FEDERAL HOUSING ADMINISTRATION, Re Barrington Plaza-FHA 122-32020-R. GENTLEMEN: In response to the requests contained in your letter of June 28, 1961, we wish to advise that we have discussed each of the matters outlined in your letter with Mr. C. Franklin Daniels, Assistant Commissioner Multi-family Housing, in our Central Office, and report to you as follows: 1. This office will be willing to waive the commitment requirement of a cash deposit of $250,000.00, which is required at time of final endorsement for the purpose of meeting certain contingencies which might arise as a result of insufficient net income to meet debt service requirements, provided we receive from you a personal indemnity agreement or letter of intent satisfactory to this office which gives the FHA substantially the same protection as the cash deposit. 2. With respect to the assurance that FHA would favorably consider an increase in the loan amount to cover the increased cost of the required changes and certain other changes of material benefit to the Commissioner, we attach, hereto, copy of letter to Mr. T. M. Fresneda, Assistant Vice President of the Security First National Bank, dated May 31, 1961, which covered this particular matter and which we again reiterate to you, herewith. This, as we understand it, is also in accord with the understanding which you had with C. Franklin Daniels, Assistant Commissioner for Multi-family Housing, in which you had conferences recently with him in Washington. We also assure you that we will reanalyze and reprocess the entire project at time of completion, using the Underwriting criteria of the manual to determine the highest commitment which we then may be able to issue. 3. We are informed by Mr. Daniels that new regulations are now in preparation which will permit the above described project to be owned by a corporation, partnership, or individuals, instead of by a special corporation as previously required. As soon as the new regulations are received, we will advise you of the conditions and requirements thereunder, so that this change of sponsorship may be prepared by you in time for final endorsement. 4. We are informed by Mr. Daniels that authority will be given to include carpeting as part of the mortgage security on this project. You may, therefore, file a change order for this if you wish and we will approve same as soon as the necessary authority and instructions are received from our Central Office. We wish to point out that this will require modification of our estimate for reserve for replacements. 5. We do not believe it appropriate to consider any request for forbearance of the mortgage obligation at this time. We can only state that the FHA is well aware of the problems of obtaining full occupancy of a project as large as the subject, immediately after completion. In the past, especially on Urban Renewal Developments, the Administration has taken a liberal attitude when problems of insufficient income to meet mortgage obligations have confronted us. Since the Assistant Commissioner for Multi-family Housing was a party to the discussion of the above matters, we obtained permission from him to forward this letter to you. Very truly yours, NORMAN M. LYON, Director. EXHIBIT No. 118 MAY 31, 1961. Re: Barrington Plaza Project #122-32020-R Mr. T. M. FRESNEDA, Assistant Vice President, Security First National Bank, DEAR MR. FRESNEDA: Pursuant to the meeting in this office on May 26, 1961, which you, Mr. Northridge, Mr. Milton Brock, Jr. and others attended, this letter is being written at the request of Mr. Milton Brock, Jr., to confirm the telephonic verbal agreement which was reached February 27th, between Director Lyon, Milton Brock, the Builder, and Director Marsh Cunningham, on the Washington end, and Chief Underwriter Morgan, on the Los Angeles end, to the effect that this office would favorably consider a request to increase the mortgage amount to cover the increased cost of the required changes and certain other changes of material benefit to the Commissioner, as soon as construction was substantially completed so that there would be reasonable assurance that no further additional costs would be encountered or other requests for increase would be forthcoming. Specifically, reference was made to our favorable consideration of the extra foundation costs caused by unexpected water seepage in the soil and to additional costs of kitchen changes which we considered highly desirable. It was emphasized that any other change orders involving additional costs would have to be called to our attention prior to the changes and adjudicated as to allowance therefor at completion of project. Since this arrangement was made with the Multi-Family Section in the Washington Office as a party thereto, we requested and obtained permission from C. Franklin Daniels, Assistant Commissioner for Multi-Family Housing in our Central Office to forward this confirmation to you. Yours very truly, NORMAN M. LYON, Director. EXHIBIT No. 119 DECEMBER 13, 1965, Re Barrington Plaza. LOUIS LESSER ENTERPRISES, INC., Beverly Hills, Calif. GENTLEMEN: 1. Your signature, when approved by you in the space provided below, will constitute our agreement relative to the resolution of certain disputes which have arisen in connection with our acquisition of the real property at 11740 Wilshire Boulevard, Los Angeles; California, know as "Barrington Plaza." 