Premier Bank Intercreditor Agreement Copyright 2014
City of Dubuque Action Items # 3.
ITEM TITLE: Premier Bank Intercreditor Agreement
SUMMARY: City Manager recommending approval of an Intercreditor Agreement with
Premier Bank for the German Bank Building, 342 Main Street.
RESOLUTION Approving an Intercreditor Agreement Between the City of
Dubuque, Iowa and Premier Bank
SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Adopt Resolution(s)
ATTACHMENTS:
Description Type
❑ Premier Bank Intercreditor Agreement-MVM Memo City Manager Memo
❑ Staff Memo Staff Memo
❑ Resolution Resolutions
❑ Intercreditor Agreement Supporting Documentation
THE CITY OF Dubuque
UBE I
erica .i
Masterpiece on the Mississippi 2007-2012-2013
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: German Bank Building 342 Main Street, Intercreditor Agreement
DATE: April 1, 2015
City Attorney Barry Lindahl is recommending approval of an Intercreditor Agreement
with Premier Bank for the German Bank Building, 342 Main Street.
James Madison, LLC is in default of the Premier Bank mortgage and the City's
mortgage. An opportunity now exists for Premier Bank to take title to the German Bank
Building. In order to expedite a potential sale of the property, Premier Bank has
requested that the City enter into a new Intercreditor Agreement. Pursuant to the new
Intercreditor Agreement, if Premier Bank obtains title to the German Bank Building,
Premier Bank will proceed with due diligence to sell the property for ninety percent
(90%) of the appraised value of $670,000.00, or $603,000.00. If Premier Bank receives
an offer to purchase the German Bank Building at $603,000.00 or more, Premier Bank
is authorized to accept the offer and the City will release its mortgage and any other
liens against the property. The net proceeds of the sale would be distributed as follows:
All sums due under the Premier Bank loan, approximately $375,000.00, and any
accrued interest or costs, would be paid to the Bank. The remaining balance would be
paid to the City in exchange for a release of the City mortgage and any other liens in
favor of the City. The current balance of the City's loan is $300,000.00 plus unpaid
interest of $12,750.00 as of March 1, 2015. Under this scenario the City would recover
just over $200,000.
1 concur with the recommendation and respectfully request Mayor and City Council
approval.
Mic ael C. Van Milligen
MCVM:sv
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
HE CITY OF
DUB
E MEMORANDUM
Masterpiece on the Mississippi
BARRY LINDAHL
CITY ATTORNEY
To: Michael C. Van Milligen
City Manager
DATE: April 1, 2015
RE: German Bank Building at 342 Main Street— Intercreditor Agreement
In 2007 the City of Dubuque entered into a Development Agreement with German Bank
Building, LLLP for the development of the German Bank Building on Main Street. The
Development Agreement required the Developer to make a capital investment in
building improvements, equipment, furniture and fixtures in the amount of
$1 ,500,000.00. The City agreed to provide the Developer with a $300,000.00 low
interest loan through the Downtown Rehabilitation Loan/Grant Program. The loan was
secured by a mortgage on the German Bank Building. The loan was subject to a
previous mortgage secured by Premier Bank to the Developer in the amount of
$375,000.00.
In 2012 the German Bank Building was sold by German Bank Building, LLLP to James
Madison, LLC. James Madison, LLC assumed all of the obligations of German Bank
Building, LLLP under the Development Agreement and the Downtown Rehabilitation
Loan Agreement.
In 2013, Premier Bank and the City of Dubuque entered into an Intercreditor Agreement
to clarify the relationship between the mortgages. Premier Bank's mortgage had a first
security position with respect to the German Bank Building and the City's mortgage was
subordinate to the Premier mortgage. However, there was concern that there could be
an issue with respect to the amount of additional funds loaned by Premier Bank to the
Developer. The Intercreditor Agreement did not change the City's position and only
clarified the amount of the Premier mortgage which had priority over the City mortgage.
James Madison, LLC is in default of the Premier Bank mortgage and the City's
mortgage. An opportunity now exists for Premier Bank to take title to the German Bank
Building. In order to expedite a potential sale of the property, Premier Bank has
requested that the City enter into a new Intercreditor Agreement, a copy of which is
attached. Pursuant to the new Intercreditor Agreement, if Premier Bank obtains title to
the German Bank Building, Premier Bank will proceed with due diligence to sell the
property for ninety percent (90%) of the appraised value of $670,000.00, or
$603,000.00. If Premier Bank receives an offer to purchase the German Bank Building
at $603,000.00 or more, Premier Bank is authorized to accept the offer and the City will
release its mortgage and any other liens against the property. The net proceeds of the
sale would be distributed as follows: All sums due under the Premier Bank loan,
approximately $375,000.00, and any accrued interest or costs, would be paid to the
Bank. The remaining balance would be paid to the City in exchange for a release of the
City mortgage and any other liens in favor of the City. The current balance of the City's
loan is $300,000.00 plus unpaid interest of$12,750.00 as of March 1 , 2015. Under this
scenario the City would recover just over $200,000.00.
