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Wednesday, June 22, 2011

Lumber Yard Loan Mod Is Under Bank Scrutiny

• City Asked for Estoppel Certificate

BY BILL KOENEKER

The Malibu City Council is scheduled to take action authorizing the city manager to execute what is called an “estoppel certificate” that is requested by Wells Fargo Bank as a result of the extension of the maturity date of a construction loan by Malibu Lumber, LLC.
An estoppel certificate is described as a document to give a third party critical information on the relationship between a landlord and tenant.
Malibu Lumber Yard, which is comprised of Richard Weintraub, Richard Sperber, and RAS Investments, LLC, the newest owner to become involved with the firm, sought to exercise its option to extend the maturity date of a $20 million construction loan for one year.
Wells Fargo now wants the city to provide the estoppel certificate confirming the current status of the ground lease.
The $20 million construction loan was obtained after Malibu Lumber, LLC signed the lease document, which was approved by the city council in 2008.
The bank wants to make sure there are no current defaults or other changed conditions under the lease that would make such an extension inadvisable from Wells Fargo’s perspective, according to a staff report.
“The Estoppel requested by the lender seeks confirmation from the city that the ground lease remains in force and effect, that the city is not aware of any default thereunder and that there is no outstanding deferred rent which has accrued as of the date of this Estoppel,” wrote Assistant City Manager Reva Feldman and special counsel Dennis Roy, in the staff report.
Feldman is expected to tell council members that the document acknowledges that it will not be construed or applied to modify in any way the existing ground lease between the city and Malibu Lumber, LLC, that the city is not assuming any obligation for enforcing any of Wells Fargo’s rights against Malibu Lumber, LLC and that “the city will retain its right to continue its implementation and administration of the ground lease in accordance with its terms without further notification to Wells Fargo.”

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