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HomeMy WebLinkAbout1989-01-09 89-53 ORDERCancil Action Date Jan. 9, 1989 Iran No.89-53 Item: QiBER: Authorizing the City Manager to Accept the Bank c itmxnt Letter Issues by Fleet Bank to Morris For, Pres., of Hendon Associates Developrant Corporation as Acceptable Security for the Completion of the 2pblic Improvemments Required for Final Subdivision Approval of the Meadws Subdivison 1k ponsible Rpk: City Manager O terry: I believe we are all quite familiar with the situation regarding Morris Per's pr Posed subdivision on Nenduakeag Avenue. At a prior Council meeting, the City Council reviewed the entire situation involving this subdivision as well as the issue of development bonds, and accepted Ute final subdivision plan subject to acceptance by the Finance Committee of the Council of appropriate security to be either a bond or a letter of Credit. At a subs¢quent heating of the Finance Committee, Mr. Ferappeared and the issue of security was discussed in greater detail. this meeting was held during the sane week as the City Council meeting in which the issue was discussed. At that meeting, the Finance Committee agreed to accept the bad commitment letter as adequate security for completion of the Wblic imprwaments in the subdivision. Subsequent to this acceptance, it canna to W attention that the authorization of the full Comcil sea to permit the Finance Committee to accept either a bond or a letter of credit, and that the authorization did not extend to the acceptance of a bank commitment letter. When flee Committee discussed this isste, I believe both staff and netnbers of the Committee were vender the Impression that the Council had authorized the Finance Committee to have somewhat greater flexibility in accepting security. In order to insre that no confusionarises at a later date, I believe it is necessary thatthe Council consider adopting the attached Order which would formally accept the rttrnmenda[ion of the Finance Committee in this matter. I believe it i6 also important to point out that the Finance Committee's recommendation is not intended to establish a precaient of acceptance of such security in the future. It is rather intended to directly address the problem of the late date at which the developer in goaction was informed of the City's requirenent for subdivision security. In addition, it takes into account the fact that several other subdivisions nave been approved during the last year or so at which time the City's policy toward participation in subdivisions has been changing and which also do not have a requirement for posting security. Mile I do not believe net the City should, as general principle, accept bank commitment letters as adequate security for improvements, I believe tbat the risks involved in accepting the security in this case are counter- balanced by coucerns over fair treatment to the developers involved. As a result, and with some reservations, I would remsoend that the Council adopt the attached Order. I _ _ — sty Manager Associated Info: Attached ander, Letter61 it Legal Approval: City Solicitor IntrxJucatl For: P86 8ge First g_ Feferral 89-53 Aedgoed to ConnNor Tilley, January 9, 1989 CITY OF BANGOR QIRFdOxptT Authorizing [ne city Manager W Ao t the Bank camnrtmapc eter ssu Dy Fleet Bank to Morris Far, President, of Meadw Associates Development Corporation, as Acceptable Security for the Completion of the PubliC lnprovaments Pk irol for Final SuMivisicn Approval of Meadows - ..........Subdvurarcn By Bu City Cour of the My of Bangor. ORDERED, MT THAT the City Manager be ane hereby is authorized on behalf of Ne City Council to accept the Letter of C itment frau Fleet Bank to Mr. I tris L. Far, President of Meadow Associates Developnent Corporation, dated M abler 15, 1988, as the required security against the required public improna ants To L made in the Meadows Subdivision; AND M 1T FD[IIMFB uBL£M®, THAT the City Manager issue a letter to W. Morris L. Far, President of Meadow Associates Developwant Corporation, formally notifying Mr. Far of the acceptance ofsaidsecurity; AMD M TT FUBlf¢8 �D, TINT acceptance of Nis security meets all requirements for final subdivision plan approval for the Meadws Su]:division. 89-53 IN CITY COUNCIL 0 RDE R January 9, 1989 ' sTitle, Author izing /tea/ •( ........... the City ....... to accept CITY...................................... the Bank Commitment Letter Issued by Pleet Beuk m Norria Per Presldeu[. oI Meadow "acetates Development Corporation Aa4ped to ....6s.bvT. Tuley..................... -. Councilman December 30, 1988 Ed Barrett, City Manager City of Bangor City Hall 73 Harlow Street Bangor, Maine 04401 Dear Ed 89-53 CITY MANAGERS OFFICE REALTY WORLD® — 1st Realty 416 Sllllwel9, Ngnue. WgoS ME 04401 Telephone: (201194].1101 Enclosed please find a copy of the Hank commitment letter on my Renduskeag Avenue project known a "The Meadows" It is my understanding that byy providing the city with evidence of Bank commitment that I ha a satisfied the last condition of my sub -division approval. Could you please provide me with a written confirmation of this. Thank you for your assistance. Sincerely, Morris L. Far, President REALTY WORLD -1ST REALTY MLF/daw enclosure EM Fleet Bank flWen N. MN'uole Y P� December 15. 