In the event that an acceptable offer has not been received and executed within 90 days
of the date Premier Bank takes title to the real estate, Premier Bank and the City will
discuss a revision to the Intercreditor Agreement to allow the sale at some other
agreed-upon price.
I have reviewed the Intercreditor Agreement and approve the form. I recommend that
the Intercreditor Agreement be submitted to the City Council for consideration.
BAL:tIs
Attachment
cc: Maurice Jones, Economic Development Director
Flint Drake, Esq.
FVUSERS\G@ckleTepartment ConespondenceAEconoma Bevelopment1215 PremlecBankVRe¢retlltor Agreement-Gentian Bank BulltlingAMVM_2015Premge anknlemretlltoAgreement W0115doc
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Prepared by Barry A. Lindahl 300 Main Street Suite 330 Dubuque IA 52001 563 583-4113
RESOLUTION NO. 120-15
APPROVING AN INTERCREDITOR AGREEMENT BETWEEN THE CITY OF
DUBUQUE, IOWA AND PREMIER BANK
Whereas, Premier Bank (Bank) entered into a Promissory Note and related loan
documents with James Madison, LLC, Mathew J. Kluesner and Sarah E. Kluesner
(Borrower), pursuant to which Bank agreed to make a loan to Borrower with respect to the
German Bank Building, which bank loan is secured by a mortgage in favor of Bank; and
Whereas, City made a loan to German Bank Building LLLP which loan has been
assumed by Borrower and is also secured by a mortgage on the German Bank Building;
and
Whereas, Borrower is in default on the Bank mortgage and the City mortgage; and
Whereas, City and Bank wish to set forth their agreement in the attached
Intercreditor Agreement for the purpose of establishing an expeditious procedure for
collecting the balances due on their respective loans; and
Whereas, the City Council of the City of Dubuque, Iowa finds that it is in the best
interests of the City to approve the Intercreditor Agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF DUBUQUE,
IOWA AS FOLLOWS:
Section 1. The Intercreditor Agreement attached hereto is hereby approved.
Section 2. The City Manager is hereby authorized and directed to sign the
Intercreditor Agreement on behalf of the City of Dubuque and to take such further action
as may be necessary to carry out the terms of the Intercreditor Agreement.
Passed, approved and adopted this 6th day of April, 2015.
Attest:
Trish L. Gleason, Assistant City Clerk
L.,
oy D. Buol, Mayor
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement'), dated as of the _
day of April, 2015, is by and between the CITY OF DUBUQUE, IOWA, a municipal
corporation organized and existing under the laws of the State of Iowa (the "City") and
PREMIER BANK, an Iowa state banking corporation (the "Bank").
RECITALS
A. The Bank entered into that certain Promissory Note and related loan
documents dated as of February 1 , 2013 (as the same may be amended,
modified, restated, supplemented or extended, the 'Bank Loan
Documents"), with, among others, James Madison, LLC, Mathew J. Kluesner
and Sarah E. Kluesner (together, the 'Borrower"), pursuant to which the
Bank agreed to make a loan in the amount of up to $375,000.00 to the
Borrower (the 'Bank Loan") which Bank Loan was secured by a mortgage
recorded July 13, 2007 as Instrument No. 2007-00010548 in the records of
the Dubuque County Recorder (and a Hypothecation Agreement dated
December 31 , 2013 executed by German Bank Building L.L.L.P.) and
January 11 , 2013 as Instrument No. 2013-00000871 executed by the
Borrower and German Bank Building LLLP in favor of the Bank, pursuant to
which the Borrower granted the Bank a first priority lien in certain property
located in Dubuque, Iowa, and locally known as 342 Main St. (the 'Real
Estate"). Bank also made additional loans to Borrower and secured such
loans with an additional mortgage(s) on the Real Estate (the "Additional
Loans"); and
B. City previously made a loan to German Bank Building LLLP in the amount of
$300,000.00, which loan has been assumed by Borrowers (the "City Loan")
and the City Loan is secured by that certain Mortgage recorded September
22, 2008 as Instrument No. 2008-00013388 in the records of the Dubuque
County Recorder (the "City Mortgage" and together with the City Loan
and all related notes, agreements and documents, as the same may be
amended from time to time, the "City Loan Documents"); and
C. City and Bank previously entered into an Intercreditor Agreement regarding
the rights and obligations of City and Bank with respect to the Real Estate;
and
D. Borrower has defaulted on the Bank Loan and the City Loan, and City and
Bank desire to address the rights and obligations of City and Bank with
respect to the Real Estate;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereby agree as follows:
033015bal
1 . Rights Upon Foreclosure or Receipt of Deed in Lieu. In the event Bank
obtains title to the Real Estate by virtue of a foreclosure action or by acceptance of a
deed in lieu of foreclosure from Borrowers, Bank shall proceed with due diligence to sell
the Real Estate and City hereby authorizes any sale of the Real Estate at a price of
$603,000.00 or more. If Bank receives an offer to purchase the Real Estate at a price of
$603,000.00 or more, Bank may accept such offer (an "Acceptable Offer") and City
agrees to release its mortgage and other liens against the property (except any liens
related to real estate taxes, assessments or similar obligations) upon receipt of
proceeds as provided below. In the event of such a sale, the net proceeds of the sale,
after payment of any closing costs, tax prorations, commissions and other typical
closing costs, shall be distributed as follows:
(a) All sums due under the Bank Loan ($375,000.00), including any accrued
interest or costs as allowed under the Promissory Note related to the Bank Loan,
shall be paid to Bank.
