t feattO theNOrthwest corner ofsa.id•Lot 11_ • • . • .: • • . • • • thimictly kiggia2740",z4fitt*olg 725:11Pglitg:Virig129:99 fiettlY-133-0.110. - • g,i4i1KftrO.,: • •.: pox_ PARCEEX-'71-5,777:"--. 5.I.:FT.::•1 • An easement for iigs iiid egnss iii favor of Parcel above through, tiveromder and Across-. the followtag described. property A space containedbi the horizontal boundaries which• asaing-throngh the inetes and-110640:314-widarr 05.cr1iod below aff :104 Iiitho.i. vr.btli. "are .horixonig plattes,vidth. lower elevatioa of 104690 feekabove sea:levet and anupper elevatiomof 'the : • • . • leghmiug at the Southwest cornier (4740 1 of:Saidlltock.90; . thence -South 7.11r5S" Wast, along the Smith line .e said tot 1 extendedi,36110lpfeettinitheitrue poi* otbegiontht . . • . .... •..„....:1-44,41....:rg:44,,-,-....,- . thettaa„ -Np, 448M1,110".W.-eat, p.ar..240. With tl., csntmdine‘ °Cada li,agateilToilaireaf,:-f§%.00riaeg ' ' ... 15% •••g-tieatisrin•-• •:-:: • • tbgilla-g•kt.r. di 711V35" Wilat-7400-iett. • - , - - • . .. • theia-Saal,f2,74flaEast 4600 feet- to -fie South Rae oiptc1Lot Lextendtdi.. : ,..:. .: ,...,.. ,..., - -if • - thelice-Sorth 7:1°Ut$5"-kols; afang tlig-SgIathible 0 said.Vot 1 extep.401; 25,00-feei to t111;ni• point ofleginning• • -Situated la Co mity,State of Washington. . .1•••••-. • ts Return Address: Donald A. Boyd Carlson, Boyd, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 ASSIGNMENT OF DEED OF TRUST Reference No.: 7456670 Grantor(s): 1. YAKIMA INVESTMENT FUND, LLC Grantee(s): 1. CITY OF YAKIMA II1!JI 1111 111111,111111118111,1111111°1111111111 J11 FILE# 7778270 YAKIMA COUNTY, WA 10/09/2012 01:40:15PM ASSIGNMENT PAGES: 3 VALUED CUSTOMER CARLSON BOYD Recording Fee: 16.00 Legal Description: 1. Lots 1, 2, 3, 4, 7 and 8, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A — 10", re-record "E — 1". 2. Lots 5 and 6, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A — 10", re-record "E — 1". 3. Lots 9, 10, 11 and 12, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A — 10", re-record "E — 1". 4. Full legal description on Exhibit "A", page 3 hereof. Assessor's Property Tax Parcel Number(s): 191319-21449, 191319-21451, 191319-21450 and 191319-21452 YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company ("Assignor"), having an address of 708 Third Avenue, Suite 710, New York, New York 10017, hereby assigns to CITY OF YAKIMA, a Washington municipal corporation ("Assignee") with an address of 129 North 2nd ORIGINAL Street, Yakima, Washington 98901, that certain DEED OF TRUST from MORRIER HOTEL, LLC, Grantor, whose address is 402 E. Yakima Avenue, Suite 1400, Yakima, Washington, 98901; Fidelity Title Company, Trustee; and NDC NEW MARKETS INVESTMENTS V, L.P., Beneficiary dated May 25, 2005 and recorded with the County Recorder in and for Yakima County, Washington as Document No. 7456674 (Pages 1 thru 8) on June 2, 2005, together with any amendments, renewals, extensions, or modifications thereto and the obligations and claims secured thereby (the "Deed of Trust") as assigned to Assignor by Assignment of Deed of Trust dated SP,o fe.wc LA,- Z7 2012, and recorded with the Yakima County Auditor on 6 (5, �r 9 , 2012 under File Number 7 7 7 g2 SS ,. This assignment is made without recourse, representation, or warranty of any kind except as set forth in the Assignment