3. Please note the attached copy of our October 18, 1963 memorandum to you, and in particular the 2nd and 3rd paragraphs thereof. The information and recommendations are substantially the same at this time.

4. There is a very urgent need for first rate management and a mortgagor with strong financial reserves.

5. This is one of the most prominent apartment projects in the Los Angeles metropolitan area and is well known in the real estate trade for the Pacific coast region of the U.S. Consequently, capable and efficient development of this project is very important to the public relation image of FHA in this area. Also, any significant lowering of our normal financing and servicing requirements is quickly known in the trade and tends to severely weaken our position and policy. In summary, the foregoing facts and information, in our opinion, strongly emphasize the need for our recommendation, that the present mortgagor should not be given any modification of this loan after April 15, 1964.

JAMES BERRY, Director.

EXHIBIT No. 126

JULY 14, 1965.

To: Raymond Lewis, Chief Property Manager (through R. C. Magnusson, Chief of Operations).

From: Ralph A. Seidler, Acting Assistant Chief Appraiser.

Subject: Market Value-Project No. 122-32020-R, Barrington Plaza, Los Angeles, Calif.

In reply to your request of June 25, 1965, for a current opinion of the present market value for the subject project (to be furnished to Mr. Frank Daniels), we offer the following information:

1. Although this project is a Section 220 development, whose original value was not established by capitalization, it is our opinion that capitalization of the estimated net income is the valid approach for determining current market value in this case.

2. Current monthly income for the stated number of rented units (as shown by Property Management data) was assumed as the base for the predicted monthly income per unit rather than the proposed rental schedule, which apparently has not been attained during the years of project operation.

3. This average monthly apartment rental for the present occupancy of approximately 62% was applied to the full 712 units for 100% occupancy. The reported commercial income has been consistent under the existing leases and was assumed to continue at present levels.

4. Two value estimates were made as follows:

(a) First year, 70 percent occupancy, present income level; second year, 80 percent occupancy, present income level; ensuing period, 90 percent occupancy, 10 percent higher income; 7 percent capitalization rate, 60-year economic life; market value, $15,100,000.

(b) First year, 75 percent occupancy, present income level; second year, 85 percent occupancy, present income level; ensuing period, 93 percent occupancy, 20 percent higher income; 7 percent capitalization rate, 60-year economic life; market value, $16,900,000.

1

5. The above value is predicated upon the necessary utilization of professional management to increase occupancy from the present 62% and to reduce the current 74% expense ratio to 50% the first year, 45% the second year, and 42% for the long-term operation.

Concur:

RALPH A. SEIDLER,

Acting Assistant Chief Appraiser.

MARVIN M. WIRE,

Chief Underwriter, Project Mortgage Division.

1 Includes estimated increase for commercial leases.

EXHIBIT No. 127

U.S. GOVERNment MEMORANDUM

JULY 20, 1965.

To: C. Franklin Daniels, Assistant Commissioner for Multifamily Housing, FHA, Washington, D.C.

From: James Berry, Director FHA, Los Angeles, Calif.

Subject: Project No. 122-32020-R, Barrington Plaza, Los Angeles, Calif.

Per your verbal request of our Property Management Section during your visit to this office on June 14, 1965, enclosed is copy of memorandum dated July 14, 1965, from our Underwriting Section setting forth two estimates of value on the captioned project.

If you desire further data on this subject, please advise.

EXHIBIT No. 128

JAMES BERRY, Director.

U.S. GOVERNMENT MEMORANDUM

APRIL 29, 1964.

To: Mr. James H. Berry, Director, Los Angeles, California Insuring Office. From: Mr. C. Franklin Daniels, Assistant Commissioner for Multifamily Housing Operations.

Subject: Project No. 120-32020-R, Barrington Plaza Corporation, Los Angeles, Calif.

We have your memorandum of April 14, 1964, and attachements cited therein, pertaining to the serious default status of the above mortgage.

