HomeMy WebLinkAboutSubordination of Real Estate Mortgage - Failed to Pass fiANT4N
y ;� CITY OF CANTON COUNCIL AGENDA ITEM
DATE: August 19, 2014
SUBJECT: APPROVAL OF SUBORDINATION AGREEMENT AND AMENDMENT
TO MORTGAGE BETWEEN CITY AND PREFERRED EAGAN I LLC (CANTON
CROSSING)
TYPE OF VOTE: 2/3-FlNANCIAL,MATTERS
ACTION REQUESTED: VOTE ON AGREEMENT&AMENDMENT
BOARD/COMMISSION
REVIEW: Click here to enter text.
DEPARTMENT: LEGAL
SUBMITTED BY: NANCY L. RABEL
FISCAL IMPACT: CITY'S $800,000.00 LOAN WOULD BE A SECONDARY LIEN
BEHIND A $1,052,750.00 FIRST MORTGAGE ON A BUILDING THAT IS OVER 100%
FINANCED
BACKGROUND: PREVIOUS TIF FUND RECIPIENT REQUESTING THE CITY TO
SUBORDINATE AN AMOUNT BEYOND WHAT WAS ORIGINALLY AGREED TO
RECOMMENDATION:Click here to enter text. '
ATTACHMENTS: FIRST AMENDMENT TO MORTGAGE AND SUBORDINATION OF
REAL ESTATE MORTGAGE
SUBORDINATION OF REAL ESTATE MORTGAGE
WHEREAS, Preferred Eagan I LLC, an Illinois limited liability company, granted a mortgage and
assignment of rents ("First Mortgage") in favor of LZ Ventures, LLC, an Illinois limited liability company,
affecting certain property("Property")located at 1741 East Chestnut Street,Illinois and legally described on
Exhibit A attached hereto and made a part hereof,
WHEREAS, the First Mortgage secured a note in the principal amount of$840,000, and is dated
May 29, 2013 and recorded with the Fulton County Recorder of Deeds on June 10, 2.013 as document
#1354520;
WHEREAS, Preferred Eagan I LLC and Canton Crossing Corporation, an Illinois corporation,
granted a mortgage ("City Mortgage") in favor of the City of Canton, an Illinois municipal corporation
("City"), affecting the Property, the City Mortgage being junior and inferior to the lien created by the First
Mortgage;
WHEREAS, the City Mortgage secured a note in the principal amount of$800,000, and is dated
August 21, 2013 and recorded with the Fulton County Recorder of Deeds on August 22, 2013 as document
#1355812;said Mortgage was amended August_,2014 and said amendment was recorded on August_,
2014 as document#
WHEREAS, MidAmerica National Bank("Bank") has agreed to make a loan to Preferred Eagan I
LLC, and said party has agreed to execute and to deliver to the Bank a note in the principal amount not to
exceed$1,052,750.00 with interest and costs thereon as may be provided,and a mortgage and assignment of
rents in favor of the Bank,as security for the payment of said note;and
WHEREAS,the mortgage("Bank Mortgage") in favor of the Bank shall replace the lien of the First
Mortgage, and as a condition of the closing of the loan, the Bank has requested that the City subordinate the
lien of the City Mortgage to the lien of the Bank Mortgage to be executed by Preferred Eagan I LLC in favor
,of the Bank as such is described in the preceding paragraph.
WHEREAS,the City of Canton has received a copy of and had the opportunity to review the Bank
Mortgage,and the City is familiar with the terms of the Bank Mortgage.
NOW THEREFORE, in consideration of the premises and of the sum of One Dollar ($1.00) in
hand paid,the City does hereby covenant and agree with the Bank that the lien of the City Mortgage upon the
Property shall be and remain at all times a second lien subordinate to the lien thereon of the Bank Mortgage
to be executed in favor of the Bank to secure a note in the principal amount not to exceed $1,052,750.00 to
the Bank with interest and costs thereon as may be provided.All proceeds from rents,awards,payments, and
insurance proceeds shall be subject to said subordination agreement.
SFGH:4825-4375-2732v 1
IN WITNESS WHEREOF,the City hereby executes this Subordination of Real Estate Mortgage
this—day of 2014.
Mayor,City of Canton
STATE OF ILLINOIS
COUNTY OF FULTON
The undersigned, a Notary Public in and for said County, in the State aforesaid,does hereby certify
that Jeff Fritz, personally known to me to be the same person whose name is subscribed to the foregoing
instrument appeared before me this day in person and acknowledged that he, being duly authorized, signed
and delivered said instrument as his free and voluntary act and as the free and voluntary act of the City of
Canton,for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this day of_ 2014._
(NOTARIAL SEAL)
Notary Public
My commission expires:
Prepared by:
Mark Lenz
Fisher Cohen Waldman Shapiro LLP
1247 Waukegan Rd—Ste 100
Glenview,Illinois 60025
After recording,please return to:
City Attorney
City of Canton
2 North Main Street
Canton, Illinois 61520
SFGH:4825-4375-2732v1
INSTRUMENT PREPARED BY:
Mark Lenz
Fisher Cohen
Waldman Shapiro LLP
1247Waukegan Rd, Suite 100
Glenview, Illinois 60025
MAIL TO:
City of Canton
City Attorney's Office
2N Main St
Canton, Illinois 61520
FIRST AMENDMENT TO MORTGAGE
THIS FIRST AMENDMENT TO MORTGAGE ("Amendment") is made this
day of 2014, by PREFERRED-EAGAN I LLC, an Illinois
limited liability company and CANTON CROSSING CORPORATION, an Illinois
corporation (collectively, "Mortgagor" or "Grantor").
