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HomeMy WebLinkAbout12/13/1971 Item #H-3jCITY OF NEWPORT BEACH DEC 13 1971 Office of By the CITY COUNCIL CITY ATTORNEY CITY BF IMA'lA►*'' %T REACH To: The Honorable Mayor and Members of the City Council From: City Attorney 43 H3�P December 13, 1971 Subject: BALBOA BAY CLU34 REQUEST FOR REFINANCING The lease of the City -owned property to the Balboa Bay Club provides that said lease may not be assigned without the prior consent of the City of Newport Beach. The Balboa Bay Club is requesting that the Council consent to a new "wrap- around" financing arrangement with U. S. Financial Corporation for $13,200,000, to be secured by an assignment of the Club's lease- hold estat&.'together with the improvements thereon. Richard Stevens, Executive Vice President of the Balboa Bay Club, will be present at the afternoon study session to outline how the new financing will operate. Mr. Stevens advises in the attached letter to the City Council that proceeds from the financing will be utilized to improve the property, reduce or pay off existing debts, and for corporate development purposes. By consenting to the assignment, the City in no way waives or relinquishes any of its rights or interests under the main lease. If the Council desires to approve the proposed refinancing, the appropriate action would be to adopt the resolution approving assignments of a leasehold estate together with the improvements, by deeds of trust and /or by sale lease -back, and authorizing the execution of a consent to such assignments, which appears on this evening's agenda. I have reviewed the refinancing arrange- ment and it meets with my approval. The legal documents necessary to carry out the proposed assignments are subject to review and final approval by the City Attorney. DENNIS O'NEIL City Attorney DO'N :mh Att. cc: City Manager City Clerk / 1221 WEST COAST HIGHWAY • NEWPORT BEACH. CALIF. 92660 / (71,6) 5482211 December 2, 1971 Newport Beach City Council Newport Beach, California Subject: Balboa Bay Club refinancing Gentlemen: We have been fortunate enough to locate a source of refinancing the Balboa Bay Club and as required by the terms of our lease with the City, prior approval of this financing is necessary. The matter has been discussed with the City Manager and the City. Attorney and they have indicated that they have no objection to the transaction in the form indicated in the attached draft resolution and . consent. While on the surface the Bay Club financial structure is complex, once understood it is really a simple matter. The essence of the situation is that the City's position is always senior to any encum- brance the Bay Club may place upon the property. In other words, when we borrow money we use as security for that borrowing the improvements such as the buildings and our interest in the lease. We are not pledging the City's interest in the lease. Since all buildings and improvements on the property must revert to the City free and clear when the lease terminates, the City is in fact improving its position whenever improvements are made or more money invested. The proceeds of the financing will be utilized to improve the property, reduce or pay off existing debt and for corporate development pur -: poses. Funds will not be expended for the purpose of dividends or distribution to the holders of the common stock of Balboa Bay, Club,. Inca . CONSENT TO ASSIGNMENT OF LEASEHOLD ESTATE BY DEEDS OF TRUST AND /OR BY SALE LEASE -BACK Reference is hereby made to that certain lease dated March 24, 1948, as amended.-April 10, 1950, September 29, 1952, and March 28, 1960, wherein the:CITY OF NEWPORT BEACH, a munic- ipal corporation, is the lessor (the "LESSOR "), and BALBOA BAY CLUB, INC., a California corporation, is the lessee (the "LESSEE ") covering and affecting certain real property situated in the City of Newport Beach, County of Orange, State of Cali- fornia, which property is more particularly described in said lease, as amended (said lease, as amended, is hereinafter re- ferred to as the "Main Lease "). BALBOA BAY. CLUB, INC. proposes to sell or hypothecate the leasehold estate created by the Main Lease by deeds of trust and /or sale lease -back (hereinafter referred to as "financing documents "). The financing documents are further described as follows: Said conveyances shall be for an amount not to exceed Thirteen Million Two Hundred Thousand.D011ars ($13,200,000.00) and shall be made by BALBOA BAY CLUB, INC, as Grantor to U-S. Financial Corporation or to an affiliate or subsidiary thereof or to such other corpora- tion, persons or entities as may be subsequently specifically approved by the CITY OF NEWPORT BEACH. The deeds of trust shall be given by BALBOA BAY CLUB, INC., a California corporation, as Trustor in favor of U..S. Financial Corpora- tion or a subsidiary or affiliate thereof or such other corporation, persons or entities as may be subsequently approved by the.CITY OF NEWPORT -1- 0 • BEACH as security for payment of an indebtedness not to exceed the said sum of Thirteen Million Two Hundred Thousand Dollars ($13,200,000.00). The CITY OF NEWPORT BEACH, as Lessor, hereby consents to the financing documents and transactions described hereinabove upon the condition that the same is given and accepted subject to the following covenants and