We have reviewed your analysis of the status of the project, and the position you have taken that the present mortgagor should not be given any modification of the loan after April 15, 1964. However, since the alternative on non-payment of the delinquencies by the mortgagor would be either assignment of the mortgage to the Commissioner or foreclosure proceedings, and since the mortgagee is willing to continue the forbearance arrangement, as evidenced by the attached correspondence from the John Hancock Mutual Life Insurance Company and the Wallace Moir Company, we consider it best at this time for the mortgagee to continue to hold the mortgage and the Administration to enter into a Forbearance Agreement for a reasonable length of time.

In this connection, it is the policy of the Administration to encourage the mortgagees to hold the mortgages, rather than assign or foreclose the property. In the subject case, although the delinquencies are serious, the mortgagee is willing to continue holding the mortgage, and this is without the benefit of the new regulations applicable to Sections 220.753 and 220.765 of the Regulations. With respect to Item 4 of your memorandum, if in your opinion there has been any gross mismanagement or any dishonesty in the operations of the project, then please let us have your further advice in this regard.

As you are aware, under date of April 13, 1964, extended protection under the contract of mortgage insurance was granted to the mortgagee by this office to June 15, 1964, in order to allow sufficient time to formalize the arrangements for continued forbearance.

Attached are copies of our reply to the John Hancock Mutual Life Insurance Company and the Wallace Moir Company, dated April 29, 1964.

EXHIBIT No. 129

FEDERAL HOUSING ADMINISTRATION,
Los Angeles, Calif., July 2, 1964.

Re Project No. 122-32020, Barrington Plaza.
Mr. C. FRANKLIN DANIELS,

Assistant Commissioner for Multifamily Housing Operations, Federal Housing
Administration, Washington, D.C.

DEAR MR. DANIELS: Reference is made to the attached letter of June 24, 1964 from Wallace Moir Company, servicing agent, Mr. Christian O. Christenson's letter of June 16, 1964 and your letter of April 29, 1964.

After reviewing the operational record and management of this project we maintain the same opinion as was noted in our October 18, 1963 and April 14, 1964 letters. We continue to strongly recommend that the mortgagor should not be given any modification agreement. As a result of this recommendation we also recommend that no further extension of time should be granted to the mortgagee for the election to assign or foreclose on this loan, in order to work out a modification for the present mortgagor. Before answering the mortgagee's request for an extension in a negative manner, we thought it would be advisable to give you our recommendation.

The following additional information is submitted to support our recommendations:

1. Attached is a copy of a May 8, 1964 memorandum from our Project Underwriting Section regarding operation and maintenance.

2. Furniture has been installed in the project without approval, air-conditioning units installed by the mortgagor did not fit the openings planned for in construction and were placed in a variety of locations. The commercial space in the Wilshire Boulevard-Barrington Avenue corner was very slow in being completed which resulted in a considerable loss of income. Trash disposal has been a continuing problem. Please note our June 9, 1964 letter to the mortgagors regarding the twelfth (12th) month inspection, also the problem in the Audit Report of March 1964.

3. Inspection of this project by various members of the local office and Washington Headquarters personnel has resulted in a unanimous expression of poor management.

In the recent proposal from the Kratter Corporation their basic premise in assuming they could operate successfully, was that they could substitute good management for the previous improper management.

4. The historical background of our experience with Mr. Louis Lesser, etc. in the operation of projects has been very unfavorable. This was noted in our October 18, 1963 letter to you, and another project, Riverside Braemar, 12230059, could be added to that list. Recent operating reports have not shown any significant improvement in dollar income from apartments and garages. (Attached are April and May 1964 monthly reports.)

The foregoing clearly indicates to us that this mortgagor is not demonstrating proper management of this project or any of his other projects in this office. There is a present overall deficiency of well over a million dollars and no significan improvement in net income during the last eight (8) months.

It is our opinion that the continued operation of this project by the present mortgagor is not feasible. Also, it is not probable that the mortgage can be restored to good standing within a reasonable time, as required by M.F. 50-324-64.

Please advise us what further action you desire us to take.
Very truly yours,

JAMES BERRY, Director.

EXHIBIT No. 130

JULY 8, 1964.

To: Mr. James H. Berry, Director, Los Angeles, California Insuring Office. From: Mr. C. Franklin Daniels, Assistant Commissioner for Multifamily Housing Operations.

Subject: Project No. 122-32020, Barrington Plaza, Los Angeles, Calif.