RECITALS:
A. On August 21, 2013, for full value received, Mortgagor signed and
delivered to the City of Canton, an Illinois municipal corporation ("City" or
"Lender") a Promissory Installment Note in the original principal amount of
$800,000.00 ("Note"), pursuant to the terms and conditions of that certain TIF
Redevelopment Agreement dated May 29, 2013 executed by Mortgagor and the
City ("TIF Redevelopment Agreement").
B. Mortgagor secured the Note by granting to the City a certain junior
mortgage ("Mortgage") dated as of August 21, 2013 and recorded with the
Recorder of Deeds of Fulton County, Illinois on August 22, 2013 as document
1355812, upon the real estate commonly known as 1741 East Chestnut Street,
Canton, Illinois 61520 ("Mortgaged Premises") and legally described on
Exhibit A attached hereto.
C. Mortgagor seeks to re-finance the existing senior debt encumbering
the Mortgaged Premises in the amount of $1,052,750.00, and the City has
agreed to subordinate its interest to said debt as evidenced by that certain
Subordination of Mortgage ("Subordination") executed by Mortgagor and the
City of even date herewith.
D. Mortgagor and the City seek to modify the terms of the Mortgage
pursuant to the terms of this Amendment to reflect the amount of debt that the
City will be subordinate to in accordance with the Subordination.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and the fulfillment of the
foregoing Recitals, the Mortgage shall be amended as follows:
1. The definition of `Subordination' contained in the Miscellaneous
Provisions of the Mortgage shall be deleted in its entirety and the following
language substituted: Subordination. Notwithstanding anything in this
Mortgage to the contrary, the Mortgage given by Grantor to Lender, as modified
by the terms of this Amendment, shall remain junior and subordinate to the
lien of MidAmerica National Bank ("MidAmerica") as evidenced by that certain
Mortgage from Mortgagor to MidAmerica dated 2014
("MidAmerica Mortgage") in the amount of $1,052,750 or any other mortgage
that replaces the MidAmerica Mortgage during the term of the Mortgage for the
balance owed (principal and interest) at the time of replacement.
2. Except as otherwise provided in this Agreement, all other terms
and conditions of the Mortgage and all other documents executed in connection
therewith shall remain in full force and effect.
Nothing herein contained shall in any manner whatsoever impair the
Mortgage and other loan documents as identified above, or the lien
created thereby or any other documents executed by Mortgagor in
connection therewith, or alter, waive, vary or affect any promise,
agreement, covenant or condition recited in any of the above-mentioned
documents, except as herein expressly modified, nor affect or impair any
rights, powers, or remedies of Lender under any of the above mentioned
documents.
IN WITNESS WHEREOF, this Agreement has been signed by Mortgagor
in the manner and form sufficiently to bind them, as of the date first written
above. PRIOR TO SIGNING THIS AMENDMENT, MORTGAGOR READ AND
UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.
MORTGAGOR AGREES TO THE TERMS OF THIS AMENDMENT AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS
AMENDMENT.
MORTGAGOR:
Preferred-Eagan I LLC,
an Illinois limited liability company
By:
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Evan Oliff, Manager
Canton Crossing Corporation,
an Illinois corporation
By:
Evan Oliff, President
ACKNOWLEDGED AND ACCEPTED:
City of Canton
By:
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State of Illinois )
S.S.
County of Cook )
The undersigned, a Notary Public in and for said county, in the aforesaid
State, does hereby certify that Evan Oliff, known to me to be the same
person(s) whose name is subscribed to the foregoing instrument, as the
Manager of Preferred-Eagan I LLC, an Illinois limited liability company,
appeared before me this day in person and acknowledged that he signed and
delivered the said instrument as his free and voluntary act, and as the free and
voluntary act of said company, for the uses and purposes therein set forth.
Dated: , 2014
Notary Public
State of Illinois )
) ss.
County of Cook )
The undersigned, a Notary Public in and for said county, in the aforesaid
State, does hereby certify that Evan Oliff, known to me to be the same person
whose name is subscribed to the foregoing instrument, as the President
ofCanton Crossing Corporation, an Illinois corporation, appeared before me
this day in person and acknowledged that he signed and delivered the said
instrument as his own free and voluntary act, for the uses and purposes
therein set forth.
Dated: , 2014
Notary Public
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those not yet ordered. The total cost for the additional totes (not yet paid by orders) would be
$7,216.32. There is current funds available in the depreciation account to cover the amount,
however it is suggested to take the money from the general fund. 50% is due up front and the
remaining 50% is due within 15 days after delivery. The number of totes ordered would have
approximately 10%of the community using totes----which is a good start. The quote includes a
10 year warranty on cart body, lid,wheels, axle, stop bar and all attachments.