1988 Mr. Morris Far, President Meadow Associates Development Corporation 416 Stillwater Avenue Bangor, ME 04401 RE: The Meadows Subdivision,. Bangor, Maine Dear Mr. Far: 89-53 This letter, when properly signed and accepted, will constitute an agreement between Fleet Bank of Maine of Bangor, Maine (hereinafter referred to as the "Bank"), which agrees to lend and Meadow Associates Development Corporation, a Maine Corporation of Bangor, Maine (hereinafter referred to as the "Borrower") which agrees to borrow, in accordance with the following terms and conditions: LOAN AMOUNT The maximum amount of this commitment is Seven Hundred Thousand Dollars ($700,000.00). In no event shall the amount of the construction loan exceed the maximum amount committed herein. In the event that the amount needed to complete the project is more than the amount available within the balance of the loan, the Borrower shall immediately make arrangements to escrow funds. TERM The loan will be closed in one transaction, and during the period of construction the Bank will advance funds monthly against invoices of your contract certified by your engineer to the Bank for services performed and materials delivered. The Borrower agrees to construct a 45 -lot subdivision with roads, water and sewer at a site in Bangor, Maine with plans and specifications approved by the Bank; to obtain all necessary licenses and permits; and agrees that such construction shall be conducted in accordance with the provisions of a construction loan agreement to be entered into by the Borrower and the Bank. Construction shall be completed on or before July 1, 1989 and during the period of construction the Promissory Note evidencing the debt shall call for the payment of interest only on a monthly basis on the principal balance then outstanding, and shall not require the repayment of principal. Thereafter, Borrower agrees with the Bank that upon the release of any lot within the E,cM,pe51,n1.Past 011lce Bm 929. Ba,ry'a. Mahe M101-0323 20]A9,E011 a Hmw,a mn,rvaav I+wiuu dam FhefBank Continuation Mr. Morris For Page 2 December 15, 1988 TERM CONT'D subdivision described herein not less than Seventy Five Percent 758 of the net selling price of each lot shall be paid to the Bank as principal reduction in consideration for a release of the mortgage on that lot described hereafter. With the exception of the principal payments noted above, the loan shall continue to call for the payment of interest only an a monthly basis on the outstanding principal balance from the completion of construction to December 31, 1991 at which time the note shall mature and any unpaid principal and accrued interest shall be due and payable. INTEREST RATE Interest shall accrue at the rate of Twelve Percent (12.008). ORIGINATION FEE As part of the consideration for the Bank's obligation to loan the money in question, an origination fee of Seven Thousand Dollars ($7,000.00) will be paid by the Borrower at the time of closing of this loan. Security shall be evidenced by a Promissory Note secured by a first mortgage covering the land and improvements located in Bangor, Maine. The Promissory Note shall also be signed by A. David Rapaport and Morris Per in their individual capacities. CONSTRUCTION LOAN DISBURSEMENTS Upon the closing of the construction loan contemplated herein, the Bank shall make disbursements of the loan not more frequently than once a month upon our receipt of written certification of your engineer acceptable to the Bank that the work covered thereby was completed to his satisfaction and in accordance with the approved plans and specifications. Each disbursement to be ` made shall be for not more than 908 of the cost of each stage of construction. The Bank shall also require evidence satisfactory to it that there are no mechanics or other liens prior to the mortgage. Your engineer will furnish periodic reports to us on the progress of the work in connection with your request for advances and he �� Dam;;naaam� Mr. Morris Ear Page J December 15, 1988 shall certify that the work is proceeding satisfactorily, and that the undlsbursed amount of the loan will be sufficient to complete the work. On completion of the work, your engineer will certify to us that all of the work was performed to his satisfaction in accordance with the approved plans and specifications, and at that time all necessary certificates required to be obtained from any board, agency, department, governmental or otherwise, shall have been obtained. PLANS ANO SPECIFICATIONS The Bank shall require that you submit for its approval final and complete engineering drawings of all work to be completed and agree that such drawings shall be approved by the City of Bangor. BONDING Tne Bank shall require a Payment and Performance Bond together with a Completion Bond on the project. All Bonds will be issued by asurity acceptable to this Bank and its counsel. TEST BORINGS The Bank shall require as part of its consideration to lend the money in question, a complete set of test borings along the roadway to be built to insure that no ledge will be encountered beneath