conditions, to -wit: (a) That except as herein otherwise provided, the financing documents and all rights now or hereafter acquired thereunder, are, and shall be subject to each and all of the covenants, conditions and re- strictions set forth in the.Main Lease, and to all rights and interests of the Lessor therein, none of which are or shall be waived by this consent; (b) That should there be a conflict between the provisions of the Main Lease and the provisions of the financing documents, the former shall control; (c) That if the leasehold estate of the Lessee which is the subject of the financing documents shall be foreclosed or otherwise acquired under the terms of the financing documents, the trans- feree thereof shall thereupon and therby assume the performance of and shall be bound by each and all of the covenants, conditions and obligations provided in the Main.Lease to be performed and ob- served by the Lessee thereunder; (d) That nothing in this Consent shall be deemed to prohibit the assignment by the holder of the evidence of the indebtedness secured by the financing documents, together.with the financing documents without the prior consent of the Lessor; (e) That the Lessor agrees that it will not termi- nate the Main Lease because of any default or breach thereunder on the part of the Lessee if the holder of the financing documents, within thirty (30) days after the service of written notice from the Lessor of its intention to terminate the Main Lease for such default or breach, shall either cure such de- fault or breach, if the same can be cured by the payment of money, or if otherwise, shall undertake in writing with and for the benefit of the Lessor, to keep and perform all of the covenants and condi- tions of the Main Lease provided therein to be kept and performed by the Lessee until such time as the leasehold estate of the Lessee shall be sold upon foreclosure pursuant to the financing documents, or shall be released or reconveyed thereunder; provided, however, that if the holder of the financing documents shall fail or refuse to comply with any and all of the conditions of this subpara- graph (e), then and thereupon the Lessor shall be released from the covenant of forebearance herein contained, and any notice provided for in this sub- -2- 0 0 paragraph (e) shall be for the service of notices, and shall be delivered or directed to the holder of the financing documents at its address as last shown on the records of the Lessor; (f) That the:Lessor assumes no liability or respon- sibility for the order of priority of the financing documents or the relation of it to any other deed of trust affecting said leasehold estate; (g) That upon and immediately after the recording of the financing documents the Lessee, at its own expense, shall cause to be recorded in the office of the County Recorder of said Orange County a written request executed and acknowledged by the Lessor for a copy of any notice of default and of any notice of sale under the financing documents as provided by the statutes of the State of Cali- fornia relating thereto. Concurrently with the recordation of such financing documents, the Lessee shall furnish to the Lessor a complete copy of the financing documents,,together with the name and address of each holder thereof; (h) That this form of Consent shall be recorded contemporaneously with the recordation of the original of the financing documents herein re- ferred to and to which this.Consent relates, in which event the copy of the financing documents attached hereto shall not be recorded. This Consent is conditioned upon the execution by the Lessee and by U. S. Financial sidiary or affiliates or such entities as may be specifical BEACH, which are the Grantees documents described above, of tached hereto and made a part Corporation, or such of its sub - other corporations, persons or Ly approved by the CITY OF NEWPCR T or Beneficiaries under the financing the acceptances and agreements at- hereof. This Consent is further conditioned upon review and final approval by the.City Attorney of the legal documents neces- sary to carry out the assignment. Prior consents of Lessor dated December 28, 1965 (as amended by the Consent dated July 8, 1968) and dated. August 14, 1967 concerning the Main Lease are not modified or affected by this Consent. Dated: 19 . CITY OF NEWPORT BEACH DON dm 12/7/71 -3- By: Mayor By: City Clerk ACCEPTANCE AND AGREEMENT The Undersigned as the Beneficiary or Grantee named in certain financing documents mentioned in the foregoing Consent, in its own behalf and for its successors in interest, and with and for the benefit of the Lessor named in said Consent, does hereby approve, accept and agree to be bound by each and all of the conditions, covenants and acknow- ledgements set forth in said Consent. Dated at , California, this day of , 1g By The Undersigned BALBOA BAY CLUB, INC., a California corporation, as the Lessee and Assignor named in the foregoing Consent, and as the Trustor or Grantor under the financing docu- ments therein mentioned, in its own behalf, and with and for the benefit of the Lessor named in said Consent does hereby approve, accept,and agrees to be bound by each and all of the conditions, covenants and acknowledgements set forth in said Consent. Dated at , California, this day of , BALBOA BAY CLUB, INC. By: Eli