HomeMy WebLinkAbout01/08/2019 08 Section 108 Loan Guarantee Assistance Program with HUDBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEM ENT
1
Item No. 8.
For Meeting of: January 8, 2019
ITEM TITLE: Resolution authorizing the City of Yakima to participate in the HUD
public offering as part of the Section 108 Loan Guarantee
Assistance Program to refinance two existing notes
SUBMITTED BY: Joan Davenport, AI CP, Community Development Director
SUMMARY EXPLANATION:
On November 27, 2018, the City of Yakima received a notice from HUD of the opportunity to
participate in a federal refinancing of two Section 108 Loans approved by the City of Yakima in
2004. These loans supported the development of the Hilton Gardens Inn project by Morrier
Hotel, LLC. The original loan from HUD for the project was $3,560,000. In 2004, all loan costs
were paid by Morrier Hotel LLC. The private company (Morrier Hotel LLC) makes monthly
payments on the loan directly to the financial institution. This loan was an economic development
project in 2004 and available within the City of Yakima due to our participation in the Economic
Development Initiative (EDI) Program of HUD.
The opportunity to refinance the loan at a lower interest rate came unsolicited to the City of
Yakima. We shared this information with the loan recipient (Morrier Hotel LLC). They have
indicated a desire to participate in the loan refinance to a lower interest rate and will cover all costs
including those incurred by the city of Yakima and the closing costs. Upon approval by the City of
Yakima, final documents will be prepared and submitted to HUD.
ITEM BUDGETED:
NA
STRATEGIC PRIORITY: Economic Development
APPROVED FOR
SUBMITTAL:
City Manager
STAFF RECOMMENDATION:
Adopt resolution
2
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description Upload Date Type
• resolution rah 12/26/2019 Culver Memo
Letter in HUD luIrut In Risfluaire, roar' B -02 -MC -53-
D 12,'2117N1H [Ick up Material
0008
Letter in HUD luIrut In Risflualsr, I nail B -04 -MC -53-
D 12,'2117N1H [3[7.k up Material
mins
• R -2C04-173 1212712018 Ceuer Memo
• 2004 coudiLiorni apprmal 12/27/2l1a Cover Memo
A RESOLUTION
RESOLUTION NO. R-2019-
3
authorizing the City of Yakima to participate in the HUD public offering as
part of two Section 108 Loan Guarantee Assistance Program to refinance
two existing notes or other obligation in the original principal amount of
$2,417,000, for the Morrier Hotel LLC project of the Hilton Gardens Inn
and a second note for $341,000 for the Hilton Gardens Inn.
WHEREAS, the City of Yakima, by Resolution R-2004-173, adopted November 16, 2004,
authorized an application seeking loan guarantee assistance under Section 108 of the Housing
and Community Development Act of 1974, as amended, from the United States Department of
Housing and Urban Development ("HUD"), and did authorize City Manager, Richard R. Zais to
execute the documents necessary to accomplish the transaction, and did accept HUD's
guarantee of Section 108 note numbers B -02 -MC -53-008 and B -04 -MC -53-008 for the Hilton
Garden Hotel Project under a Section 108 Contract for Loan Guarantee Assistance dated
September 14, 2006; and
WHEREAS, the assistance provided by HUD was the guarantee of a note in the original
principal amount of $3,560,000, plus interest thereon; and
WHEREAS, HUD has notified the City of Yakima that a public offering will occur in
February, 2019, which will reduce and solidify the interest rate on the notes, and to participate,
the City of Yakima must immediately notify HUD of its intention to refinance all or a portion of its
existing Section 108 commitment through the public offering; and
WHEREAS, HUD may require, as a condition of participation in the public offering, that
City of Yakima execute documents related to the transaction, and whereas Morrier Hotel, INC has
previously agreed to pay the City of Yakima's share, as determined by HUD, of the customary
and usual issuance, underwriting, legal, and other costs related to the public offering and future
administration of the Note and the trust certificates, in addition to Morrier Hotel Inc.'s obligation to
pay the note principal and interest; and
WHEREAS, it is economically sound and in the best interest of the City of Yakima to
accept more favorable fixed rates of interest under the Section 108 Loan Guarantee program
offered by HUD under the public offering; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
1. That the City Manager, Cliff Moore, or his duly authorized agent, shall notify HUD of
the City's and Morrier Hotel, Inc.'s desires to participate in the February, 2019, public
offering by HUD through the loan guarantee assistance program under Section 108
of the Housing and Community Development Act of 1974, as amended, for the
existing obligation of $2,758,000 in the original principal amount of $3,560,000, and
to refinance the original principal amount of $3,560,000 at such rates of interest that
will be determined by HUD at the time of the public offering.
2. That the City Manager, Cliff Moore, is authorized to execute the necessary documents
as required by HUD to refinance the existing guaranteed Section 108 Note, and to
execute such other documents, contracts, amendments and agreements with HUD,
4
and to authorize payment of any required fees, as may be necessary to effectuate
this refinancing transaction.
ADOPTED BY THE CITY COUNCIL this 8'h day of January, 2019.
