Title: Emergency Mtg. re: AIMCO

Recommendation:
I recommend the School Board approve the essential elements of a Sixth Amendment to Purchase and Sale Contract with AIMCO and authorize the Chairman and Superintendent to execute all necessary documents, and that the School Board find that an emergency exists under Fla. Stat. Sec. 120.525(3) as to an immediate danger to the public welfare requiring emergency and immediate action to approve the essential elements of the Sixth Amendment today and that the procedures and notice are fair and provide sufficient procedural protections for the reasons as stated within the Board report on this item.

Description:

The following is a brief history of the events leading up to the Sixth Amendment:

• On April 11, 2007 the Board approved the Purchase and Sale Contract to purchase from AIMCO the Broadmoor Apartment Complex (Broadmoor) for use as a part of the new campus for Suncoast High School.  The Contract called for the transaction to close on or before June 1, 2007.

• Following Board approval of the Contract, Board staff advised the Miami Field Office of the Department of Housing and Urban Development (HUD) of the pending transaction and sought their assistance and approval of the transaction.  HUD review of the transaction began shortly thereafter however an approval or denial of Board’s request was not immediately forthcoming.

• Because HUD did not render a decision on the Board’s request prior to the scheduled closing date of June 1, the Contract was extended a total of four times, with the fourth extension running through August 17, 2007.  In exchange for the extensions, the entire amount of the Board’s $240,000 earnest money deposit went at risk.

• Following numerous conversations and correspondence between staff and HUD, on August 15, HUD advised staff that the School District did not satisfy the definition of “Owner” as set forth in the United States Housing Act of 1937 and therefore, HUD would not approve the School Board’s purchase of Broadmoor.

• In order to keep the deal alive, a fifth extension was done extending the closing date until August 31.

• Since HUD’s ruling of August 15, staff and AIMCO have negotiated the essential elements of a Sixth Amendment to the Contract.  The essential elements are as follows:

ALTERNATIVE 1

• The transaction will be restructured so that prior to September 24, AIMCO will convey the land to the Board, but AIMCO will retain ownership of the improvements and continue to operate the project in accordance with the HUD regulations.  The amount paid will be $7,999,999. 

• The Section 236 mortgage will be paid off with the sales proceeds.

• AIMCO will enter into a ground lease with the Board for the land for $1/year.

• After March 31, 2008, and upon the termination of the Section 8 Housing Assistance Payment contract with HUD and the vacation of the premises by all tenants, the Board can terminate the ground lease and AIMCO will quitclaim all remaining improvements to the Board for $1.  

• During the period from closing through the termination of the ground lease, the Board will reimburse AIMCO for any operational losses, HUD related REAC inspection costs; AIMCO’s casualty insurance deductibles if a casualty occurs.  Collections experience and operational expenses will be required to remain consistent with historical trends.

• The Board will receive any positive operating revenue during the interim period.

• AIMCO will continue to carry liability insurance and will indemnify the Board for matters that occur during the interim period.

• Moving forward with Alternative 1 is expressly conditioned up approval by HUD.

ALTERNATIVE 2

• Alternative 2 will be followed in the event that HUD does not approve Alternative 1 for any reason.

• The Contract will be restructured for a closing after March 31, 2008, upon the termination of the Section 8 Housing Assistance Payment contract and the vacation of the project by all tenants.

• Prior to September 24, 2007 the Board and AIMCO will submit all closing documents in fully executed form to the escrow agent.  The Board will also submit the balance of the $8,000,000 purchase price of $7,760,000 to the escrow agent to be held in an interest bearing account. 

• Approximately $930,000 funds held by the escrow agent will be released to pay off the Section 236 mortgage prior to the September 24, 2007 deadline. 

•  AIMCO continues to own and operate the project.

• After March 31, 2008, and upon the termination of the Section 8 Housing Assistance Payment contract and the vacation of the project by all tenants, escrow will be broken and closing will occur.  Title to the project will be conveyed to the Board and the balance of the Purchase Price of approximately $7,070,000 will be disbursed to AIMCO. 

• During the period between the submission of all documents and funds to the escrow agent and prior to the closing, the Board will reimburse AIMCO for any operational losses, HUD related REAC inspection costs; AIMCO’s casualty insurance deductibles if a casualty occurs.  Collections experience and operational expenses will be required to remain consistent with historical trends.

• The Board will receive any positive operating revenue during the interim period.

• In the event that the escrow is not disbursed as contemplated, the Board will receive a return of all funds remaining in the escrow and will be reimbursed for the $690,000 that was released to pay off the Section 236 mortgage.

• The welfare of the School Board requires that the Board take immediate action to approve the essential elements of the Sixth Amendment so as to prevent forfeiture of the earnest money deposit and termination of the Contract.

• As the Board will be loosing one member following today’s meeting and an extraordinary vote is required by Florida Statute, it is essential that the Board approve the essential elements so that staff can assure AIMCO of its desire to move forward with the transaction.

• Board approval of the essential elements of the Sixth Amendment is necessary to protect the public interest under this emergency procedure and good cause exists for this matter to be decided today because time is of the essence and Board approval today is necessary to continue the transaction and protect and preserve the earnest money deposit.  If the Board does not approve the essential elements of the Sixth Amendment, the Board risks that AIMCO will not agree to further contract extensions and will terminate the Contract and keep the earnest money deposit. 

For Additional Information, contact:

Joe Sanchez, Chief of Facilities Management

Barry Present, Director of Real Estate