Subord Agree Main St 101-123TO:
MEMORANDUM
September 9, 2003
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT:
Subordination Agreement
Premier Bank for Anthony Kemp and William Bardck
CDBG Loan #2-96 for 101-123 Main Street
Economic Development Director Bill Baum recommends City Council approval of a
Subordination Agreement with Premier Bank related to the City's mortgage interest in
property located at 101-123 Main Street associated with Anthony Kemp and William
Barrick's $100,000 Community Development Block Grant Loan that was used to
rehabilitate the property, and that a public hearing be set for October 6, 2003.
In 1996 the City provided a $100,000 loan (15 year term at 3% interest) to Sidney and
Colleen Wallace to renovate property they owned at 1st and Main Street. The City had a
first mortgage position with that loan. On Mamh 6, 2000, the City approved an
assumption agreement that allowed Kemp and Bardck to assume the City loan when
they pumhased the commercial building from the Wallaces. Kemp and Barrick's
outstanding debt to the City is approximately $76,000.
Premier Bank is requesting the City subordinate its existing mortgage interest to allow
the bank to refinance the property with Kemp and Barrick. The current owners intend to
buy out a third-party investor, pay off another outstanding loan on the property and
invest $92,000 in building renovations. An August 28, 2003 appraisal commissioned by
the bank indicates the existing value of the building to be $410,000, which is great than
the outstanding combined bank and City debt.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
MCVM/jh
Attachment
CC'
Michael C. Van Milligen
Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
William Baum, Economic Development Director
CITY OF DUBUQUE, IOWA
MEMORANDUM
September 8, 2003
TO:
FROM:
SUBJECT:
Michael Van Milligen, City Manager
William Baum, Economic Development Director
Subordination Agreement
Premier Bank for Anthony Kemp and William Barrick
CDBG Loan #2-96 for 101-123 Main Street
INTRODUCTION
This memorandum requests that the City Council set a public hearing on a subordination
agreement with Premier Bank. The subordination agreement relates to the City's mortgage
interest in property associated with Anthony Kemp and William Barrick's $100,000
Community Development Block Grant Loan #2-96 that was used to rehabilitate property
located at 101-123 Main Street. A resolution setting the public hearing for October 6, 2003
is attached.
BACKGROUND
In 1996, the City provided a $100,000 loan (15 year term at 3% interest) to Sidney and
Colleen Wallace to renovate property they owned at 1st and Main Street. The City had a
first mortgage position with that loan. On March 6, 2000, the City approved an assumption
agreement that allowed Kemp and Barrick to assume the City loan when they purchased
the commercial building from the Wallace's. Kemp and Barrick's outstanding debt to the
City is approximately $76,000.
DISCUSSION
A letter dated September 8, 2003 from Premier Bank is attached hereto requesting the City
subordinate its existing mortgage interest to allow the bank to refinance the property with
Kemp and Barrick. The current owners intend to buyout a third party investor, pay off
another outstanding loan on the property and invest $92,000 in building renovations. An
August 28, 2003 appraisal commissioned by the bank indicates the existing value of the
building to be $410,000 which is greater than the outstanding combined bank and City debt.
Attached to this memorandum is a resolution that initiates the process for approving the
subordination agreement. Because a mortgage constitutes an interest in a particular piece
of real estate, approval of a subordination of that mortgage is treated as a disposition of
public property. State law requires that before a city may dispose of public property it must
hold a public hearing. The resolution declares the City's intent to subordinate its mortgage
interest and sets a date for public hearing on the matter.
RECOMMENDATION
I recommend that the City Council adopt the attached resolution setting a public hearing for
October 6, 2003 on the proposed subordination agreement. At that time, the City Council
will be presented with a second resolution authorizing the Mayor to sign the subordination
agreement with Premier Bank.
ACTION STEP
The action step for the City Council is to adopt the attached resolution.
attachmen~
F:\USERS~Pm~hre\WPDOCS~LOANDOC\kernp&barrick\sub 1 .mern,doc
PREMIER BANK
Expect the Best.