Motion and second were made by Aldermen Ellis/Picket to approve the resolution and place it
on file.
ROLL CALL Yes No Absent
Alderman Jerry Ellis X
Alderman Justin X
Nelson
Alderman John Lovell X
Alderwoman Hale X
Alderman Craig West X
Alderman Tad Putrich X
Alderman Dave Pickel X
Alderman Jim Nelson X
The motion carried.
pISCUSS, CONSIDER AND VOTE ON: A RESOLUTION APPROVING THE SUBORDINATION
V AGREEMENT AND FIRST AMENDMENT TO MORTGAGE BETWEEN PREFERRED EAGAN LLC AND
THE CITY OF CANTON AND DIRECTING THE MAYOR TO EXECUTE AND DELIVER SAID
AGREEMENT AND MORTGAGE ON BEHALF OF THE CITY OF CANTON, ILLINOIS.
Mark Lenz (representative from Preferred Eagan LLC) explained that renovations were made to
the Canton Crossing Center. The original loan was taken out for the renovations between the
City and LZ Ventures. The City provided TIF funding through the redevelopment agreement.
The City agreed to subordinate to a primary lender under the terms of that agreement.
Mark explained that the primary lender will be taken out and the loan will be with MidAmerica
National Bank as a local lender. The loan with MidAmerica Bank is intended to be a long term
loan that is based on the appraisal of 1.8 million dollars. The City previously approved the
allocation for TIF funding in May 2013. The closing then took place using funds from LZ
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Ventures. The closing then took place with the City's TIF funding in August 2013. The request
now is to remove the LZ Loan and add MidAmerica National Bank.
Alderman Jim Nelson asked why there would be an increase in less than one year. Mark
explained that during the renovation process they were informed of leakage by Krogers. An
assessment of the roof took place and it was determined that the roof should be replaced. A
bid was received from Holthaus Roofing. If the requested loan is approved, the funds would be
used to repair the roof. The mural that was placed along the side of the building was higher in
cost than what was originally anticipated. The mural, closing cost and fees contribute to the
increase in the debt.
Alderman Jim Nelson said it is due-diligence to have an inspection completed (including the
roof) prior to purchasing a building. Alderman Jim Nelson said he has a problem requesting
additional money a year later to repair a roof that should have been originally identified as a
need. Alderman Jim Nelson said that money was used for the mural that could have been used
for the roof.
Kroger's extended their contract until 2020. CVS extended their contract for five years.
Attorney Rabel explained that they are not requesting additional funds from the City of Canton,
however they are asking the City to subordinate( the original amount was $840,000.00) now
they are requesting us to subordinate$1,052,750.
If they defaulted on the first mortgage-Mid-America would get paid their portion ($840,000.00)
and then the City would get paid. The new request would have Mid-America getting paid
$1,052,750.00 and then the City would get paid anything above.
Attorney Bruce Beal said that essentially the City is dropping further down in the subordination
by $212,000.00. Bruce said an important question to address is to determine if the building is
worth 1.8 million dollars. The amount that is currently owed to the City of Canton and the
amount that would be owed to Mid-America would create an unsecured amount of$52,750.00.
Motion and second were made by Aldermen West/Pickel to approve the resolution and place it
on file.
Z,
ROLL CALL Yes No Absent
Alderman Jerry Ellis X
Alderman Justin X
Nelson
Alderman John Lovell X
Alderwoman Hale Abstain
Alderman Craig West X
Alderman Tad Putrich Abstain
Alderman Dave Pickel X
Alderman Jim Nelson X
The motion failed by lack of number of votes required.
Motion and second were made by Aldermen Ellis/Hale to bring back in two weeks for
reconsideration.
The motion carried by voice vote and was unanimous.
DISCUSS. CONSIDER AND VOTE ON: AN ORDINANCE APPROVING AND AUTHORIZING THE
FIRST AMENDMENT TO A REDEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF
CANTON AND JERRY JARNAGIN, INDIVIDUALLY AND AS TRUSTEE FOR CHESTNUT RENTALS
LAND TRUST. fist Reading)
Steve Kline explained that in April 2014 the City approved a redevelopment agreement with
Jerry Jarnagin for the redevelopment of the property on East Chestnut Street. (Formerly Heilig
Meyer) As part of the terms to the redevelopment agreement the City agreed to loan Jerry
Jarnagin the amount of$60,000.00 toward TIF eligible project cost to make improvement to the
facility to attract new retail tenants to the building.
Jerry Jarnagin successfully attracted Label Shopper and is aggressively marketing the remaining
three spaces left in the building. There is currently someone very interested in occupying one
of the remaining spaces.
The question that came up was precipitated by the fact that the $60,000.00 that the City was
going to loan-was going to be loaned to the TIF II fund from the TIF I fund.
There has been an assessment of the TIF I area and there has been a reduction in the amount of
real estate taxes being received by the City. Essentially the money the City was going to use
from TIF I is not there. The TIF I fund will be shorted about $240,000.00 that the City was
expecting.
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