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HomeMy WebLinkAboutESM 10-17-79October 17 12 :00 p.m. Presiding. SOUTH BEND REDEVELOPMENT COMMISSION EMERGENCY SPECIAL MEETING 1979 1200 County -City Bldg. 227 W. Jefferson Blvd. Ifficer: F. Jay Nimtz, South Bend, IN. 46601 President The South Bend Redevelopment Commission of the City of South Bend, Department of Redevelopment met in special session duly called in accordance with the law and rules of the Redevelopment Commission at 12 :00 noon at Room 1200, County-City Building, in the City of South Bend, Indiana. The meeting was called to order w th F. Jay Nimtz, President, presiding and the following members of the Redevelopm nt Commission present: 1. ROLL CALL Membert Present: Members Absent: Legal counsel: Redevelopment Staff: Commun News Mi Guests ity Development Staff: Mr. F. Jay Nimtz, President Mr. Lloyd E. Robinson, Sr., Vice President Ms. Paula Auburn, Member Mr. A. Peter Donaldson, Secretary Mr. Robert J. Cira, Assistant Secretary Mr. Kevin J. Butler Mr. Carl Ellison, Director Mrs. Ann Kolata, Deputy Director Mr. Kevin C. Horton, Real Estate Officer Ms. Ann Bathon, Acquisition Specialist Mrs. Jane A. Zimmerman, Executive Secretary Ms. Denise Fleming, Secretary Mrs. Barbara J. Radican, Performance Standards Officer Mrs. Theresa Ellett, Monitor �dia: Mr. Larry Ford, Reporter, WSJV -TV Mr. Bill Hentsch, Photographer, WSJV -TV Mr. Dave Anderson, Reporter, WNDU -TV Mr. Dick Nemeth, Photographer, WNDU -TV Mr. John McKnight, Reporter, WSBT -TV Mr. Frank Vellner, Photographer, WSBT -TV Mr. Marchmont Kovas, Reporter, South Bend Tribune Mr. Thomas J. Brunner, City Attorney The Secretary of the Redevelopment Commission reported that notice of this em rgency meeting, in the form attached to these minutes, had been given prior to t is meeting, as follows: 1. Byltelephoning the members of the Redevelopment Commission to inform South Bend 4ecial edevelopment Commission Emergency Meeting - October 17, 1979 1. (continued)... th m of this emergency meeting; 2. By posting a copy of the notice of this em rgency meeting at the main entrance of th principal office of the Redevelopment Commission; and 3. By telephoning all news media which have fi ed written requests for notice of meetings with the Redevelopment Commission to inform them of this meeting. The resident concluded that the meeting had been duly callel in accordance with the rules of the Redevelopment Commission and Indiana Code 5- 14 -1.5 and ordered a copy of the notice fil d with the records of the Redevelopment Commission. 2. NEW BUSINESS Mr. E1 ison: The Redevelopment Commission held a special meetin on September 27, 1979, during which Resolution #592 w s passed authorizing the execution of a Lease Agreem nt with RAHN Properties II relative to Disposition Parcel No(s) 4 -1, 4 -31, and 4 -32 in IND. R -66. At thar meeting, Mr. Butler read the provisions of the lease agreement between the Department and RAHN Properties II. The Commission approved the lease and al owed Legal Counsel certain latitude to refine the do ument, but indicated that should a change of substa tial nature be necessary, that change would need Commis ion approval. Based on the apparent need for such a proval, an emergency meeting was called for today. Mr. Bu ler: The developers, RAHN Properties II, a partne ship comprised of two general partnerships, AETNA nsurance Casualty Company, and a number of indivi uals, have requested certain changes to the Lease greement. Today's meeting has been called to dis uss those changes as the closing is scheduled for to orrow (October 18, 1979) and Friday, (October 19, 1979) in Chi ago. A number of the changes are simply formal change;, but since we are meeting, we might as well a prove those as well as the substantial change . -2- DISCUSSIONS HELD CON- CERNING LEASE AGREE- MENT CHANGES WITH RAHN PROPERTIES II South BendlRedevelopment Commission Emergency Ppecial Meeting -- October 17, 1979 2. NEW BUSINESS Mr. Butler continues... Basically, we are providing that the plans and specifications must be submitted to the Commission by Jan ary 1, 1980 (the previous date was March 1, 1980) and we are stating that the construction plans must be approved by the Commission in final form by April ,1980 (the previous date was May 1, 1980). There 's provision in the Lease Agreement that no partne of the partnership may sell his interest withou approval by the Department of Redevelopment. AETNA asualty Insurance Company is a New York Corpor tion, and under the insurance laws of the State f New York, they cannot restrict at any time, y any agreement, their ability to transfer any in erest that they have in any property. They are re uesting that we make a specific exception with r spect to that particular partner of the