FINAL REPORT - San Bernardino Superior Court

Section 4: SCLA Hangar Development
before the settlement agreement for a term of 12 months. The loan note is just over one page and
was secured only by a two page personal guaranty by Jeffrey Kinsell. The loan agreement
required interest only payments with a balloon payment due 13 months from the note start date,
which was 90 days from the disbursement of funds.
Within a week of the execution of the settlement agreement, KND Affiliates was provided a
second, $12.2 million, 12 month loan for the purpose of paying CBS Aviation Development and
its subcontractors. This loan was also secured by a personal guaranty of Jeffrey Kinsell, but
unlike the first loan, it was secured by a deed of trust in certain real property. The promissory
note and deed of trust do not describe the exact parcels that securitized the loan. Rather, this
information is included in an exhibit that was not provided for this audit.
In December 2007, about 17 months after the security agreement was executed, SCLAA
provided KND Affiliates with four loans totaling about $61 million and ranging from $10.7
million to $21.3 million. Each loan was securitized by a deed of trust in certain real property
with assignment in rents, presumably the four hangar facilities that were under development.
However, unlike the other loans, these notes contain a provision that states:
Upon the expiration of the Term, provided Payor is not or has not been in material breach or default of this
Note, Payee shall forgive the entire outstanding unpaid principal balance due under this Note.
Table 4.3
SCLAA Loans to KND Affiliates as Summarized by the City Attorney
Loan Dates Loan Description Total Loan Amounts
Not specified
Not specified
December 18, 2007
Four separate loan agreements for
purposes of assisting KND in meeting
its obligations under the settlement
agreement.
Additional loan for purposes of
assisting KND in meeting its
obligations under the settlement
agreement.
To complete KND’s obligations under
the settlement agreement and develop
improvements not budgeted for under
settlement agreement, develop
additional tenant improvements, and
finance certain change orders.
Total Amount Loaned as of December 18, 2007 According to SCLAA
Board Staff Report:
$47,977,880
Note: Total amount equaled
$52,881,839 as of December 18, 2007
due to accrued interest.
$2,000,000
$12,300,000
$67,181,839
Source: SCLAA Board staff report submitted by Authority Counsel on December 18, 2007 regarding resolution
07-009.
4-8
Harvey M. Rose Associates, LLC