Agmt01 Shores Childcare, LLC - Max Keech

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REPORT To the Honorable Mayor and City Council From the Cit Mana er September 23, 2013 SUBJECT Shores Childcare LLC and First Amendment to Note Secured by Deed of Trust and First Amendment to the Leasehold Deed of Trust. RECOMMENDATION By Motion, Approve the First Amendment to Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing with Shores Childcare LLC (Amended Deed of Trust) and Authorize the City Manager to execute and notarize the Amended Deed of Trust; and Accept the First Amendment to Note with Shores Childcare LLC Secured by Deed of Trust. BACKGROUND In April 2001, the City entered into a Ground Lease and financial arrangement with Shores Childcare, LLC ("Shores") for Shores to remediate City property and develop a new licensed childcare facility at 1050 Twin Dolphin Drive. Subsequently, Shores completed the development and placed into operation the Redwood Shores Childcare Facility. In order to construct the facility, the parties entered into a Note in 2003, secured by a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust"). The Note resulted in the City lending $3.2 million to Shores in 2003 to assist with financing construction of this facility. The term of the loan is for 20 years with the interest rate being that which the City earns on funds deposited in the State Treasurer's Local Agency Investment Fund (LAIF), currently 0.30%. The projected balance outstanding on this loan is $1.7 million as of March 1, 2013. The Note also allows for the loan to be called, at the City's option, after February 2013. ANALYSIS Council Finance Committee Approval At the September 2012 Finance Committee meeting (comprised of Council Members Jeff Ira, lan Bain, and John Seybert), the committee directed the City's Finance Director to begin efforts to "call" the loan and initiate formal discussions with Shores concerning the amount of time needed to replace this loan. The discussion between the Finance Director and Shores resulted in a proposal from Shores to increase the interest rate to LAIF rate plus 2.5%. All other Note terms, including the existing "call" provision, remain the same.