the surface which would increase the cost of road construction. In the event any ledge is found in the proposed roadways, effective financial measures will have to be found to deal with this situation if it arises prior to a loan closing. CONTRACTS Bank shall require executed bonded contracts for all work to be completed, and all contracts entered into shall be subject to approval of the Bank and its counsel. CONTRACT ASSIGNMENTS The Borrower agrees that all contracts, including the construction contract, engineering contract or any other contract entered into for the completion of this project shall be assigned to the Bank during the entire course of the loan described herein. Fx.eemk Cominuauon Mr. Morris Far Page 4 December 15, 1988 The Borrower agrees to use its funds in the amount of $37,750.00 in the initial phase of this loan. It is hereby agreed and understood the Borrower's funds are to be disbursed prior to any loan proceeds being advanced. ITEMIZED CONSTRUCTION BUDGET The Borrower agrees that with the acceptance of the commitment described herein, Borrower will deliver to Bank a proposed itemized construction budget setting forth all of the cost of the project together with a proposed schedule of construction showing the estimated completion dates of each phase of the project. COST OVERRUNS AND CHANGE ORDERS The Borrower agrees that prior to making any change orders during the construction phase of this loan, that each change order shall require approval by the Bank. Borrower further agrees to set aside from the Borrower's own resources sufficient sums to cover any change orders or any cost overrun during the Course of construction. P143S2{NNn•s.�nma¢�w. aunra. wa The project, and all improvements thereon and thereto in their use and operation as proposed by the Borrower shall fully comply with all building, zoning, health, conservation and other laws, ordinances and rules and regulations governing the improvements and use of land. Title to the premises securing the loan contemplated herein shall not be changed by sale, assignment nor otherwise without the prior written consent of the Back, which consent will not be unreasonably withheld. A change in the beneficial ownership of the borrowing entity without Bank consent shall be considered a sale of the premises. Should the property be sold without prior written approval of the Bank, then the Bank shall have the right to require the balance of the loan to be paid immediately in full, provisions to this effect shall be included in the document securing this loan. sieateank cominuauon Mr. Morris Far Page 5 December 15. 1988 HAZARDOUS WASTE AND TOXIC SUBSTANCES Prior to closing, the Bank will require satisfactory evidence that the site and areas adjacent thereto are free from hazardous materials, hazardous waste, asbestos, PCBs or toxic substances. The cost of such evidence is to be borne by the Borrower. The loan documents shall contain a provision whereby the Borrower shall he obligated to immediately contain and remove any hazardous waste and toxic substances found on the mortgage premises and to indemnify and hold harmless the Bank from any and all costs, expenses and liability arising out of environmental laws, rules or regulations. UTILITIES. APPROVALS Prior to the first construction advance, the Borrower shall provide evidence satisfactory to the Bank and its counsel as to the availability of all necessary utilities to meet the scope of the project as well as all governmental approvals, licenses or other government requirements necessary to begin and complete the project as planned. RIGHT TO INSPECT The Bank shall have the right to inspect the project from time to time at any reasonable time prior to the closing of the loan set forth herein and thereafter. The Back reserves the right to approve and/or install professional management of this property at any time this loan is thirty (30) or more days in default. This requirement shall be a covenant of the mortgage instrument. During the term of the loan, the Borrower agrees to provide Back within 90 days of Borrower's fiscal year end a copy of its reviewed financial statement prepared by a certified public accountant. Fkaet9ank Gonfinualion Mr. Morris Far Page 6 December 15, 1988 FINANCIAL STATEMENTS CONT'D Each Guarantor who is a natural person shall provide an annual financial statement certified by each Guarantor to be true and complete within 00 days after the end Of the calendar year. SIGNAGE During the term of financing, the Borrower shall allow the Bank to place signs on the construction site. LEGAL All matters, including the required mortgage documents, title - insurance documents and any other loan documents, shall be prepared by Bank counsel with any expense to be paid by the Borrower. APPLICABLE LAW. This commitment is delivered and intended to be performed in the State of Maine and shall be construed in accordance with the laws of said state. AFFIDAVITS OF NO PENDING ACTION The Borrower shall provide to the Bank the following affidavits and such further information and assurances as the Bank shall request respecting claims and actions affecting the Project, the Borrower and any Guarantor: A. Against Project. The Borrower shall provide the affidavit of Borrower, or an appropriate representative acceptable to Bank of any Borrower which is not a natural person, that there are no pending or threatened actions by any person or governmental authority against the Project or, to the best of Borrower's knowledge, any state or facts which could reasonably be expected to result in such an action nor, to the best of Borrower's knowledge, against any adjacent property which would have a materially adverse effect on the Project or the loan. B. Against Harrower or Guarantor. The Affidavit of the Borrower and each Guarantor, or of an appropriate representative acceptable to the Bank, of any Borrower Or Fleet Bamnl, Crntinvailon Mr. Morris Far Page 7 December 15. 