Of Loan Documents dated September 27 , 2012 between Assignor and Assignee. Executed under the seal as of the 'Z 7day of September, 2012. YAKIIVIA INVESTMENT FUND, LLC, a Delaware limited liability company By: Community Development Properties New Markets MM, Inc., a Delaware limited liability company Its: Managing Member Robert W Davenport, C :. irman STATE OF DEL=RW5SRE ) ss. � 1 ) COUNTY OF 1364Mb -k-- } The foregoing instrument was acknowledged before me this day of September, 2012 by Robert W. Davenport, Chairman of Community Development Properties New Markets MM, Inc., a Delaware limited liability company, Managing Member of YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company. Notary Public State of Residing At: 8/OnX x:\city ofyakima-200091moirier hotel project-200401812012\assignment of deed of trust - yif to city.doc WENOOLY CASTRO .., Notarypublic -,State of-NetaitirlP - NO %01 0116188085 ' . , `4:C. Qualified in Bre x C My Commission Expirosd V2i r k • . •ttr �i.'�{e:. . e. Lots 1, 2, 1, 4, 7. and S, Block 90, TOWN OF NQR:TIL II 1A, noov Yalu, accoorfing to .the pkat Thereof ret9r4e3 in :Vol.,mute "4!! of PlatO'age 100{nd re-iecoxded fe V'p1 niie. elE' 4f Plats, rage 1, . • • Vast 9 .Igg 9 - ._ .. - - - : -•'-•------.-:.._ . -. --. - -•- - • . . . • Situated in a ma Coarity, State otWa gtoIL PARCEL•B • Loi. $ and 6, Block 90, TOWN OP I OiiTk1 yA .tvr.kno:Ailtg3ri+�?a,• aC.goidslng to 'the off jal plot theroo4.rec(tr cl,* Volume' "A" .4 Plats, .'age 10, and r-e_zecbftl d nai?olnme #B'f o .ja#s .P.aee• L. antesiis• of a4e • . .Situated bt1 ik a city, $taEt =of as3tington. Lots -9, 10, 11 astd 12, Block •9Q TQ7iV . •oF **it X,444,*,: A. ir.:Y--si. *.i,.. lomor to the o$1.plat Miggif xeeorder .Tri Val .!* of Etta Page 4. d r recorded Tan Yo1u►e`i'B"•-Of - _ Plats, Page'., records af.Yakimfi.:County WaQkti gton. • . • • • . • . Situated i t Yakima County, State o£Washiiigton- • • Return Address: Donald A. Boyd Carlson, Boyd, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 ASSIGNMENT OF RENTS Reference No.: 7456675 Grantor(s): 1. YAKIMA INVESTMENT FUND, LLC Grantee(s): 1. CITY OF YAKIMA Legal Description: FILE# 7778268 YAKIMA COUNTY, WA 10/09/2012 01:29:41PM ASSIGNMENT PAGES: 4 VALUED CUSTOMER CARLSON BOYD Recording Fee: 75.00 1. Lots 1 through '12, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A 10", re-record "E — 1". 2. Full legal description on Exhibit "A", pages 3 and 4 hereof. Assessor's Property Tax Parcel Number(s): 191319-21449, 191319-21451, 191319-21450, 191319-21452, 191319-21455 and 191319-21422 YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company ("Assignor"), having an address of 708 Third Avenue, Suite 710, New York, New York 10017, hereby assigns to CITY OF YAKIMA, a Washington municipal corporation ("Assignee") with an address of 129 North 2nd Street, Yakima, Washington 98901, that certain ASSIGNMENT OF RENTS from MORRIER HOTEL, LLC, Grantor, whose address is 402 E. Yakima Avenue, Suite 1400, Yakima, Washington, 98901 and NDC NEW MARKETS INVESTMENTS V, L.P., Beneficiary dated May 25, 2005 and recorded with the County Recorder in and for Yakima County, Washington as Document No. 7456675 (Pages 1 thru 8) on ORIGINAL June 2, 2005, together with any amendments, renewals, extensions, or modifications thereto, and the obligations and claims secured thereby (the "Assignment of Rents"), as assigned to Assignor by Assignment of Rents dated Scl,1 pm L,er 27 2012, and recorded with the Yakima County Auditor on °A1or q , 2012 under File Number 777 $ 2 S 2. . This assignment is made without recourse, representation, or warranty of any kind except as set forth in the Assignment Of Loan Documents dated September 2.7 , 2012 between Assignor and Assignee. Executed under the seal as of the 27 day of September, 2012. STATE OF 11;3AitiwitY4)44' ) !