Condo Conversion Vote Passed

The Board is pleased to announced that tonight's condo conversion vote passed. With a total of 135 ballots counted (representing a nearly 83% voter turnout!) we are very grateful for your participation in this process, and for the support of Hutton Group, Brenda, Michelle and the entire Lordon team for pulling this together.

A vote of 51% of the membership was needed to pass. With 163 shareholders, that is 83 total "yes" votes needed. The vote tally is shown below:

Yes

No

Abstain

Total Votes

114
20
1
135
84%
15%
<1%
100%

70% of the total membership voted "yes".

Note: One additional envelope not included in the above count was received, but it was empty.

We are excited about accomplishing this essential milestone, and now have a clear path to conversion. Stay tuned for updates from Hutton Group on next steps and have a happy Thanksgiving!

The Board of Directors

Condo Conversion Vendor Selected

Dear Shareholders

When we were elected as Board of Directors, we made a commitment to complete the conversion project as our number-one priority. The conversion had faced many delays leading up to our tenure, and several more followed as we worked through issues that arose throughout the process. Over the past several months, we have focused our energy on identifying vendors who could successfully complete this conversion effort in today’s environment. There are complicating factors at work today that didn’t exist before, and the process is becoming increasingly complex and heavily reliant on Fannie Mae (FNMA). In researching potential vendors, we followed every lead available to us to identify firms and attorneys that might be able to see the conversion through. In total, we contacted 34 attorneys, firms and consultants.

We narrowed the search to two potential vendors, which we have extensively vetted over the past several months: Murakami Law and ROA Hutton. We were very fortunate to have proposals from these two skilled vendors, both with a history of successful conversions and are well-respected in the conversion industry. Our goal was to ultimately select a consultant whom could demonstrate extensive experience in: cooperative to condo conversion, navigating 2014 FNMA regulations, and additionally could provide evidence of recent successful co-op conversions and relevant progress. It was imperative to us that the selected consultant provide a detailed proposal and plan to work collaboratively with lenders and FNMA using proven strategies, to avoid further delays in our conversion effort. The Board was very impressed with Tim Murakami and Tim Shuey's town hall presentation on July 9th. Mr. Murakami presented a conversion strategy that he felt would effectively cut through the FNMA and lender financing impasse. However, when later presented with additional information from NCB representatives, it was determined that his initial strategy would not work as planned. The Board was eager to consider a proposal by Mr. Murakami, so additional time was provided for a new strategy to be developed. The revised strategy Mr. Murakami presented was one that had not been attempted before. This strategy would require additional legal complexity and would incur expenses beyond the scope of the initial proposal. Although Mr. Murakami felt confident that his revised strategy would be successful, the same was said of the initial plan which raised some concern to the Board. Additionally, the particulars of the plan and the fact that it was untested meant unanticipated setbacks could be encountered and result in additional costs and delays. Mr. Murakami asked that the details of his strategy not be publicly disclosed, so we are unable to go into much detail. However, as the conversion strategy itself is paramount in the success of this conversion, the Board struggled with the particulars of Mr. Murakami’s conversion plan and the implications it would have on The Royal Palms.

So, after careful and extensive deliberation regarding both vendors and their respective strategies, the Board members have voted unanimously (5-0) in favor of hiring ROA Hutton to complete the conversion. After examining all details available, the Board is convinced that ROA Hutton is the strongest and most experienced conversion consultant able navigate the Royal Palms through the FNMA approval process and complete the conversion in the most efficient timeline possible. ROA Hutton has already obtained an FNMA Conditional PERS approval in 2014 for a cooperative conversion in Northern California which provides a path for the Royal Palms to follow. Additionally, as part of the agreement, ROA Hutton will retain a reputable California-based attorney as part of our fixed-cost contract so the Royal Palms is guaranteed not to incur any additional legal expenses.

This decision was not easy, but we sincerely believe it to be the right one. We have listened to some shareholders voice their opposition to ROA Hutton and all opinions were given great consideration. However, with our access to privileged information from lenders, title professionals, realtors, HOA board members from other conversion project communities, and other industry professionals, we were able to form a more accurate view of each consultant’s capabilities and process beyond just their proposals and reputations. We were provided first-hand experiences of how the consultants communicated with the communities and board members, handled FNMA PERS approval and managed any problems that arose in the process. These insights combined with the knowledge developed over months of extensive due diligence gives us full confidence that ROA Hutton is the firm that will be able to complete this conversion given the current environment.