Thank you for your letter of July 2, 1964, and enclosures, concerning the default status of the referenced mortgage and related matters.

We have discussed the serious status of this case with Mr. Frank Rees, Assistant Treasurer of the John Hancock Mutual Life Insurance Company, the mortgagee, and in order to allow sufficient time to arrange a meeting with the parties of interest to determine the future handling of the mortgage we have today extended the time in which the mortgagee must elect to either assign the mortgage or tender title to the property to the Commissioner to August 17, 1964. (Copy of our telegram to the mortgagee has been furnished your office.) We will correspond with you further with respect to the meeting to be scheduled with the mortgagee and to be held in your office.

C. FRANKLIN DANIELS.

EXHIBIT No. 132

APRIL 6, 1965.

To: Mr. James H. Berry, Director, Los Angeles, California Insuring Office. From: Mr. C. Franklin Daniels, Assistant Commissioner, Multifamily Housing. Subject: Project No. 122-32020-R, Barrington Plaza Corporation, Los Angeles, Calif.

This is in reply to your memorandum of March 8, 1965, and enclosures cited therein, pertaining to the proposed transfer of physical assets by Barrington Plaza Corporation to Barrington Plaza Enterprises.

In accordance with agreements reached at a meeting in your office on April 1, 1965, it will be in order to grant preliminary approval to the proposed transfer contingent on full compliance with the following administrative and legal conditions:

1. Payment in cash or certified check of $81,394.69 to John Hancock Mutual Life Insurance Company for immediate application to the delinquent interest simultaneously with transfer of title.

2. Payment of application fee, if not already collected.

3. Purchaser will arrange with John Hancock Mutual Life Insurance Company for the orderly payment of the delinquent mortgage interest under a plan satisfactory to the mortgagee and FHA.

4. Preparation of a Modification Agreement to include Amendment No. 2, deferring principal payments effective with the May 1, 1965, payment through October 1, 1965. Upon acceptance by FHA of the Modification Agreement, waiver of the Replacement Reserve Fund deposits will be approved. Approval of this modification of the mortgage and waiver of the Replacement Reserve Fund require ments does not constitute any understanding there will be further modification or waiver.

5. Compliance with enclosed copy of memorandum of March 12, 1965, from Mr. Morton W. Schomer, Office of the General Counsel, satisfactory to you and our Regional Attorney.

6. Purchaser's acceptance of enclosed letter addressed to Mr. Jack Gorden, representative of Barrington Plaza Enterprises, with a copy of such signed acceptance forwarded with the documents submitted for final approval.

7. The purchasers clearly understand that with the May 1, 1965 installment and monthly thereafter full payment on the modified basis must be met with no exceptions.

We are returning the Regulatory Agreement for your execution on behalf of the Commissioner upon your preliminary administrative approval of the transfer. C. FRANKLIN DANIELS.

EXHIBIT No. 133

MEMO TO THE FILES

(R. D. Cunningham, Barrington Plaza)

A meeting was held on March 15, 1965, with Mr. Jack Gorden, one of nine principals referred to as the "Ohio Group"; Mr. Stanley Berman, Attorney for Mr. Gorden; Mr. C. Franklin Daniels, Assistant Commissioner; Mr. JohnO'Donnell, Urban Renewal Section, Office of the General Counsel; and Mr. Philip Lavin and Mr. Robert D. Cunningham of this office.

The purpose of the meeting was to review a proposed sale of the above project. by Mr. Louis Lesser to the Ohio Group. Such sale to be accomplished through our transfer of Physical Assets procedure with the joint approval of the mortgagee, John Hancock Mutual Life Insurance Company, and FHA. The mortgage in this case is $18,604,500 with an interest delinquency of approximately $2,000,000. The Ohio Group is interested in the purchase of the property for a tax benefit which will run to the purchasers. The mortgage is under an existing Forbearance and Modification Agreement which expires with amounts due April 1, 1965; and on May 1, 1965 full debt service of $143,330.00 is called for. Mr. Gorden had hopes that with the new purchasers, the mortgagee and FHA would grant further concessions in order to allow six months or more for the Ohio Group to improve the operations of the project.