� 1 ) ss. COUNTY OF I ph� vl:LtJ votx) YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company By: Community Development Properties New Markets MM, Inc., a Delaware limited liability company Its: Managing Member By: Robert W. avenport, Ch The foregoing instrument was acknowledged before me this 27 day of September, 2012 by Robert W. Davenport, Chairman of Community Development Properties New Markets MM, Inc., a Delaware limited liability company, Managing Member of YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company. COVEN Notary U E UJ YO�%, o G9 `r me i e �.,; r, State of �* - .� d3'',t) P Residing At:, : . o q..-..°7 ,,... 4, ; soeceseuaeatO x:lcity of yakima-200091morrier hotel project -2004018 \20121assignment of rents - yif to city.doc VIRGINIA R IZ MDIU O NOTARY PUBLIC STATE OF NEW YORK BRONX COUNTY LIC. #14907414 ��)10-05-20 )-� _ /7 . • PARCki, A FarIdbit A • Lots 1,, 2, 1, 4,1 OA 8, 131odt 90, TOWN OF NORTH YAK., now•Yakiina, 0.ccov.ding to thc Opt. thereof recordledin•Vol.tone "Al! of ralis,Tage 10, And.reacrded Volguie. kids; rage • • - • . . Sitgefed State orWatli41014)11. • • PARttLB Lots $ and 6, Block 90, TOWN oy NOILW TAIONA,Rovii:V.4diia,•aCerirt#ng te stb.e ofReini pint thereof,.recurfleditt Volume -1'A" ,of T1p.ts, age 10 ansa gerzegOradeitin-Y:altwp !tg"...of *Page. L.. wecordwofWajneife.untri-W:agliat • . • . .Situated biTalrOxa 6.4.1pp.ty, StitO,ofWaibington. C Lots 9, 10, 11 siod12,Zoct •9O'V1'. 'OF NOIC1% tga044;: P•Oivit-EY-4411*- 4etOrtikg to the offidaiplat er oecordea.m Volu* "4' of PIOA Pogo ID 04. *tecoideit fit youwor -of - - PIatePag1 ecordii Com y.k ; •••••• - • 1 11 SU -dated Yattimacoimiy, Stite *of Woslftton. • . — — . • Wait RcrD ' An Innkrgratind sfistge(4744itteill)37.tlie horizsintartomdailes...which are. veiticalllatieLpassing. through the *des and hoitadi hoffidurir descAted-belaw and•-lyinOritfthi.-twe-velIical-boundasies which are horizontal planes with a. lower elevation Of 1046.9.0 feet above sea .10v.el and an qpper - elevation 1056,0 feetabove-sel leYel; • . That portion of -vagglit VtiFtlttiget lying )391w904. iBlocks • 70 and 90. TWIN O 9Raw . . YAX)MA,ow Yarmvi,secorcling toilie.plat thereaf reCoided m lioltijte "A" of Pege 10, and re,xecorded hi Volimie ng" of Plats, Page 1, records of Yakima Coition Washingtan, described as follows: -----.33epafinl-attlic.Bslithwest-con. ier•oflAtIoksaid-Block-90;-''': thence South -71°4'35" alonglbe SOnt.b rine of saic: lLat lexteaded, 89.00 fect;. thglice North jrxmir wok.pargnet vitth the centerline or said vacated Ftiaith Steit99.75 feet; • siencoNorth 7V.2401.g.aaff.45•10* • •• • • ; thence Nr±lL 18-27120 *est 30.24 feet iolue-yortWin'of p04:totl'41iiidect;. itteitce Nardi 71c3Z35". East:44..4e Nei& Ihie.a.f.said.4kit otitaid.,40.gfeOftO theNkirtfiwost corner •; • •• . • • . • threitiS031. 