We want to thank you all for putting your faith in the five of us to do what is best for this Association, and ask for you to trust us and our judgment. We as a Board stand united in this decision, and we encourage you to join us in supporting ROA Hutton get this building converted. We can do this, but we must do it together.

We will be providing additional information shortly, and invite you to pose any questions you may have to conversion@100atlantic.com.

Sincerely,
Royal Palms Board of Directors

Condo Conversion Survey

Please take a moment and fill out an important survey regarding Condo Conversion and submit to the front office or via email no later than Sunday, June 1st, 2014.

If you did not receive the update accompanying this survey, you can request it. Also, be sure to subscribe to email updates to ensure you always stay up to date on the latest from the Board.

Important Condo Conversion Update

If you didn't catch the latest update from the Board regarding condo conversion posted in the lobby, check it out here. Please read it, as it contains important information regarding the current status of the conversion and the need to change course if we want the conversion to complete.

Last Thursday we had a Town Hall meeting with guest speaker Jack Boyajian of ROA Hutton. ROA Hutton is a company specializing in co-op to condo conversions and could prove to be our only viable option in completing this conversion. We invited Mr. Boyajian to this special meeting to share the process ROA Hutton would undertake if we were to engage their firm to complete the process. A few highlights from the meeting:

  • The conversion would be taken on contingency, meaning we would not pay anything unless ROA Hutton were able to successfully convert the Royal Palms
  • Recent changes to the law this year would require a revision of our CC&Rs; this is true regardless of whether we hire ROA Hutton or not
  • If engaged, ROA Hutton has provided a 6 month completion timeline; much of this time is a result of statutory requirements, such as needing 35 days for a vote of updated CC&Rs by shareholders
  • Some of the work that has been completed is still usable; other work is not usable given the amount of time that has lapsed or the quality of the work that was done
  • ROA Hutton considers shareholders its clients, not the Board; if hired, they would individually engage each owner to ensure the process is handled quickly and efficiently
  • ROA Hutton is working to acquire what is called a Collateral Replacement Agreement (CRA) with Fannie Mae, which would prevent owners from having to refinance once we convert. Obtaining the CRA is not a guarantee, though ROA Hutton is increasingly optimistic of this happening.
  • Hiring ROA Hutton to complete the conversion would require funds beyond those available in the conversion account. We have no currently available option to complete the conversion without needing additional funds.
  • Jack shared some of his professional history, including some details of debt collection business he was involved with which garnered much criticism and led to suits being filed; he assured everyone that these old businesses had nothing to do with ROA Hutton or its practices and invited shareholders to contact him directly if they had any questions or concerns about matters of his personal or professional past.

Thursday Meeting with Pam Moore

We wanted to engage shareholders prior to making any decisions about how we proceed. We have been examining all options available to us, which have been unfortunately few given the obstacles we face.

As ROA Hutton seems to be our most viable option at this time, we wanted to invite our Corporate Attorney Pam Moore to discuss her thoughts on them, the contract they have provided the Board for our consideration, and respond to any shareholder questions or concerns.

This would be an excellent opportunity to be part of the discussion, and we hope everyone can join in. If you can't be there, share your thoughts at conversion@100atlantic.com. If you have a question for Pam, we will share it with her in the meeting.

Hope to see you there!

An Update on Condo Conversion Progress

The most common questions we get asked, both at Board meetings as well as in the hall are, "Where are we with condo conversion? When will we be done?!"

They are excellent questions, and ones that we as a Board have had top-of-mind for the entirety of our term. However, it has always been a struggle to find a response that feels wholly satisfactory given how urgently we all desire the conversion to complete. The fact of the matter is, this process has been and will likely continue to be fairly complicated and at times out of our control. In our last Board meeting, we were met with heartfelt pleas from shareholders reinforcing just how much they are depending on this conversion to go through. We were asked for some sort of commitment for a completion date. Many are understandably frustrated at the seeming lack of progress and some have shared those frustrations each month.