parnte ship, and I would so recommend. Another ten mi lion dollars worth of bonds are going to be sol for the financing of the construction of the fa ility, and another two and a half million in equity put into the project by the partnership itself. They would like us to approve the specific mortgage and they outline, in their draft language, the to ms of that mortgage. We would be providing, by acc pting this particular provision, that the mortgage is acceptable to us. We have a provision in the Lease by which our rent payments are subordinated to the payments under any mortgage loan tat is approved by us; so we are approving this 1 an in advance. This is a usual provision. The la ;t provision that was requested was an exculp tion provision, basically stating that the partners and the partnership would not be liable for any of the obligations of the tenant under the Lease Agreem nt. The only recourse of the Agency would be a termination of the leasehold estate. In other words, we could take action to eject or evict them from the premis s. We have discussed this provision with the repres ntatives of the partnership and some of the partners of the partnership who were particularly intere ted in this provision. They have agreed to a fall back position, which would put them basically in the same situation had they incorporated. In other 4ords, the partners will not be personally liable for any of the obligations of the partnership under the lease, but the partnership itself, basically the as ets of the partnership, will be and we will have recour a against them. -3- South Bend Redevelopment Commission Emergency ' pecial Meeting October 17, 1979 2. NEW BU�INESS (continued) Mr. Ni tz: I might say to the Commission, Mr. Butler and Mr. Ellison, and I have been in contact this week while these discussions have been taking place. Mr. Butler, you mi ht list what the assets of the partnership are. Mr. Butler: The assets of the partnership at this point are nothing. The partnership really will become effective as an Economic entity tomorrow (October 18, 1979) or Friday, (October 19, 1979) when the bonds are sold. Bascially, the assets will be the improvements to be transferred from the City to the partnership. As construction proceeds on the hotel, the building with t e furnishings, fixtures, and equipment will constitute the partnership's major asset. Additionally, the partnership is entering into management and operations agreements with Marriott Hotel Corporation to operate the hotel and this agreement is an asset. Also, cocuments with FBT Corporation, because this is an int grated development, as between FBT and RAHN Properties as the developers of that block - and so there are certain agreements with respect to parking usage, to access easements, and so forth. So those are the assets of the partnership. Additionally, the partnership, as I i dicated, is going to be investing two and a half millior dollars, roughly of equity money for purposes of financing the construction in addition to the ten million dollar loan they are receiving. Mr. Ni tz: Carl, in the discussions you and I had Friday didn't you indicate to me that there has been some 2scussions with Rahn Properties II that they may incorrate? Mr. Ellison: That is correct, but at a later date. Mr. Ni tz: Which would essentially put them in the positi n that they are asking for now, anyway. Mr. Butler, it is our recommendation we go ahead and approve these changes now as negotiated, is that correct? Mr. Butler: Yes, that is correct. Ms. Au urn: Would you explain to me what tenant obliga ions we are talking about? Mr. Bu ter: We begin with, of course, the construction of the improvements. They are obligated under the terms of the Lease Agreements to construct the improvements, as per the plans and specifications which ultimately they will be pre enting to the department for review and approval. They will be obligated under terms of the agreement to convey the public improvements, the garage and atrium to -4- South Bend 4ecial edevelopment Commission Emergency Meeting - October 17, 1979 2. NEW BUSIN Mr. Butler continues... mainta n and operate those particular improvements for the benefit of the public. They will have the no mal obligations o`f°a tenant under a lease once the facility has been constructed to pay rent to mainta n the premises, to make sure the taxes are paid and to see that insurance requirements are met. Mr. Ro inson: Is this the last crisis meeting we are going o have before they start putting up the bricks and mo tar? Mr. Butler: Construction work on the hotel itself will not begin until next summer. The garage has to proceed to a point where their construction can begin. This should be the last meeting as they are supposed to sign the lease agreement