HomeMy WebLinkAbout2024-69 CC Resolution RESOLUTION NO.2024-69
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF TEMECULA APPROVING A SUBORDINATION
AGREEMENT WITH NEWPOINT REAL ESTATE
CAPITAL, LLC, FOR ITS LOAN TO LAS HACIENDAS
HOUSING ASSOCIATES, L.P. TO REFINANCE AND PAY
OFF ITS EXISTING CONSTRUCTION LOAN
THE CITY COUNCIL OF THE CITY OF TEMECULA DOES RESOLVE AS
FOLLOWS:
Section 1. The City Council does hereby find determine and declare that:
(a) Pursuant to a Loan Agreement dated May 26,2020,the City made a loan of
$718,445 of development impact fees and a construction loan of$8,910,698 of low/mod housing
set aside funds (as successor to the assets of the former redevelopment agency)to Las Haciendas
Housing Associates, L.P. ("Borrower") repayable from a percentage of net cash flow/residual
receipts. The loan was to help finance a 77 unit apartment project ("Project") with 37 units
restricted to low income households at affordable rent by a recorded agreement with the City
("Regulatory Agreement").
(b) The existing construction loan for the Project is coming due on November
7, 2024 and the Borrower is negotiating a refinancing loan or so-called "permanent loan" from
NewPoint Real Estate Capital, LLC to refinance and pay off the construction loan. That new loan
will be purchased by Freddie Mac (i.e., the Federal Home Loan Mortgage Corporation) and put
into a pool of similar loans in order for Freddie Mac to issue mortgage-backed securities.
(c) Counsel for the new lender has provided the attached form of Freddie Mac
Subordination Agreement as a document required from the City in order for the new loan to be
made, and after repeated discussions with counsel to Freddie Mac, Freddie Mac counsel has
reportedly said that no changes can be made to it because the loans in the securitization pool must
have standard documentation (they can't make special disclosures to securities purchasers
regarding legal differences for certain loan documentation, like the Subordination Agreement).
(d) That form of Subordination Agreement provides for much more than simple
subordination of the City's deed of trust, but such scope is not unusual for commercial
subordination agreements with one primary exception--it provides that upon a default under the
City Regulatory Agreement that is not cured, the City may not exercise its right to accelerate its
loan and if not paid, foreclose its junior deed of trust, without the consent of the new lender. That
is the so-called"standstill provision".
(e) In adopting this Resolution and approving the proposed Subordination
Agreement, Council recognizes that: (1) it contains an unlimited "standstill" clause with certain
impacts on the City's rights under the Loan Agreement; (2)) the refinancing lender in question
requires that form of Subordination Agreement with unlimited standstill in order to make its new
loan; (3) according to the Memo Regarding Las Haciendas Subordination Agreement from the
owner/borrower dated as of October 21, 2024, the owner/borrower is not able to get acceptable
loan terms (amount; use; interest rate) from any other lender that would not require an unlimited
standstill provision; and (4) since the City's deed of trust is currently subordinate to the
construction loan deed of trust, if the construction loan is not timely repaid by refinancing, the
existing senior construction loan deed of trust could be foreclosed, extinguishing the City's
junior/subordinate deed of trust.
Section 2. The City Council hereby approves the Subordination Agreement in
substantially the form attached hereto as Exhibit A and authorizes the City Manager to execute the
Subordination Agreement on behalf of the City with such changes as are necessary or convenient
to accomplish the purposes of the City's loan agreements for the Project and this Resolution. The
City Manager is further authorized: 1)to enter into amendments to the Subordination Agreement
to change, adjust, or clarify provisions of the Subordination Agreement that are appropriate to
further the intended purposes of the Subordination Agreement and this Resolution; 2) for good
cause, extend the time for performance of Developer's obligations under the City's Agreements
with the Developer of the Project; and 3) approve on behalf of the City such subordination
agreements or other amendments to the City's Agreements for the Project as necessary or
convenient to integrate the Developer's affordable housing financing and Project financing with
the terms of the City's Agreement.
PASSED,APPROVED,AND ADOPTED by the City Council of the City of Temecula
this 461 day of November, 2024.
James Stewart, Mayor
ATT
Rands , ity Clerk
[SEAL]
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STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF TEMECULA )
I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing
Resolution No. 2024-69 was duly and regularly adopted by the City Council of the City of
Temecula at a meeting thereof held on the 4"day of November, 2024, by the following vote:
AYES: 3 COUNCIL MEMBERS: Alexander, Schwank, Stewart
NOES: 0 COUNCIL MEMBERS: None
ABSTAIN: 0 COUNCIL MEMBERS: None
ABSENT: 1 COUNCIL MEMBERS: Kalfus
Randi Johl, City Clerk
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