September 8. 2003
Pam Myhre
Economic Development Planner
The City of Dubuque
50 West 13th Street
Dubuque, IA 52001
Re: Bill Barrick and Tony Kemp Refinance
Panl~
As you are aware from our various phone conversations, Bill Barrick and Tony Kemp are
in the process of refinancing their commercial property located at the comer of 1s' and
Main Street, Dubuque, with Premier Bank. As such, Premier Bank is requesting The City
of Dubuque to subordinate their mortgage to Premier Bank on the subject property.
Shown below is the approximate sources and uses of funds relating to the refinanmng and
the loan-to-appraised value of the property based on the new appraisal.
Sources and Uses of Funds
Sources:
Premier Bank Real Estate Loan
Total Sources
$307,500
$307,500
Uses;
Buyout Third Party Investor
Cash for Building Renovations
PayoffFiffh Third Bank 1sI REM
Total Sources
5175,000
92,000
40,500
$307,500
Loan-to-Appraised Value
Loans:
Premier Bank
City of Dubuque
Total Loans
$307,500
76,000
$383,500
Appraised Value:
Tom Kane Appraisal
Appraised value
$410,000
$410,000
WEST SIDE OFFICE · 1975 JFK Road - P.O. Box 420 · Dubuque, Iowa 52004-0420 · Telephone 563-588-1000 · ]:ax 563-588-3352
DOWNTOWN OFFICE · 9th & Iowa Streets- P.O. Box 420 · Dubuque. Iowa 52004-0420 · Telephone 563-690-1000 · Fax 563-690-0070
www. premierbanking.com
Member FDIC
Page 2
Barrick and Kemp
Premier Bank LTV
City of Dubuque LTV
75.00%
93.54%
Enclosed for your records is a recent copy of the appraisal for the subject property
completed by Tom Kane. Please feel free to call me at 588-1000 with any questions.
Sincerely,
Darin P. Fischer
Senior Vice President
Premier Bank
RESOLUTION NO. 328-03
RESOLUTION DECLARING THE INTENT OF THE CITY OF DUBUQUE, IOWA, TO
SUBORDINATE A MORTGAGE INTEREST IN CERTAIN REAL ESTATE
Whereas, Anthony Kemp and William Barrick assumed a Real Estate Mortgage made to the
City of Dubuque, Iowa ("City"), filed October 4, 1996, as Instrument No. 11847-96, in connection with
Community Development Block Grant Loan #2-96 from City;, and
Whereas, Lot 80 and the South 1 and 5/12 feet of Lot 79 in the City of Dubuque, Dubuque
County, Iowa, is the real estate parcel described in said ~Vbrtgage; and
Whereas, City and Premier Bank both have Mortgage interests in the above-described real
estate; and
Whereas, Premier Bank requests that the City subordinate its Mortgage interest in the
above-described real estate to Premier Bank's interest to allow Anthony Kemp and William Barrick
to refinance their propertywith the bank; and
Whereas, the City Council has determined that the execution of a subordination agreement
with Premier Bank regarding the above-described real estate mortgage is in the public interest.
NOW, THEREFORE, BE IT RESOLVED BY THE CiTY COUNCIL OF THE CITY OF
DUBUQUE, IOWA:
Section 1. That it is the intent of the City Council to execute a subordination agreement with
Premier Bank with regard to the above-described Mortgage on the following described real estate
located in the City of Dubuque, Iowa:
Lot 80 and the South I and 5/12 feet of Lot 79 in the City of Dubuque, Dubuque County,
Iowa.
Section 2. That the City Clerk is hereby directed to give notice in the manner required by law
of a public headng to be held on October 6, 2003 at 6:30 P.M. in the Auditorium of the Carnegie-
Stout Public Library, at which time and place all interested parties will be given opportunity to be
heard for or against the proposal to dispose ofthe real estate interests herein described.
Passed, adopted and approved this 15th day of September 2003. ~/,-~zlz~
Terrance M. Duggan, Mayor
Jeanne F. Schneider, City Clerk
F:\USERS\Pm~hre\WPDOCS~OANDOC~kemp&barrick~subsetPh.res-doc