2. Under date of May 24, 1965, by letter agreement, Lesser Development Corporation assigned, transferred and agreed to deliver the sum of $15,000 to the Barrington Plaza Enterprises, an Ohio Limited Partnership, and transferee Barrington Plaza, for use in satisfying a portion of the accounts payable transferred by the Lesser Development Corporation and assumed by Barrington Plaza Enterprises. The transfer and delivery of the said $15,000 has not been accomplished. It is therefore agreed that the Barrington Plaza Enterprises may apply the sum of $15,000 against the rental payments due under the personal property lease agreements with Louis Lesser Enterprises due for the months of August and September in the monthly amount of $8,836.44, for a total of $17,672.88. 3. It is agreed between us that you shall transfer, assign and set over to Barrington Plaza Enterprises, certain advertising time owned by you on television station KTLA, in the agreed value of $6,787.00. You do hereby agree to execute and deliver any and all documents necessary to effect the said transfer so that the advertising time may be utilized by Barrington Plaza Enterprises. 4. In consideration of the transfer to Barrington Plaza Enterprises of the said television time at the agreed upon value of $6,787.00, Barrington Plaza Enterprises agrees to accept same as full payment for all rental charges incurred heretofor by the occupancy of apartments B-1409,1 B-707,2 A-1202,3 and ; and for rental charges for apartments B-707,2 and A-12023 through December 31, 1966; there shall be no further obligation on our part to continue to provide any apartments for your benefit, and our obligations hereunder shall cease and terminate. Nothing herein shall be deemed to constitute a waiver by you of any personal property lease payments due you, or any other lessor, or a waiver of any of the other terms or conditions of said personal property sublease agreements between us. 5. It is further understood and acknowledged that as part of the consideration for the transfer of Barrington Plaza to Barrington Plaza Enterprises, Barrington Plaza Enterprises executed a promissory note in the amount of $300,000, together with a collateral agreement, both of which are attached hereto and marked Exhibit A. It is further understood and agreed between us that you do hereby, for yourself and your successors in interest, waive and relinquish any and all right or rights which you have or may have by virtue of the aforesaid promissory note, and/or collateral agreements, or by virtue of any other agreement understanding or undertaking to acquire, assign or deal with any portion of or interest in the property known as Barrington Plaza, or the partnership of Barrington Plaza Enterprises. Nothing herein, however, shall be construed to otherwise terminate or alter your other rights under and by virtue of the aforesaid promissory note and collateral agreement. 6. Kindly acknowledge your approval hereof in the space provided below. Agreed and consented to: BARRINGTON PLAZA ENTERPRISES, By: HUGH W. CROUSE II. By: DONOVAN D. KARNES. LOUIS LESSER ENTERPRISES, By: LOUIS LESSER. EXHIBIT No. 121 OCTOBER 18, 1963. To: C. Franklin Daniels, Assistant Commissioner, Multifamily Housing Operations. From: James Berry, Director, FHA, Los Angeles. Subject: Project No. 122-32020-R, Barrington Plaza, Los Angeles, Calif. Reference is made to your letter of October 10, 1963, regarding the proposal outlined in a letter from Louis Lesser to the John Hancock Mutual Life Insurance Company, dated October 4, 1963. Last week, Mr. Stanley Berman, Associate Deputy Commissioner, FHA, Washington, D.C., discussed the default on this project with us. After hearing our opinion, he suggested that we write you a letter stating our recommendation on this default problem. Therefore, we have withheld action on your October 10, 1963 letter pending your decision on our recommendation. Mr. Louis Lesser is and/or has been strongly affiliated with all of the following projects, which are in very serious default or foreclosure: Project Nos. 122-32020-R, Barrington Plaza, 712 Units, Mortgage Amount, $18,604,500. 122-00079, Sunset Apartments, Inc., 192 Units, Mortgage Amount, $4,064,800. 122-00080, West Covina Apartments, 196 Units, Mortgage Amounts, $1,959,500. According to our records, none of these projects have been satisfactorily rented at any time. In addition, our records on these projects indicate there have been: various violations of FHA controls by the mortgagor; mortgagor agreements with FHA, which have not been complied with; difficulties in obtaining information from the mortgagor vital to FHA; very little, if any, principal payments on any of these projects since final endorsement; etc. Under the foregoing circumstances, and in consideration of the captioned project's outstanding prominence to FHA in this Insuring Office Area, as well as the project's urgent need for substantial and able financial backing and management; we recommend: Disapproval of Mr. Lesser's request of October 10, 1963, and also that the mortgagor be required to bring this account current by November 1, 1963, without any further extension of time. JAMES BERRY, Director. To: File. EXHIBIT No. 122 U.S. GOVERNMENT MEMORANDUM DECEMBER 11, 1963. From: Raymond E. Lewis, Chief Property Manager. Mr. Daniels stated he had received our memorandum of October 18, 1963, and he was fully aware of our experience with Mr. Lesser as outlined. Nevertheless, he stated his decision was made in his October 10, 1963 letter and he thought it was a matter of FHA trying to obtain an additional $182,000 from Mr. Lesser, while still maintaining control of the situation through paragraph 7 of his October 10, 1963 letter. Mr. Daniels stated that inasmuch as his decision was made, he had referred this matter to Mr. Berman. Mr. Berman said he has considered our letter of 10/18/63, but concurred in Mr. Daniels' decision of October 10, 1963. We then suggested that if this was their decision, we should at least make a mandatory requirement from Mr. Lesser for a first class management firm out of his own funds, as the overall management and display of apartments did not seem good. Mr. Berman and Mr. Daniels said this would probably be too severe a requirement for Mr. Lesser to be able to comply with financially. Mr. Berman agreed with us that this latter decision, with our limited local office personnel, would make our mortgage servicing requirements even more difficult with a project of this size and complexity of ownership, but he said to do the best that we can under the circumstances. On 11/1/63, approx. 1:00 p.m., Mr. Brownstein, FHA Commissioner, Mr. James Berry, Director, local FHA office, Mr. George Bradner, Asst. Director, Mr. Walker Gabbert, Chief Underwriter for Multifamily Projects and myself visited Barrington Plaza. Service was poor in directing us to the model apartments. There was no one in the rental office near the apartments. The model apts. themselves had some weather stains, needed touch of paint work, a good cleaning and were not in good condition for showing in the price range of these apartments. R. E. LEWIS. EXHIBIT No. 124 To: C. Franklin Daniels, Director, Multi-Family Division. DECEMBER 13, 1963. Enclosed is copy of FHA Form No. 25588 and Financial Statement for the year ended June 30, 1963. This project is in process of preparing a modification agreement in accordance with instructions in your memorandum dated October 10, 1963. Our analysis of the financial statement reveals a net loss for the year of approximately $370,000.00. No full monthly payment has ever been made on the mortgage. As of September 30, 1963, the mortgagors monthly report showed $563,408.00 due on the mortgage. Air conditioning equipment installed in these buildings is to be made a part of the realty as evidenced by copy of the enclosed agreement. The final execution and recordation of this agreement is in the hands of the mortgagee. We are assembling additional financial and lease data on the air-conditioning and furnishing of apartments which at present may be a violation. Our previous unsatisfactory experience with this mortgagor, in the overall management and renting of the West Covina Apartments and Sunset Tower projects, has left much to be desired and they are both in the U.S. Attorney's possession for foreclosure. This project is also unsuccessful in its overall operation to date and appears at this time with an approximate 50% dollar amount of apartment rental vacancy, to be subject to the same fate. Because of the manner in which income is shown on the financial statement, the modification status of the project, the large net loss reported for the year ended June 1963, and the complexity of analyzing the mortgagors overall operations, we recommend that an operations audit be made as soon as possible. JAMES BERRY, Director. EXHIBIT No. 125 APRIL 14, 1964. To: C. Franklin Daniels, Assistant Commissioner, Multifamily Housing Operations. From: James Berry, Director, FHA, Los Angeles. Subject: Project No. 122-32020-R; Status Report and Recommendation, per your request, Barrington Plaza, Los Angeles, Calif. Reference is made to our memorandum of April 3, 1964. Attached is the monthly report for March 1964, which shows some improvement in the occupancy of this project. However, the March Dollar Occupancy of 47%, Item (f) of our April 3rd memorandum will show only a 5% increase from October through March, and the October figure of 42% has fluctuated up 2 months, and down 3 months during this period. For a more probing analysis of the status of this project, the following information is submitted: 1. The Wallace Moir Company, servicing agent for the mortgages, reports that on April 1, 1964, it would take $1,193,877.43 to bring the mortgage to a current status. 2. Approximately average Total Monthly Financial Requirements compared to average Total Monthly Income (Adjusted to 100% occupancy of apartments and garages)-based on January, February, and March 1964 Monthly Statements: Income. Average Monthly Income For Apartments and Garages-$182 per unit (Apt., plus garage). Assume project is 100 percent occupied at the present income of $182 per unit x 712 units____ All other income including commercial, deposits, etc.. Total monthly income_. Total monthly requirements--- Less total monthly income__ Monthly deficiency. NOTE.-Assuming 100-percent occupancy of apartments and garages, $130,000 27, 000 157, 000 211, 000 157,000 54, 000 |