(b) The remaining balance shall be paid to City (not to exceed all sums due
under the City Loan Documents) in exchange for the release of the City
Mortgage and any other liens in favor of City in the Real Estate (except liens for
unpaid real estate taxes, assessments and similar obligations).
(c) Any funds remaining after the above payments to the City shall be paid to
Bank to be applied to the Additional Loans.
(d) The parties shall cooperate to effect the agreement expressed in this
paragraph, and from time to time shall execute such other and further
documents, including subordination agreements, assignments of claim, and
otherwise as may be necessary or appropriate to implement the provisions of this
Agreement.
The parties agree that in the event that an Acceptable Offer has not been received and
executed within 90 days of the date Bank takes title to the Real Estate, the parties shall
discuss a revision to an Acceptable Offer and any revision to such Acceptable Offer
must be mutually agreed upon by the parties.
2. Continuing Agreement. The subordinations, agreements and priorities set
forth hereinabove shall remain in full force and effect regardless of whether either party
hereto in the future seeks to rescind, amend, assign, terminate, or reform, by litigation
or otherwise, its agreements with the Borrower.
3. Priority Not Conditioned on Perfection: Limitation on Actions. The relative
priority agreements set forth above are not conditioned upon the perfection of the
security interests described herein. Each party hereto agrees for the benefit of each
other party that it will not institute any proceeding in law or in equity in which it seeks to
set aside any lien or security interest created by the Bank Loan or the City Loan, as the
case may be, and each party hereto irrevocably waives any right now existing or which
may hereafter accrue to it to assert that any such pledge constitutes a fraudulent
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conveyance or fraudulent transfer within the meaning of the United States Bankruptcy
Code, the Uniform Fraudulent Transfer Act as in effect in the State of Iowa or other
applicable law. No party hereto shall contest the validity, perfection, priority or
enforceability of any lien or security interest granted to any other party, and each hereby
agrees to cooperate in the defense of any action contesting the validity, perfection,
priority or enforceability of any such liens or security interests.
4. Relationship of Parties. This Agreement is entered into solely for the
purposes set forth herein, and except as expressly provided herein, no party assumes
any other duties or responsibilities to any other regarding the financial condition of the
Borrower, or regarding any collateral, or regarding any other circumstance bearing upon
the risk of nonpayment of the obligations of the Borrower under any of the agreements
hereinabove referred to. Each party shall be responsible for managing its credit
relationships with the Borrower, and no party shall be deemed to be the agent of the
other for any purpose.
5. Benefit of Agreement. This Agreement is entered into solely for the benefit of
the Bank and the City and their respective successors and assigns, and none of the
Borrower or any other persons or entities whatsoever shall have any right, benefit,
priority or interest under or because of the existence of this Agreement.
6. Notices. Any notices required to be given hereunder shall be given by
certified mail, return receipt, postage prepaid, to the addresses of such parties set forth
in the signature blocks of this Agreement; or as to any party, at such other address as
that party may designate by notice given as provided herein to the other parties. Notice
shall be deemed to have been given on the second business day after the date of
mailing.
7. Miscellaneous.
(a) This Agreement may be amended, modified or terminated only by a written
instrument signed by both parties hereto. No waiver of any term or provision of this
Agreement shall be effective unless it is in writing and signed by the party against whom
such waiver is sought to be enforced.
(b) To the extent any part of this Agreement shall conflict with any of the terms of
the Bank Loan documents or the City Loan documents, whether existing as of the date
hereof, or hereafter arising or amended, the terms of this Agreement shall control.
(c) This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof.
(d) This Agreement shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(e) This Agreement shall be governed by and construed in accordance with the
laws of the State of Iowa, without regard to principles of conflicts of laws of such state.
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TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO THIS
AGREEMENT HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY WITH RESPECT
TO ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
CITY:
THE CITY OF DUBUQUE, IOWA, A
Municipal Corporation Organized and
Existing Under the Laws of the State of
Iowa
By:
Michael C. Van Milligen
Its City Manager
BANK:
PREMIER BANK, an Iowa state
banking corporation
By: -
Its V Pi' `d err -
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