Every member of the Board, along with virtually all shareholders of the Royal Palms want to convert to condominium, and do so as quickly as possible. That point may seem trivial, though it is worth stressing. We are all working towards the same goal. However, it's understandable that shareholders aren't able to see this progress, perhaps in a way that we are able to see a leak being fixed, or paint on the building, or film on a window, and that can be frustrating.

To help provide what information we have, here are the answers to some common questions we receive. We hope this helps keep you up to date, along with reinforce that we are urgently pursuing conversion and are committed to do so as long as we are on the Board.

What progress has been made on conversion?

The first major breakthrough was in passing the CC&Rs. Without those, the entire conversion process was at a legal standstill. In fact, because it took several years to get these passed meant some work had to be redone even just to initiate the conversion process again.

Once we had overcome that hurdle our conversion consultant, Mr. Scarlatti, focused his time on identifying who had mortgages in the building and who the point of contact was at each lending institution. To get this information, you might remember having filled out a mortgage questionnaire. Getting everyone to fill this out was a time-consuming process, and Erin Copenbarger literally went door-to-door to get this accomplished!

As most existing mortgages are held by NCB, this was Mr. Scarlatti's first stop and the area for him to make the most progress. He's been navigating NCB as a primary lender in hopes that once conversion is approved at NCB, it provides a template to follow for the other lenders. Both Mr. Scarlatti and designated board members are in regular communication with NCB and working on approving "in-house" loans for conversion.

Additionally, Mr. Scarlatti is in contact with other lending institutions with varying degrees of engagement. The strategy has been to focus on NCB hoping that once they approve, it should make the approval process much easier. The process, as Mr. Scarlatti has called it, is like "herding cats in a rain storm."

Who are these other lenders?

There are a total of a dozen or so lenders that hold mortgages within the building, and all must approve the conversion. There is a mix of large banks, small banks, and even private lenders. To add to the complexity, some loans have been sold off to Fannie Mae/Freddie Mac which will require yet another approval. Mr. Scarlatti is in contact with all of them, and navigating through the bureaucracy that comes along with institutions of this nature.

Why is it taking so long?

If you have ever struggled finding the "right person" to talk to on a customer service phone call, you might have a hint of what this process was like starting off. In some cases of foreclosed units, we had no idea who even owned the property or where to start. Then, even if we found that information the loan might have been sold or we had another rabbit trail to follow just to find a contact that could point us in the right direction. And that would be for a single unit! In some cases of foreclosure and other distressed properties the mortgages have been sold and that makes the situation even more complex. And all of this transpired even before the talks with the banks could even begin.

So please understand, this is a very complex process. It will likely remain complex though it should simplify over time. Leading into the effort, Mr. Scarlatti was hesitant to give any sort of time estimates and it's easy to see why-- there is so much that is out of our control and in the hands of third parties, all of which have their own policies and procedures and processes for us to navigate.

Who is in control in this process?

While the Board are your elected representatives to help keep the process moving, unfortunately not much is in our direct control at this point. We push Mr. Scarlatti and David is in contact with him several times a week. Erin is in direct contact with NCB and aiding in the process, as Mr. Scarlatti has faced some challenges given he is not a shareholder himself but simply representing us. We will be working with banks more directly to assist with any specific issues as they arise to aid Mr. Scarlatti with any red tape that arises. Ultimately, this current phase (which is effectively the "conversion approval" phase) will be exclusively in the hands of the banks. Additionally, we have utilized Pam Moore's office to aid in title searches and will continue to leverage her resources where appropriate to further the process. We are very much pushing this along in every way we are able.

How can I help?

First and foremost, your patience, understanding and support are incredibly helpful. We welcome and encourage you to come to the Board meetings to get updates and even share your concerns. However, understand we are doing everything within our power to move this process along as quickly as possible.

Also, there will be an upcoming opportunity to do your part. On a lender-by-lender basis, once conversion is "approved" those who hold mortgages will be required to sign off on the loan modification to enable the conversion. By signing these agreements and urging your neighbors to do the same once they receive theirs will ensure that no further delays happen; at least none that are within our control.

We thank you all for your continued support!
- The Board of Directors