tomorrow. Mr. Ni tz: The Chair recognizes the Honorable Thomas J. Brunner, City Attorney for the City of South Bend. You have been involved in these negotiations too; we are very appreciative of the help you have put into this project. There has been a lot f effort that the public doesn't realize. Mr. Brunner: No specific comments. Generally, you are correct, a gread deal of effort by many people has been devoted to this project, and we are pleased that it is nearly a reality. Mr. Ni tz: Any questions by the press or the public? Mr. Larry Ford: Mr. Nimtz, who is the tenant that the partners don't want liable for the obligations to RAHN Properties II? Mr. Bu ler: RAHN Properties is the tenant. Mr. John McKnight: Without this provision, how would the liability work? Would the partners and the tenants be liable for one another's obligations? Mr. Butler: No, the individual partners will not be liable It would be similar to a corporate structure and th re has been talk in the past about ultimately assign ng the interest of the partnership to a torpor tion that will be established. -5- South Bend 4ecial edevelopment Commission Emergency Meeting - October 17, 1979 2. NEW BUM Mr. Butler continues... If a corporation at this time were entering into a lease with us, the shareholders in the corporation, the officers and the directors of the corporation would not be personally liable. The partners then are in the same position as if they were share- holder; of a corporation. This is not an unusual situation. Incidentally, the lender has also provided simila exculpatory provisions in the loan agreement, the no e, the mortgage, and so forth. Basically, their -ecourse is against the assets of the partnership, which gain would be the improvements and management operat ng agreements related thereto. Mr. Jo n McKnight: It doesn't then adversely affect the City's or Commission's interest? Mr. Butler: No. Mr. Dave Anderson: If the partners are not liable then who is? Mr. Butler: The partnership itself because we would have recourse against anything that the partnership owns. Mr. Nirtz: Any further questions or discussions? Mr. Ellison: I think it should be noted that this project has often come to several crisis points and, should the Commission elect to approve these changes in the lease, it obviously reflects that the project continues to move forward despite some problems. The staff, along with the Commission, believes the project will happen. We will see a groundbreaking, Friday. There should be a great commun ty enthusiasm at this point and not a feeling that the project is dying. For the record, it should be stated that in fact we are still optimistic that we are going to be at that groundbreaking at 11:15, Friday. ' and the -press should so note. Mr. *e Anderson: Was there any reason to believe beyond this approval we shouldn't be optimistic? Mr. E1 ison: None whatsoever, I just want to make very sure t at the press understands that. South Bend 4ecial edevelopment Commission Emergency Meeting - October 17, 1979 2. NEW BUSINESS (continued) Mr. Butler: I think maybe for purposes of perspective, these requested changes were not unanticipated. I am not surprised at all that they requested them. It is not an unusual situation when you are dealing with or negotiating with a partnership for the partners themselves to be exonerated or exculpated from 1iabil ty. Again, for purposes of perspective, I have been involved in the transaction for about a month and a half. In talking with Mr. Brunner, who has been involved in this project for 2Z years, attorneys who are representing the lender, and the attorneys who are representing the developer RAHN Properties, and of course, the people with First Bank, have all stated that this is one of the most complex transactions that they have ever been involved in. It is extremely complex, and as a result, it is inevitable that some requested changes will occur as the transactions are being constantly structured towards its final form. Ms. Auburn made a motion to approve the above modifications in the lease agreement with RAHN Properties II relative to Disposition Parcels No(s) -1, 4 -31, and 4 -32, seconded by Mr. Robinson, and the motion was unanimously carried. 3. NEXT COMMISSION MEETING The ne t regularly scheduled South Bend Redevelopment Commis ion Meeting will be held on October 19, 1979, at 10: 0 a.m. 4. ADJOURINME There Commis be adj was un at 11 : ieing no further business to come before the ion, Ms. Auburn made a motion that the meeting ,urned, seconded by Mr. Robinson, and the motion .nimously carried. The Meeting was adjourned 'S A.M. CHANGES IN LEASE AGREEMENT WITH RAHN PROPERTIES II APPROVED NEXT COMMISSION MEETING ADJOURNMENT UIXA-T z, President Carl Ellison, Executive Director -7-