Kathy Coffey, Mayor
ATTEST:
Sonya Claar Tee, City Clerk
December 11, 2018
CO ITY DEVELOPME DEPARTME
Joan Davenport, AICP, Director
129 North Second Street, 2nd Floor Yakima, Washington 98901
Phone (509) 575-6183 • Fax (509) 575-6105
www.yakimawa.gov/services/community-development
Ms. Kerry S. Zombeck
Vice President
The Bank of New York Mellon Trust Company, N.A.
AIM 1554-1270
500 Ross Street, 12th Floor
Pittsburgh, PA 15262
5
Subject: Optional Redemption of Note Issued in Connection with Section 108 Government
Guaranteed Participation Certificates, Series HUD 2006-A
Note Number: B -02 -MC -53-0008
Dear Ms. Zombeck:
Pursuant to Section 3.03 of the Trust Agreement governing the Section 108 Government
Guaranteed Participation Certificates, Series HUD 2006-A, the City of Yakima (the "Borrower"),
hereby provides notice of its election to redeem as of February 1, 2019, the Note that it issued as
part of the Series HUD 2006-A Participation Certificates ("Optional Redemption"). The Trust
Agreement was executed on January 1, 1995, by the Secretary of Housing and Urban Development
(the "Secretary") and Chemical Bank as Trustee, and Series 2006-A Supplement to the Trust
Agreement was executed on September 14, 2006, by the Secretary and The Chase Manhattan Bank
as Trustee. Amendment No. 1 to the Trust Agreement was executed on June 30, 2004, by the
Secretary and JP Morgan Chase Bank as Trustee. The Borrower recognizes that The Bank of New
York Mellon is the successor to the foregoing trustees and has assumed all of the obligations of
the Trustee under these agreements. Capitalized terms used in this letter and not defined herein
shall have the same definition as in the Trust Agreement as amended.
The Note and its Principal Amounts to be fully redeemed on February 1, 2019, are
identified below:
Note Number: B -02 -MC -53-0008
Maturity Date
August 1, 2019
August 1, 2020
August 1, 2021
August 1, 2022
Total
Principal Amount
(in Dollars)
Interest Rate
Participation Certificate
CUSIP Number
$ 80,000
84,000
87,000
90,000
$ 341,000
5.45%
5.51%
5.57%
5.62%
911759 JA 7
911759 JB 5
911759JC3
911759 JD 1
Code Ad 'ni.5frallean (509) 575-6126 Planning (509) 575-618. ° 0 o Neighborhood & Develop ,nt Services (509) 575-6I0
2015
1994
6
The Borrower recognizes that its Optional Redemption of the listed Note requires payment
of the full Principal Amounts thereof, and accrued interest to February 1, 2019. Accrued interest
must be remitted to the Trustee no later than January 23, 2019.
The Borrower hereby authorizes the Trustee to give notice of this Optional Redemption to
the Holders of the Participation Certificate in accordance with the Trust Agreement.
If you require additional information regarding this transaction please contact Joan
Davenport at the following address:
City of Yakima, Department of Community Development
129 North 2' Street, Yakima, WA 98901
Office: (509) 576-6417
joan.davenport@yakimawa.gov
cc: Paul Webster, HUD
oan Davenport, AICP, Community Development Director
Authorized Representative of the Borrower
2
*PCM.A;1140 "
December 11, 2018
COMM ITY DEVELOPME DEPARTME
Joan Davenport, AICP, Director
129 North Second Street, 2nd Floor Yakima, Washington 98901
Phone (509) 575-6183 • Fax (509) 575-6105
www.yakimawa.gov/services/community-development
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Ms. Kerry S. Zombeck
Vice President
The Bank of New York Mellon Trust Company, N.A.
AIM 1554-1270
500 Ross Street, 12th Floor
Pittsburgh, PA 15262
Subject: Optional Redemption of Note Issued in Connection with Section 108 Government
Guaranteed Participation Certificates, Series HUD 2006-A
Note Number: B -04 -MC -53-0008
Dear Ms. Zombeck:
Pursuant to Section 3.03 of the Trust Agreement governing the Section 108 Government
Guaranteed Participation Certificates, Series HUD 2006-A, the City of Yakima (the "Borrower"),
hereby provides notice of its election to redeem as of February 1, 2019, the Note that it issued as
part of the Series HUD 2006-A Participation Certificates ("Optional Redemption"). The Trust
Agreement was executed on January 1, 1995, by the Secretary of Housing and Urban Development
(the "Secretary") and Chemical Bank as Trustee, and Series 2006-A Supplement to the Trust
Agreement was executed on September 14, 2006, by the Secretary and The Chase Manhattan Bank
as Trustee. Amendment No. 1 to the Trust Agreement was executed on June 30, 2004, by the
Secretary and JP Morgan Chase Bank as Trustee. The Borrower recognizes that The Bank of New
York Mellon is the successor to the foregoing trustees and has assumed all of the obligations of
the Trustee under these agreements. Capitalized terms used in this letter and not defined herein
shall have the same definition as in the Trust Agreement as amended.
