Loading...
HomeMy WebLinkAboutExhibitDate: To: From: Subject: Memorandum M c4UNTrIAMMDADE July 18, 2006 Honorable Chairman Joe A. Martinez and Members, Board of County Commissioners ager Agenda Item No. 14(A)(28) Resolution authorizing a new loan to Parrot Jungle and Gardens RECOMMENDATION It is recommended that the Board adopt the attached resolution that authorizes a new loan to Parrot Jungle and Gardens of Watson Island, Inc. (PJG) in the amount of $4,701,782 to cover the County's advanced payments to U.S. Housing and Urban Development (US HUD) through February 2006 for loan repayments (including administrative costs) for which the anticipated revenue from Parrot Jungle has not been received by the County; authorizes PJG's request to defer payments on the $25 million US HUD Section 108 loan until January 2012, for which the County and City will make payments on the US HUD Section 108 loan until January 2012, subject to City of Miami approval as required by the Development Agreement among the County, City, and PJG; authorizes the County Manager to negotiate an assumption by the City of Miami at a minimum level of 80 percent of the US HUD Section 108 loan; and authorizes the County Manager to execute any required documents, agreements, and amendments that may be necessary to implement the recommended modifications subject to the review of the County Attorney. BACKGROUND In the fall of 1997, Miami -Dade County was approached by the owner of Parrot Jungle for the purpose of seeking financial assistance through the US HUD Section 108 Loan Program. The assistance was being requested to facilitate the relocation of the PJG attraction from its long-time home in South Dade to a new location on Watson Island in the City of Miami. The City of Miami was approached by the owners of PJG for Section 108 loan assistance, and due to the City's then financial crisis, the City was unable to provide such assistance. In approaching Miami -Dade County for Section 108 loan assistance, PJG received support for assistance. City of Miami officials appeared before the County Commission on June 16, 1998 during a public hearing to consider the final approval of an application to US HUD for a Section 108 loan in the amount of $25 million to be used to assist PJG. The County Commission considered and initially approved a loan application in the amount of $21 million, with subsequent modifications that increased the loan application amount to $25 million after public hearings were held on February 3, 1998 and on June 16, 1998. As a condition precedent to the submission of the Section 108 loan guarantee application to US HUD, the County required the City of Miami to enter into a Joint Participation Agreement (JPA) requiring the City to substitute itself as the guarantor for 80 percent of the $25 million Section 108 loan guarantee subject to certain conditions (see attachment). The required JPA between the County and the City was executed September 9, 1998 and the County's application to US HUD was submitted nearly a month later on October 6, 1998. US HUD notified the County of the approval of the loan application on April 26, 1999. Subsequently, a development agreement among the County, Parrot Jungle, and the City of Miami was executed on April Honorable Chairman Joe A. Martinez and Members, Board of County Commissioners Page 2 20, 2000 and the Section 108 loan to Parrot Jungle was closed with an initial disbursement of funds on January 9, 2001. Miami -Dade County obtained a $25 million loan through the US HUD Section 108 Loan Program to make a loan to PJG for the relocation and expansion of the attraction. In addition' to its collateral for the loan to PJG the County has, as required by US HUD, pledged its current and future Community Development Block Grant (CDBG) funds as the ultimate source of repayment for this obligation. The source of revenue to the County for the required payments to US HUD is the loan payments from PJG to the County. In addition, the Board directed that no CDBG funds be used for any future advances of funds by the County that may be required in the event of further shortfalls in the receipt of payments from Parrot Jungle to the County for the Section 108 loan. The new construction and relocation of this attraction to Watson Island in the City of Miami has been completed. As of November 2005 Parrot Jungle has created 305 jobs (217 full-time and 88 part-time), with the overwhelming number of the permanent positions going to low -to -moderate -income persons as defined by US HUD Guidelines. Of the full-time jobs, 60 percent, or 270, have been confirmed by OCED staff site visits as being held by low -to -moderate -income persons. STATUS OF PARROT JUNGLE AND GARDENS SECTION 108 LOAN At the present time, Miami -Dade County is the obligor to US HUD on the $25 million loan; however, as a condition of the County applying for the loan, the JPA entered into by the County and the City of Miami required the City to substitute itself as a guarantor for 80 percent, or $20 million. The instruments required to implement the loan guarantee substitution are a US HUD Amended Pledge Agreement and an Inter -creditor Agreement. Those instruments could not be implemented until certain pre -conditions in the JPA were satisfied, and the City and County were ready to request US HUD to implement the loan guarantee substitution. The joint City and County request to proceed with the loan guarantee substitution was