344qt*..249.314 thn weFOge fltern;t 12999 fiettIlltej..43-01_1.1-thg*Ilit- • •--- - • :1—Se- .1.: 'fr417rt-•:.P.liffli17131."'!ale7efi44ngtelL-' • ' An. easement fOt ifriFess and egress tn favor of Palmeri:1'1 above thirongh„ oveiomder and .:apross- • the following described propetty • • A space'containcithi the botizoutil boundaries wiiiclilreiertical.planes:pastingtoixigh.th.enietes - and -baands.31{9.andaq Oacdied liauvii :and lying •v.iithin- On.• Velika.154iiidadei Waith. 'Are .btoripitg plilgms,iiith-4-liiiTer elevailop.. of 1044;90feetabove sea level- and ailligip0 elelatlau- of the . e*sting:fir7i6n1117v5-651:7 ' ' •• : .. - ' . ; : .. :. . . . , -----, . .. . - . . . )3eginning at the Southwest coiner of Let 1 ef-SaidSlack 9.0; • thence -South 7112tfl' West; aloi3g-Ibe Souili line of 941.4 Lot 1 extencle4.1inifeli4itlie-trae.poJni . orbegintith t; . . •-• : - ...4i•W;i:u41:,.-.4:ileoz,',,,.;.,•:.,.,,. ., . • -,..g.2:: -4:migf.••.".4y4.?2,-:.i. -:-., % , tliena,e3410,141-8=1.2r We 4 Bar -.240 With tbe.•exttv,Iiike.ofkia leacgtpii*o*iii attOpt;:-ffetiiiiieg Ilielxee. &ilia: 71412'3$1' Wt.:00.tiet • . • - • -: .• tbenee-Sidh1720"'Eait'46.60.feet- to -the South line .0Esgd•Lot Lextendedi. -.,....4.......1. . . * thea,S0-140ith 711=5" Eiast, along the.Soutli: line of ofti:fot 1•extegdect 2600 Toet to tiiiiiui point • ofbegionini: • •Situatedin.YalifTria.County,State of Washington. 11* 111111111111111,111,1111111111111,1111L111 Return Address: Donald A. Boyd Carlson, Boyd, PLLC 230 South 2nd Street, Suite 202 Yakima, WA 98901 ASSIGNMENT OF LEASE FOR SECURITY PURPOSES Reference No.: 7456667 Grantor(s): 1. YAKIMA INVESTMENT FUND, LLC Grantee(s): 1. CITY OF YAKIMA FILE# 7778269 YAKIMA COUNTY, WA 10/09/2012 01:35:29PM ASSIGNMENT PAGES: 3 VALUED CUSTOMER CARLSON BOYD Recording Fee: 74.00 Legal Description: 1. Lots 1 through 12, Bl. 90, TOWN OF NORTH YAKIMA, now Yakima, "A 10", re-record "E — 1". 2. Full legal description on Exhibit "A", page 3 hereof. Assessor's Property Tax Parcel Number(s): 191319-21452 and 191319-21455 YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company ("Assignor"), having an address of708 Third Avenue, Suite 710, New York, New York 10017, hereby assigns to CITY OF YAKIMA, a Washington municipal corporation ("Assignee") with an address of 129 North 2nd Street, Yakima, Washington 98901, that certain ASSIGNMENT OF LEASE FOR SECURITY PURPOSES from MORRIER HOTEL, LLC, Grantor, whose address is 402 E. Yakima Avenue, Suite 1400, Yakima, Washington, 98901 and NDC NEW MARKETS INVESTMENTS V, L.P., Beneficiary dated May 25, 2005 and recorded with the County Recorder in and for Yakima County, Washington as Document No. 7456676 (Pages 1 thru 28) on June 2, 2005, together with any amendments, renewals, ORIGINAL extensions, or modifications thereto and the obligations and claims secured thereby (the "Assignment of Lease for Security Purposes") relating to that certain Lease recorded under Yakima County Auditor's file Number 7456667, as assigned to Assignor by Assignment of Lease for Security Purposes dated 5er4. 