1. Update on 440 Oakland Avenue Note Sale
John Ward
July 20, 2016

2. Property Background
Purchased by EMWD in July 1988 and used until relocation to Perris in June 1995
Declared Surplus – May 1998
Actively Marketed for Five Years
Sold to JDP Development for $700,000
Grant Deed and Deed of Trust – Recorded November 2003 in the name of Juanita Properties, LLC

3. Financing Background & Note Modifications
$250,000 Cash Down Payment
$450,000 Note Extended to Juanita Properties, LLC – November 2003
Secured by Deed of Trust in the first position
Quarterly Interest Payments
Principal Balance Initially Due – November 2005

4. Modifications to Note Six Note Modifications November 2005
December 2007
June 2009
March 2013
Also incorporated requirements to cure property tax deficiencies, and restated insurance requirements
January 2015
Also incorporated specific requirements to maintain and preserve property from disrepair
All Modifications Extended Maturity Dates and some Adjusted Interest Rates

5. Status Interest Payments
One Quarterly Payment of $6, due on May 15, 2016 has not been paid
Insurance Coverage and Property Taxes – Current
Property Maintenance/Site Condition Problems Persist
Weeds
Debris
Fencing
Security
Roof in Disrepair
Electrical Wiring Stripped
Balloon Payment of $450,000 due November 14, 2016

6. Sale of Note Secured by Deed of Trust
Risk Analysis Undertaken at Direction of the Board explored EMWD’s Options:
Continue to Attempt to Enforce Property Maintenance Provisions
Explore a Sale of the Note
Explore Costs Associated with Foreclosure and Property Risk Mitigation; Pursue Sale of Property
Board Directed Staff to Pursue a Sale of the Note as the Best Economic Alternative, while Mitigating Risks
Note Marketed for 22 Calendar Days to 8 Note Buyers and through Three Public Websites
Seven Offers Received - One Unsolicited Offer Received
Highest Offer Received from JDP Development, Inc. for $310,000
JDP Development, Inc. is owned by the same individual as Juanita Properties LLC (current property owner)

7. Board Action and Subsequent Events
April 27, 2016: Board Authorized Sale of Note to JDP Development
Directed staff to close escrow within thirty days (by May 27, 2016)
If escrow did not close, Board authorized General Manager to accept the next highest bid, subject to the concurrence of the Board Treasurer
May 25, 2016: Deadline for JDP Development to Fund Escrow
Failed to fund escrow account
Did not return any phone calls from the District seeking status until May 26, Advised that JDP Development needed more time to obtain funding.
May 27, 2016: District Cancelled Escrow for Non-Performance under Purchase and Sale Agreement
Current Alternatives:
1. Sell the Note to the next responsible bidder using the authority previously provided to the General Manager, with the concurrence of the Board Treasurer; or
2. Attempt to bring owner into compliance with Sixth Note Modification; if non-performance continues, foreclose on the Note starting in November 2016

8. Alternatives
Sell the Note to Next Highest Responsible Bidder
Commence Foreclosure, Clean- up Property, Sell Property
Commence Foreclosure, Demolish Existing Building, Sell Property
Commence Foreclosure, Demolish Existing Building, Clear Entire Site, Sell Property
Sales Price: $ 140,000
Costs:
Legal and Title <$ 25,000>
Site cleanup and
security <$ 75,000>
Building repairs <$ 100,000>
Contingency (10%) <$ 20,000>
Legal and Title <$ 25,000>
Building
demolition <$ 375,000>
and clearing
Contingency (10%)<$ 40,000>
Legal and Title <$ 25,000>
Pavement,
concrete, and <$ 162,000>
tree removal
Contingency (10%) <$ 54,350>
Potential Sale * $ 275,000
Potential Sale * $ 275,000
Potential Sale ** $ 543,500
Net Recovery $ 140,000
Net Recovery $ 55,000
Net Recovery <$ 165,000>
Net Recovery <$ 72,850>
*Based on Broker’s Opinion of Value ** Based on Appraisal; assumes full site clearing.
Note: Property would need to be offered under surplus requirements to other public agencies, which under certain conditions, could result in a sale at less than market value.

9. Recommendation
Based upon economic analysis, and to mitigate risks moving forward:
Continue under Board’s previously approved action to authorize the General Manager to accept the next highest offer on the Note, subject to the concurrence of the Board Treasurer

10. Contact Information
John Ward
Director of Engineering Services
(951) Ext. 4453