transmitted to US HUD in a letter dated November 24, 2003. A conference call involving County, City, and US HUD staff was convened on January 30, 2004 to discuss the structure, process, procedures, required documentation and timetable for completing the requested loan guarantee substitution. As a result of that conference call, US HUD agreed to assume the lead responsibility to draft an Amended Pledge Agreement and the County assumed the lead responsibility to develop an Inter - creditor Agreement. While the Inter -creditor Agreement prepared by the County was drafted in April, 2004, the US HUD drafted participation agreement was delayed and it was not received until December 23, 2004 along with final review comments on the inter -creditor agreement. The documents have been prepared in final draft form and were delivered to the City on January 21, 2005. The City staff has expressed some concerns with the loan guarantee substitution and staff met with officials from the City on January 18, 2005 who took the position that until the delinquent status of PJG is cured, the City has no contractual obligation to proceed with the substitution. In this regard, a series of meetings have taken place involving the County, City of Miami and PJG for the purpose of developing recommendations for an interim loan restructure and a cash flow strategy for PJG. In exploring other possible options for funding this debt service obligation, the County has been fully assessing its options pursuant to the JPA with the City of Miami. Efforts involving US HUD, the County, and the City of Miami have been underway throughout the past year to implement the terms of that loan guarantee substitution and meetings in June 2005 have included Parrot Jungle in an effort to develop a Honorable Chairman Joe A. Martinez and Members, Board of County Commissioners Page 3 comprehensive, short-term and long-range solution for the next five years. As a result of these meetings, PJG has prepared a comparison of actual financial results from the 15t quarter of 2004 with the actual results from the 131 quarter of 2005. These results have been reviewed by the City and County and used to evaluate the reasonableness of PJG's financial projections for 2005-2009 that are being used to determine PJG's loan repayment ability as part of a comprehensive loan restructure and workout strategy. In addition to these ongoing meetings of all parties, the County has been aggressively pursuing the implementation of the City's 80 percent loan guarantee substitution and the recovery of the funding that the City of Miami is obligated to provide toward the PJG debt service pursuant to the JPA. A provision of the agreement provides that "until such time as the Guarantee Replacement occurs, in the event of a monetary default by PJG under the terms of the Section 108 loan, the City's financial obligation in reducing the amount of said default shall be to pay to the County a proportionate amount of the amount owed by PJG, based upon the amount of the lease payments paid to the City by PJG...exclusive of the City's payments to the State of Florida..." The City has acknowledged that in accordance with this provision and the estimated payment by PJG of approximately $1.7 million in cumulative lease payments to the City through September 2005 that approximately $1.5 million may be due to the County from the City's CDBG funds. However, the guarantee replacement should have actually occurred by no later than January 21, 2005. During the course of this series of ongoing meetings and efforts relative to implementing the terms of the JPA, and the negotiation of a loan repayment/work-out agreement including the County, City and PJG, the City of Miami indicated its desire to seek a modification to the terms of the loan substitution as required by the JPA. The City indicated that it would like to modify the terms of the loan guarantee substitution so that its share of the loan guarantee will be reduced from the 80 percent. The City and County have extensively discussed the City's contention, that the manner in which the $25 million loan was drawn down in a single sales of 108 serial notes in June 2000 resulted in increased costs for the loan transaction that have not been fully mitigated by actions that have been taken by the County. Based on the City's contention of increased total loan costs, the City requested that the payment of any future shortfalls in PJG's payments that are used to fund the debt service payments due to US HUD be advanced by the City and County on a basis other than the 80/20 percent basis. However, the issue of increased total loan costs was addressed in 2003 when the County provided a $1.5 million "forgivable" loan to PJG to mitigate the increased loan transaction costs, which did not increase the City's obligation in the $25 million loan. Nevertheless, on September 30, 2005 the City proposed a reduced assumption of 70 percent of the $25 million loan to PJG. The County preliminary agreed to the reduction. Subsequent to the aforementioned agreement, the City Manager sent a letter dated March 10, 2006 stating that the City had reconsidered its position regarding the 70/30 percent loan guarantee substitution transaction and would not be going forward on that basis. NEW LOAN AGREEMENT As the result of the City's request to not move forward with the 70/30 percent assumption, it is recommended that the Board authorize the proposed new loan to Parrot