27 2012, and recorded with the Yakima County Auditor on ag(i, bei 'i , 2012 under File Number 777 ' 2 S' f ,. This assignment is made without recourse, representation, or warranty of any kind except as set forth in the Assignment Of Loan Documents dated September 2 7, 2012 between Assignor and Assignee. Executed under the seal as of the 2 77 day of September, 2012. YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company By: Community Development Properties New Markets MM, Inc., a Delaware limited liability company Its: Managing Member /By i — Robert W. ,avenport, C'/ I. • I STATE OFIE-17trYtkItt ) ) ss. COUNTY OF Iv fswio/V- ) The foregoing instrument was acknowledged before me this '7 day of September, 2012 by Robert W. Davenport, Chairman of Community Development Properties New Markets MM, Inc., a Delaware limited liability company, Managing Member of YAKIMA INVESTMENT FUND, LLC, a Delaware limited liability company. Notary Public l / State of 044J 70 Residing At: x \city of yakima-20009\morrier hotel project -2004018\20121 assignment of lease - yif to city.doc WENDOLY CASTRO, ':.a''7: Notary Public , State°of Notw?York - I, I NO. 01CA6188055 ,'4. Qualified in Bronx Cour I My Commission Expires 011i-�/r1�_i WA* A ' PARCI D • An undergrou id space,'coantaiued.by the horizon'terhom1.daiaes which -are. !e icai_pl _passing. through the bites and botiadt bitundary dese }ed•below and•-. withfm•• T two;aysirtical-bonudavie;t which are horizontal planes with a. lower elevation of 1046.9 feet above sea level and an upper elevation 1956,40 feet above -sea level: That portion of vacated. Fourth, Street lying between Blocks- 70 and 90,. TOWN OF NORTH ' YAKIMA, now Yalpma, according .to the plat theregf recorded In Volume "A" of •PZaisi Page 10, •and re-recorded in Volume "E" of plats, Page 1, records of Yakima County, Washington, described as follows: 13epinnin at ihe.S.o uthwAst.corner-•of Lot 1-orlaid-Blocic90; __.' - . thence South -71934'3S" Welt; alongthe South lbe of said Lot 1•estouded, 89.00 feet;. tbenee North i 7'20i' West,:parailel; with the centerline of said vacated-ii.'enrth Sti,cat 99.75• fret; thence -North 71`3240•=t•E '$ 25fee . -•- ,.1,0;# -ended;.• .- thence North 18927'20*est 3024fot to tie:}i:oratefaidLottxeace N9t 713235", fast alpng • •the Neith a4e4seld.L4t1 exteged, .-k • erb the Tort vest . corner ofaaidLot 1; - - - • h Al a' •• - tli:"�ri':�lsaace:SiiI20",zastialoi g the NireA pAltemai;. 29 feet to -t le_ oigi giant is io __ i . •.Pdtiin^ G Ely; Si af, aeTfiiugf PARCEL E 71;7:7:77-2 ...,;.,.�.,.,.-....: - • CV ',,,jf.:.! . . An. easement for ingiess and egress in favor of Parcel' "ii" above through, over, ander anti :$eross_. date follow ng described property: • A space, contained:by the•hotizontal boundaries which•areiieal•plairies•passiwg'f ! gh.thenotes and-bounds:Mi4tindaty• 4ese i eC1• :below -and 1 •.ping. -vi thin-•-tw,o; vertieal:•, [Sounda; fes wliith are horizontal lanes•Wit a-loyvex•elevat on of 046:90feat- 23 _ 1 above sea level�and upper elevation:. of the i of a ops;. eaistfmg. .. - .. - .. .teginning at the Southwest coiner of Lot 1 o# -said,-: j ck 90; thence -Sunni 7I°32'35" West; alongthe South line -esaid.Lot 1extendedy,3 ;O ftevion'tiie;i ue.point ' i : tlieuxe' °14"1:2%t 'We,} garallewith t$ecent�ime� otsemvacatedyoust0•�reet;;-'lfs00: fet theace•South 71° 2'35"- Weat 2$ 000 feet; _ • - thence-'Shith-8c27.20"'East'4.0.00'feet-to:the Southline .ofs udLot 1_extende14.- „Jr -r. the .eeNorth 71°32,15":East} alangthe.Solithline Of said:Lot1.extended, 25400•feet to e•true-point of.lig. • •Situated:inYalO'ni •Cotmry,.State of Washington.