1999 AGN JUN 15 I17 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT rvx uuuruu. Mr r:ruNtv ur rune iz, iv TO: HONORABLE MAYOR & CITY COUNCIL AN APPROVAL: HENRY GARCIA CITY MANAGER MICHAEL J. WILLIAMS, CITY TREASURER /l/1.-)'-) SUBJECT: Resolution to approve the sale of Blue Mountain Terrace Apartments and the outstanding bonds from Fowler Shore and Flanigan and UDR Western Residential Inc. TE: June 7, 1999 In April 1985, the City assisted in providing low and moderate income housing to our residents by acting as a conduit issuer of municipal bonds. The proceeds of the bonds were used to build the Blue Mountain Terrace Apartments. As a part of the documents, a certain number of units are set aside to people of low and moderate income with rents lower than the rest of the project. These bonds were not backed by credit of the City or the Redevelopment Agency. The bonds were backed by a bank letter of credit, to provide protection for the bondholders. In 1997, the original developer defaulted on their obligation and the project was sold to a real estate company named Fowler Shore & Flanigan (FSF). FSF acquired the project and purchased the outstanding bonds as well. Amendments to the bond indenture were made to accommodate the transaction. One of the issues that staff was concerned about at that time, was that the bonds not be resold unless they were credit enhanced or their distribution limited to institutional investors exclusively. Many municipalities have spent a significant amount of time and money to deal with issues related to defaulted multi -family housing bond issues. Our preference would be for the bonds to be credit enhanced if they were to be resold. If for some reason that was not feasible, we would in the alternative, insist that changes to the bonds and the indenture be implemented that limited their distribution to institutional investors or sophisticated high net -worth individuals. The proposed buyer of the project is UDR Western Residential Inc. (UDR) which is an affiliate of United Dominion Realty Trust, Inc. There is a legal requirement that the City, by resolution, approve the transaction. UDR has stated that they are interested in buying the project to improve it. They have also stated that they would buy the project and the outstanding bonds from FSF. UDR may be interested in selling the bonds in the future. Item # 17