Mr. Daniels made it very clear to Mr. Gorden through a review of the serious status of the mortgage and the problems confronting the project, that no further concessions could be granted and that on May 1, 1965, full monthly requirements must be met and monthly thereafter, otherwise foreclosure by the mortgagee was the only alternative. Mr. Daniels also informed Mr. Gorden that in considering approval of the proposed sale of the project, FHA would require a sizeable amount ($1,000,000) paid on the delinquent mortgage interest. Further, Mr. Gorden was informed of the full amounts due May 1, 1965, the amount of monthly net income from the project, and the amount of $110,000.00 to be paid out-of-pocket to meet full May 1, 1965 requirements, and monthly thereafter. At this juncture Mr. Daniels suggested that the purchasers escrow $500,000.00, or a letter of credit to guarantee the full payment for several months commencing May 1, 1965. Mr. Gorden said the Ohio Group would not be able to do this, but would meet the out-of-pocket funds when they became due. However, Mr. Gorden stated he would get in touch with the Ohio Group to see if some funds could be raised and at this time the meeting closed. We were later informed by Mr. Gorden that this arrangement could not be accomplished. A further meeting on the proposed sale was held on March 17, 1965, with Mr. Louis Lesser, Owner; Mr. Malat, Attorney for Mr. Lesser; Mr. C. Franklin Daniels, Assistant Commissioner; Mr. John O'Donnell, Urban Renewal Section, Office of the General Counsel; and Mr. Philip Lavin and Mr. Robert D. Cunningham of this office. Generally the same matters and requirements were reviewed with Mr. Lesser and his Attorney as were reviewed with Mr. Gorden on the previous meeting.

Mr. Lesser stated that he was not in a position to meet the May 1, 1965 requirements and made several pleas for FHA approval of the sale, stating among other things that FHA's position would not be worsened by the sale. The meeting was concluded by Mr. Daniels in order that a further meeting be scheduled to include both Mr. Gorden, Purchaser; and Mr. Lesser, Seller; at which time FHA requirements could possibly be negotiated between Gordon and Lesser satisfactory to all parties of interest.

On March 19, 1965, a further meeting was held with all parties of the first two meetings except Mr. Stanley Berman. Contemplated negotiations between the Purchaser and Seller were not forthcoming. Mr. Daniels reviewed time after time FHA requirements for approval of sale. Every possible approach was explored but no funds were available by Gorden and Lesser to curtail the delinquencies under the mortgage. The meeting adjourned at noon and resumed at 1:30 PM. Mr. Lesser again made a number of pleas for FHA approval of the sale with the same contention that FHA would not be hurt and that Lesser Enterprises Inc. would be saved as well as the stockholders of his parent corporation approximating 2000 widows and orphans.

After further lengthy discussions, Mr. Daniels made one final offer:

1. The seller and purchaser put up $250,000.00 each or its equivalent.

2. FHA in concert with the mortgagee modify the mortgage as to principal only for six months.

3. The purchaser work out an orderly program acceptable to the mortgagee and FHA for liquidation of the interest delinquency.

Mr. Lesser then offered to put up a piece of land located in Ohio and indicated the value to be between $200,000.00 to $250,000.00. To firm up this phase of the offer if possible, Mr. Daniels informed the parties that he would request an appraisal on this land from our Cleveland, Ohio Insuring Office, and the meeting closed.

On March 24, 1965, Mr. Daniels was advised that a fair market value of the land offered is $15,000.00.

On March 24, 1965, telephone communication was made by Mr. Daniels to Mr. Frank Rees of the John Hancock Mutual Life Insurance Company, the mortgagee, and full information of the three meetings was given to Mr. Rees, and the appraised value of the land of $15,000.00.

Mr. Rees informed Mr. Daniels that he would be willing to go along with the sale if the April 1, 1965 interest of $50,000.00 plus $35,000.00 on the delinquent interest, or $115,000.00 was paid, and that full requirements commence on May 1, 1965.

On March 24, 1965, Mr. Daniels and Mr. Robert D. Cunningham reviewed the whole matter with the Commissioner. The Commissioner indicated he would be willing to go along if $115,000.00 was paid as suggested by the mortgagee. Mr. Daniels will contact the parties on this offer of $115,000.00.