1988 B. Against Borrower or Guarantor Cont'd) Guarantor which is not a natural person, that neither affiant nor any entity in which the affiant is a principal is in default under any note or other agreement, that there are no pending or threatened legal actions against the affiant which, if resolved against such individual or entity, would have a material adverse effect on the affiant's financial condition nor, to the best of the dffiant's knowledge, any state of facts which could reasonably be expected to result in such an action. The Bank's obligations hereunder are conditioned upon and the Borrower agrees to be bound by and comply with the following: A. TITLE. Title to the project will stand in the name of the Borrower. Title will be good and marketable, free of liens, restrictions and encumbrances except those approved in writing by the Bank. The Borrower will likewise be the absolute owner of all personalty in which the Bank has required a security interest hereunder free and clear Of all liens and encumbrances except those approved in writing by the Bank. B. DEPOSITS. The rate and terms of this commitment and all fisting commitments are in express reliance on your maintenance of aoomprehensive non-interest bearing deposit relationship with the Bank for the construction and operation of the building, and on your compliance with the terms and conditions of this commitment and the loan documents. If, for any reason, this relationship changes, the Bank specifically reserves the right to review and modify the rates and terms. C. DOCUMENTS. All loan documents shall be on the Bank's standard forms where applicable and shall be executed without modification. The Borrower shall execute all such other documents as the Bank's counsel shall request in form and substance satisfactory to the Bank and the Bank's counsel. D. COSTS. The Borrower shall pay all costs incurred by the Bank an connection with this loan, whether it is closed or FIeN Bank Confinua(im Nr. Norris Per Page 8 December 15, 1988 D. Costs Cont'd not for any reason whatsoever, including without limit, attorneys' fees, and other expenses actually incurred s that the Bank will bear no expense whatsoever in connection with this loan and commitment letter. ITEMS TO BE PROVIDED AT BORROWER'S COST' The Bank's obligations hereunder are conditioned upon and the Borrower agrees to provide at the Borrower's cost, or to bear the cost of obtaining, as the Bank directs, the following: A. INSURANCE. The following coverage in form and amount satisfactory to the Bank, issued by companies having ratings of AAAA or better as reflected in "Best's Insurance Guide" and otherwise satisfactory to the Bank. All such policies shall name the Back as insured mortgagee and loss payee and shall contain an obligation on the part of each insurance carrier to notify Bank in writing at least thirty (301 days prior to cancellation or reduction in coverage. 1. Hazard. Policies of fire and casualty insurance with extended coverage endorsement, including coverage against vandalism and malicious mischief and including also sprinkler, boiler and flood insurance, if applicable. For projects under construction, such insurance shall be in builder's risk completed value non -reporting form (including all risk and extended coverage, collapse, cost of demolition, increased cost of construction and value of undamaged portion of the improvements provisions). 2. Public Liability. Policies for bodily injury, death and property damage covering owner's and, with respect to construction projects, contractor's and subcontractor's liability. 3. workmen's Camnensation. Policies in the name of Borrower providing workmen's compensation Insurance in amounts not less than that required by law. 4. Flood Insurance. Federal Flood Hazard Insurance to the extent required by applicable regulations or required by the Bank. FMaf9INt Continua(i0n Mr. Morris Far Page 9 December 15. 