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SR-410-003 (3) J\ ,.-... _ t . . '/ItJ -- tJct3 '..111 DeT 1 1 1988 Santa Monica, California CA:RMM:lld345/hpc city Council Meeting 10-11-SS STAFF REPORT TO: Mayor and City council City Attorney FROM: SUBJECT: Recommendation to Authorize Execution of the Consent to Transfer and Assignment with National Medical Enterprises, Inc. and NME Headquarters, Inc. National Medical Enterprises, Inc. ( t1NME It) has requested that the city approve the transfer of its property at 2600 Colorado Boulevard to one of its subsidiaries. The transfer will have no impact on NME I s obligations under the terms of the Development Agreement with the City and amendments thereto. This Staff Report transmits for City council review and approval a Consent to Transfer and Assignment between NME, NME Headquarters, Inc. (UNMEHQU), and the city. NME is currently arranging financing for several of its projects through a subsidiary of Merrill Lynch. The transaction is structured and the documentation is drafted to provide for loans directly to the subsidiaries, with guaranties from NME. The only NME project that is not currently owned by one of NME's subsidiaries is the 2600 Colorado Boulevard Corporate Headquarters proj ect. NHE has requested that it be allowed to transfer the 2600 Colorado Boulevard project from NME to a wholly-owned subsidiary, NMEHQ. This would enable NME to z;" - 1 - OCT 1 1 1988 . . for and realize substantial cost and administrative savings which would result from borrowing money for the 2600 Colorado Boulevard Project from a Subsidiary of Merrill Lynch, rather than from its current lender. RECOMMENDATION It is respectfully recommended that the City Council approve and authorize the execution of the accompanyinq Consent to Transfer and Assignment. PREPARED BY: Robert M. Myers, City Attorney Laurie Lieberman, Deputy city Attorney - 2 - . . CONSENT TO TRANSFER AND ASSIGNMENT THIS CONSENT TO TRANSFER AND ASSIGNMENT (the "Consent"), is entered into this day of September, 1988, by and between NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation ("NME"), NME HEADQUARTERS, INC., a California corporation ("NMEHQU), and the CITY OF SANTA MONICA, a municipal corporation, for itself and for each of its agencies, departments, bureaus, and other subdivisions (the "City"), is made with reference to: g ~ ~ 1. ! ~ !:! ~: A. NME, NMEHQ, and certain other subsidiaries and affiliates of NME have entered into that certain Master Loan Agreement, dated as of May 26, 1988, with MP Funding Corporation, a Delaware corporation (the 11 Lender" ), pursuant to which Lender has agreed to lend money to certain Subsidiaries and affiliates of NME if such subsidiaries and affiliates agree to deliver a deed of trust with respect to the project being financed and NME agrees to guaranty the indebtedness of such subsidiaries and affiliates to Lender. B. There will be material and substantial cost, administrative and mechanical savings with respect to the Kaster Loan Agreement if NMEHQ, rather than NME, borrows from Lender the money necessary to finance the construction of the project located at 2600 and 2700 Colorado Boulevard in Santa Monica, California. A legal description of the land on which the project is being constructed is attached as Exhibit A hereto (the "Land"). The Land, together with all of NME's right, title, and - 1 - . . interest in and to the real property, personal property, and fixtures located thereon, and all rights and obligations of NME with respect to the project, are referred to herein collectively as the IIproject... C. In order to achieve such material and substantial cost, administrative and mechanical savings, NME desires to transfer and assign the Project to its wholly-owned subsidiary, NMEHQ. D. City has agreed to consent to the transfer and assignment of the Project by NME to NMEHQ, and the encumbrance of the Project by NMEHQ in favor of Lender, on the terms and subject to the conditions set forth in this Consent including, without limitation, NME's agreement to guaranty the obligations of NMEHQ to City. NOW, THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: AGREEMENT 1. Consent to Transfer and Assignment. city hereby irrevocably consents to the transfer and assignment by NME to NMEHQ of the Project and all contracts, documents, instruments, agreements, permits, and licenses entered into by or granted to NME in connection with the Project, and the delegation by NHE to NMEHQ of all of NME's obligations, duties, and responsibilities to the City and to all other parties with respect to the Project, including without limitation, under the Development Agreement (as defined below). For purposes of this Consent, the Development - 2 - . . . Agreement shall mean that certain Development Agreement, dated as of April 16, 1982, between Colorado Place Associates, a California general partnership, and the City, as such Development Agreement has been amended by that certain Covenant and Agreement, dated as of August 30, 1984, between Campeau/Sedgwick Properties, a California general partnership, Campeau corporation of California, a California corporation ("Campeau"), Grant Sedgwick, an individual, and City, by that certain First Amendment to Development Agreement, dated as of February 20, 1987, between 2600 Colorado Associates, a California limited partnership, Campeau and City, by that certain Second Amendment to Development Agreement, dated as of April 8, 1987, between NME and city and by that certain Third Amendment to Development Agreement, dated as of August 8, 1988, between NME and city. 2. NME Guaranty. In consideration of city entering into this Consent, NHE hereby irrevocably guaranties the full and punctual payment and performance by NMEHQ of each and every obligation of NMEHQ to City including, without limitation, under the Development Agreement. 3. Consent to Encumbrance. The City hereby acknowledges and agrees that there exists no covenant or agreement between the City and NME, NMEHQ, or any of their predecessors-in-interest prohibiting or restricting the encumbrance of the Project. NMEHQ hereby agrees to include in any deed of trust or other instrument enc~mbering the Project, language to the effect that any lender or other person acquiring a security interest in the Project is taking subject to this Agreement and the Development Agreement. - 3 - . . ~ 4 . NMEHQ Assumption. As a condition of approval by the Ci ty of the transfer and assignment by NME to NMEHQ, NMEHQ assumes and promises to perform all of NME's obliqations, duties, and responsibilities to the City and to all other parties with respect to the project including, without limitation, under the Development Agreement as defined in Paragraph 1 of this Agreement. s. Headings. The paragraph headings in this Consent are for reference only and shall not be used in construing or interpreting any of its provisions. 6. Severability. If any provision of this Consent is determined to be invalid, the remainder of this Consent shall survive. 7. California Law. This Consent shall be governed by and construed in accordance with California law. 8 . Counterparts. This Consent may be executed in any number of counterparts, each of which shall be an original and all of which taken together shall constitute one agreement. - 4 - . . ~ IN WITNESS WHEREOF, the parties hereto have caused this Consent to Transfer and Assiqnment to be executed and delivered as of the day and year first above written. CITY OF SANTA MONICA, a municipal corporation By: JOHN JALILI City Manager APPROVED AS TO FORM: ROBERT M. MYERS City Attorney NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation By: Title: NME HEADQUARTERS, INC., a California corporation By: Title: LLD344jhpc - 5 -