Jungle to facilitate the County's effort to have the City perform its original obligation to substitute itself as the guarantor for 80 percent of the $25 million US HUD 108 loan. The recommended business terms and parameters for the new loan note and/or agreement are as follows: Honorable Chairman Joe A. Martinez and Members, Board of County Commissioners Page 4 Item Recommended Parrot Jun le New Loan Terms . Amount The note will be in the amount of $4,701,782. Interest Rate 5 Percent - interest on the new loan will start to accrue six months prior to January 15, 2012 when the first payment is due. Collateral The note will be guaranteed by Dr. Bern Levine. Language will be included in the guarantee to permit the County to consider releasing the personal guarantee based on a positive change in Parrot Jungle's financial conditions in the future. Should the Park generate a net income of at least $1.5 million after payment of all operating expenses and after Senior debt payments to the first lender, Miami Dade County will consider releasing the personal guarantee provided that PJ agrees to begin repayment of the new loan prior to January 2012. Repayment Schedule Semi-annual payments will be due on January 15 and July 15 starting in 2012 in 14 payments of equal installments over seven (7) years. The repayment will be completed with a final payment on July 15, 2018. The note can be prepaid at any time with no prepayment penalties. Late Payment Penalty and Default Provision Borrower shall pay Lender a late fee of 5 percent of the payment amount due for any payment that is not received by the fifteenth (15th) day after the payment due date. Subject to applicable notice, grace or cure periods, if any, failure to pay any principal and/or interest, or other obligation due under the note, filing or suggestion of bankruptcy, or violation of any loan term and/or condition as may be set forth in the loan agreement will accelerate and the loan shall be due and payable immediately, As the Board has been previously advised the last payment that was due to US HUD in the amount of $915,914.25 was made as required by February 1, 2006 by the County. Including this most recent payment, the County has now advanced 4 payments to US HUD totaling $4,579,719.50 as delineated in the following table. Due Date Amount Due to USHt1D Principal Interest Total August 1, 2004 350,000.00 946,276.75 1,296,276.75 February 1, 2005 933,764.25 933,764.25 August 1, 2005 500,000.00 933,764.25 1,433,764.25 February 1, 2006 915,914.25 915,914.25 Subtotal 850,000.00 3,729,719.50 4,579,719.50 PJ Payment Due Total 1,327,276.75 964,326.75 1,464,326.75 945,851.75 4,701,782.00 Note: PJ Payments Due to the County include Administrative Costs Please note that the total amount of payments due from Parrot Jungle to the County is $4,701,782, including the interest rate spread to cover the administration of the loan. Upon the approval by the Board of the new loan, and execution of the amended Pledge Agreement and Inter -creditor Agreement by the County, City and US HUD, the City will be responsible for 80 percent of the outstanding principal balance of the US HUD Section 108 loan. Approval is also sought for Parrot Honorable Chairman Joe A. Martinez and Members, Board of County Commissioners Page 5 Jungle's request to defer payments on the $25 million Section 108 loan until January 2012 subject to City of Miami approval as required by the Development Agreement among the County, City, and PJG. Responsibility for the deferred payments would be as detailed in the table below: Payment Date Total Payment 80 Percent (City) 20 Percent (County) 08/01/2006 $1,665,914 $1,332,731.20 $333,182.80 02/01/2007 889,177 711,341.40 177,835.35 08/01/2007 1,889,177 1,511,341.40 377,835.35 02/01/2008 853,077 682,461.40 170,615.35 08/01/2008 2,103,077 1,682,461.40 420,615.35 02/01/2009 807,964 646,371.40 161,592.85 08/01/2009 2,307,964 1,846,371.40 461,592.85 02/01/2010 753,979 603,183.40 150,795.85 08101 /2010 2,698,979 2,159,183.40 539,795.85 02/01/2011 681,547 545,237.96 136,309.49 08/01/2011 2,626,547 2,101,237.96 525,309.49 TOTAL;: 07,277,403 ; $13,821,922.32 . ; $3 455,480.58 The first payment from PJG to the County for the Section 108 loan, if the deferral is approved by the City of Miami, will be due on January 2012, and at that point PJG will also start repaying the $4,701,782 owed to the County. PJG, the City, and the County must develop a plan by 2012 to address the repayment of the $17,277,403 advanced by both the City and the County during the deferral period. As he above table illustrates, the City of Miami will be responsible for a minimum of 80 percent of the deferred payments. The Board is advised that this recommended course of action is intended to re -position the existing financial and debt structure to provide an opportunity for PJG's operations to further stabilize, to resolve the current non-payment to the County on the 108 loan, and to implement the City's loan guarantee substitution on the 108 loan. In addition, by ultimately providing a long-term structure to defer Parrot Jungle's payments on the 108 loan, the recommended course of action will enhance Parrot Jungle's ability to maintain its payments on a senior bank loan of $13.7 million in current status thereby avoiding a possible foreclosure that would be detrimental to the subordinated position held by the 108 loan debt. Attachment t is W. urry S.' for Advisor to the County Manager