1988 B. TITLE INSURANCE. An ALTA form mortgagee's title insurance policy or policies issued by a national title insurance company satisfactory to the Bank qualified to do business in the state in which the property is located in an aggregate amount not less than the total loan amount insuring that the Bank's mortgage constitutes a good and valid first lien upon the Project subject only to such customary exceptions as the Bank deems acceptable and containing such additional coverages and endorsements as the Bank may require. Without exception, the so-called "standard exceptions" in Schedule B will not be acceptable. With respect to construction loans, such policy may contain a "pending disbursement" or comparable clause with provision for title rundown and policy endorsement for each construction disbursement. A commitment evidencing the required title insurance coverage must be provided to counsel for the Back not less than ten (10) days prior to any proposed closing date for the loan in satisfactory form acceptable to Bank counsel, unless the Bank's counsel has undertaken to secure such title insurance. C. SURVEY. An accurate, currently dated survey by a licensed engineer or land surveyor acceptable to the Bank and title insurers and meeting current ALTA standards showing, without limitation, dimensions and total square footage of the project; interior lot lines, if any; dimensions and location of improvements; location and width of adjourning streets, nearest intersecting streets, easements, rights of way, if any; and such other details as to the project as the Bank may require, certifying that the project complies with the dimensional requirements of applicable zoning ordinances, conservation and other land use laws, that the improvements situated on the property do not encroach upon lot lines, easements or restricted areas and setting forth the flood hazard zone in which the project is located. D. OPINION OF COUNSEL. The opinion of counsel of Borrower's selection but acceptable to the Bank: 1. Formation and Qualification. That the Borrower and each Guarantor, aE nnet natural persons, are validly formed and existing entities qualified to do business in the state in which the property is located and are current on all tax obligations. £lest/aM[ Continuation Mr. Morris Per Page 10 December 15, 1988 2. Authority to Act. That the Burrower and each Guarantor, if not natural Persons, have full power and authority to carry out the terms and conditions of this commitment and to enter into and execute any and all instruments, documents, undertakings and agreements required in connection with the loan transaction herein set forth, including without limitation promissory notes, guarantees, mortgages, construction loan agreements, security agreements, financing statements and assignments of lease; that there are no provisions of the Borrower's or any Guarantor's Charter, Articles of Organization, By -Laws or other constituent documents that would impair that party's power to enter into or carry out the undertakings required of it hereunder; that the individuals executing such items have been duly authorized and empowered; and that such items upon execution will be valid and binding obligations of the Borrower or any Guarantor, as the case may be. 3. Building and Zoning. That the property and all improvements therein and thereto and their use and operation in the manner proposed by the Harrower fully comply with all building, zoning ordinances, rules and regulations applicable to land use and operation of the Project for its intended purposes. COMMITMENT SURVIVAL It is agreed that this commitment shall survive the loan closing and constitute continuing obligations of the Borrower until the entire Less, any renewals and all other obligations of the Borrower to the Bank are paid in full. BANE'S RIGHT TO TERMINATE The Bank may terminate this commitment by written or telegraphic notice to the Borrower in the event that; (a) the Borrower shall fail to comply with any material term, condition or requirement hereunder; (b) any representation, warranty, statement, certification, schedule or report made or furnished in connection with commitment and the loan transaction set forth herein, prove to have been false or misleading in any material respect at the time made or furnished; or (c) the Borrower or any Guarantor shall become insolvent or shall apply for, or be the object of I, ReefBMY Contlnw0en Mr. Morris Far Page 11 December 15, 1988 BANE'S RIGHT TO TERMINATE CONT'D any proceedings or arrangement for relief from creditors or otherwise, shall suffer a material adverse change in financial condition. This Commitment Letter is not assignable or transferrable COMMITMENT SURVIVAL It is agreed that this commitment shall survive the loan closing and constitute continuing obligations of the Borrower until the entire Loan, any renewals wals and all other obligations of the Borrower to the Bank are paid in full. COMMITMENT FEEANDEXPIRATION OF COMMITMENT LETTER The Bank shall be under no obligation hereunder unless acceptance of the terms hereof are delivered to it on or before December 31, 1988 together with the the Borrower's payment of a $3,500.00 non-refundable commitment fee, which fee shall be applied to the construction loan origination fee. If accepted this loan is to be closed on or before January 31, 1989. This commitment shall expire January 31, 1989 unless extended by this Back in writing. If the foregoing is acceptable to you, would you please so indicate in the space provided below, returning the original to the Bank and retaining a copy for your files. Very truly yours, FLEET BANK OF MAINE By: Robert N. Mcpuoid Vice president RNM/asp Enclosure ACCEPTED: By: orris Far, President