The Note and its Principal Amounts to be fully redeemed on February 1, 2019, are
identified below:
Note Number: B -04 -MC -53-0008
Maturity Date
August 1, 2019
August 1, 2020
August 1, 2021
August 1, 2022
August 1, 2023
August 1, 2024
Principal Amount Interest Rate
(in Dollars)
$ 83,000
89,000
97,000
105,000
5.45%
5.51%
5.57%
5.62%
206,000 5.66%
1,837,000
5.70%
Participation Certificate
CUSIP Number
911759 JA 7
911759JB 5
911759 JC 3
911759 JD 1
911759JE9
911759JF 6
Total
$ 2,417,000
Code Administration (509) 575-6126 • Planning (509) 575-6183 • Office of Neighborhood & Development Services (509) 575-6101
Yakima
2015
1994
8
The Borrower recognizes that its Optional Redemption of the listed Note requires payment
of the full Principal Amounts thereof, and accrued interest to February 1, 2019. Accrued interest
must be remitted to the Trustee no later than January 23, 2019.
The Borrower hereby authorizes the Trustee to give notice of this Optional Redemption to
the Holders of the Participation Certificate in accordance with the Trust Agreement.
If you require additional information regarding this transaction please contact Joan
Davenport at the following address:
City of Yakima, Department of Community Development
129 North 2nd Street, Yakima, WA 98901
Office: (509) 576-6417
joan.davenport@yakimawa.gov
cc: Paul Webster, HUD
Sincerely,
o avenport, AICP, Community Development Director
Authorized Representative of the Borrower
2
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RESOLUTION 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
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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
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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
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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
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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
14
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.
15
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.
16
17
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
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JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn
Conditional Approval Letter
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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.
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JEM Properties, LLC and Morrier Hotel, LLC as Co -Borrowers dba Hilton Garden Inn
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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
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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.
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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.
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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
A RESOLUTION
Distributed at the44.
Meeting g-iq
RESOLUTION NO. R -2019 -
authorizing the City of Yakima to participate in the HUD public offering as
part of two Section 108 Loan Guarantee Assistance Program to refinance
two existing notes or other obligation in the original principal amount of
$2,417,000, for the Morrier Hotel LLC project of the Hilton Gardens Inn
and a second note for $341,000 for the Hilton Gardens Inn
WHEREAS, the City of Yakima, by Resolution R-2004-173, adopted November 16, 2004,
authorized an application seeking loan guarantee assistance under Section 108 of the Housing
and Community Development Act of 1974, as amended, from the United States Department of
Housing and Urban Development ("HUD"), and did authorize City Manager, Richard R. Zais to
execute the documents necessary to accomplish the transaction, and did accept HUD's
guarantee of Section 108 note numbers B -02 -MC -53-008 and B -04 -MC -53-008 (the "Notes") for
the Hilton Garden Hotel Project under a Section 108 Contract for Loan Guarantee Assistance
dated September 14, 2006 (the 'Contract"); and
WHEREAS, the assistance provided by HUD was the guarantee of the Notes in the
original principal amount of $3,560,000, plus interest thereon, and
WHEREAS, HUD has notified the City of Yakima that a public offering will occur in
February, 2019, which will reduce and solidify the interest rate on the Notes, and to participate
the City of Yakima must immediately notify HUD of its intention to refinance all or a portion of its
existing Section 108 commitment through the public offering; and
WHEREAS, HUD may require, as a condition of participation in the public offering, that
City of Yakimatexecute documents related to the transaction, and whereas Morrier Hotel, INC has
previously agreed to pay the City of Yakima share, as determined by HUD, of the customary and
usual issuance, underwriting, legal, and other costs related to the public offering and future
administration of the Notes and the trust certificates, in addition to Morrier Rotel, INC's obligation
to pay the principal and interest on the Notes; and
WHEREAS, it is economically sound and in the best interest of the City of Yakima to
accept more favorable fixed rates of interest under the Section 108 Loan Guarantee program
offered by HUD under the public offering, now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE cirtr OF YAKIMA:
1. That the City Manager, Cliff Moore, or his duly authorized agent, shall notify HUD of
the City s and Morrier Hotel, INC's desires to participate in the February, 2019, public
offering by HUD through the loan guarantee assistance program under Section 108
of the Housing and Community Development Act of 1974, as amended, for the
existing obligation of $2,758,000 issued in the original principal amount of $3,560,000,
and to refinance the loan and the related Notes at such rates of interest that will be
determined by HUD at the time of the public offering. Payment of the principal of and
interest on the Notes (including any refinancing obligations) shall be as provided in
the Contract and related documents. Such Notes (and obligations issued to refinance
such Notes) are not general obligations of the City of Yakima, and shall not be
included in the debt capacity calculations of the City of Yakima for either constitutional
or statutory debt capacity purposes.
2. That the City Manager, Cliff Moore, is authorized to execute the necessary documents
as required by HUD to refinance the existing Notes and to execute such other
documents, contracts, amendments and agreements with HUD, and to authorize
payment of any required fees, as may be necessary to effectuate this refinancing
transaction.
ADOPTED BY THE CITY COUNCIL this 8th day of January, 2019:
Kathy Coffey, Mayor
ATTEST:
Sonya Clear Tee, City Clerk
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