[RESERVATION OF RIGHTS LETTER]€¦ · 9. On May 22, 2014, Original Lender executed an allonge to the Note (the "Allonge") which assigned the rights and payments due under the Note

CORE/0772514.0037/154212767.5

IN THE DISTRICT COURT OF WYANDOTTE COUNTY, KANSAS

TWENTY NINTH JUDICIAL DISTRICT

FANNIE MAE,

Plaintiff,

v.

KM-T.E.H. REALTY 6, LLC, a

Missouri limited liability company,

and

JETZ SERVICE CO., INC. a

Kansas corporation,

Defendants.

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Case No.

PETITION FOR JUDGMENT ON THE DEBT

AND REAL ESTATE FORECLOSURE

COMES NOW, Fannie Mae, ("Lender") and for its petition pursuant to Kan. Stat. Ann.

Chapter 60, states as follows:

1. Lender is a corporation duly organized under the Federal National Mortgage

Association Charter Act with its principal place of business located at 3900 Wisconsin Avenue

N.W. Washington, D.C. 20016.

2. KM-T.E.H. Realty 6, LLC (the "Borrower") is a Missouri limited liability company

authorized to do business in Kansas who's, on information and belief, registered agent is located

at 4601 E. Douglas Street, Suite 150, Wichita, Kansas 67218 and may be served with process at

that location pursuant to Kan. Stat. Ann. § 60-304(e).

3. Jetz Service Co., Inc, ("Lessee") is a Kansas corporation who's, on information and

belief, registered agent is Cogency Global Inc., located at 2101 SW 21st Street, Topeka, Kansas

66604 and may be served with process at that location pursuant to Kan. Stat. Ann. § 60-304(e).

4. Jurisdiction in this action is proper pursuant to Kan. Stat. Ann. § 60-308(b) as follows:

ELECTRONICALLY FILED2019 Sep 09 AM 11:10

CLERK OF THE WYANDOTTE COUNTY DISTRICT COURTCASE NUMBER: 2019-CV-000689

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the defendant's principal place of business is located in the state of Kansas; the defendant is

authorized to transact business within the state of Kansas; the defendant has transacted business

within the state of Kansas; the defendant owns, uses or possesses property within the state of

Kansas; the defendant entered into a contract to be performed in the state of Kansas; caused injury

to Lender in the state of Kansas; and the defendant contractually agreed to jurisdiction in the state

of Kansas and thereby submitted to the jurisdiction of this Court.

5. Venue in this action is proper pursuant to Kan. Stat. Ann. §§ 60-601(b)(3) and 60-

604(2).

FACTS COMMON TO ALL COUNTS

6. On or about May 22, 2014, Borrower executed a Multifamily Note ("Note") in favor of

Arbor Commercial Funding, LLC ("Original Lender"), evidencing a loan made by Original Lender

to the Borrower in the original principal amount of $2,966,000.00. A true and correct copy of the

Note is attached hereto and marked as Exhibit A.

7. To secure repayment of the amounts owing under the Note, Borrower executed a

Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing

(the "Mortgage"), granting the Original Lender a lien on, inter alia, the real estate located at 2010

N. 57th Street, Kansas City, Kansas, and more fully described in the Mortgage (the "Real Estate").

8. The Mortgage was recorded on May 23, 2014 in the Wyandotte County, Kansas

Register of Deeds Office as Document No. 2014R-06379.

9. On May 22, 2014, Original Lender executed an allonge to the Note (the "Allonge")

which assigned the rights and payments due under the Note to Lender without recourse. A true and

correct copy of the Allonge is attached hereto and marked as Exhibit B.

10. The Mortgage was assigned by Original Lender to Lender on May 22, 2014 by virtue

of an Assignment of Multifamily Mortgage (the "Assignment").

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11. The Assignment was recorded on May 27, 2014 in the Wyandotte County, Kansas

Register of Deeds Office as Document No. 2014R-06385.

12. In conjunction with the execution of the Note and Mortgage, Borrower executed a

Multifamily Loan and Security Agreement in favor of Original Lender (as amended, the "Loan

Agreement"). A true and correct copy of the Loan Agreement is attached collectively hereto and

marked as Exhibit C.

13. The mortgage registration tax was fully paid thereon as required by law.

14. Subject to any unpaid real estate taxes in favor of Wyandotte County, Kansas, the

Mortgage constitutes a valid, indefeasible, first and prior lien on the Real Estate.

15. Pursuant to Section 7 of the Mortgage, Borrower has waived its right of redemption

with respect to the Real Estate.

16. The Note, the Loan Agreement, the Mortgage and Guaranty are collectively referred

to hereafter as the "Loan Documents."

17. Original Lender executed an Assignment of Collateral Agreements and Other Loan

Documents on May 22, 2014 in favor of Lender, thereby assigning all right, title and interest in

the Loan Documents to Lender.

18. The loan evidenced by the Loan Documents is a commercial loan.

19. Pursuant to the Loan Documents, the Borrower agreed to pay attorneys' fees and

collection costs incurred by Lender in collecting the amounts owing under the Loan Documents

and in enforcing Lender's rights and remedies thereunder.

20. Lender is the current holder of the Loan Documents and is owed all amounts owing

thereunder.

21. On April 9, 2019, Original Lender, as servicer for the Lender, sent Borrower a Notice

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of Demand for Cure (the "First Demand Notice"), notifying Borrower of its failure to maintain the

Real Estate pursuant to Sections 6 and 14 of the Loan Agreement and demanding that Borrower,

within thirty (30) days, fully repair the items listed as Life Safety in the Property Condition

Assessment ("Required Repairs") performed on January 8, 2019 by f3, Inc. Real Property

Consultants and attached to the First Demand Notice and provide evidence of completion to

servicer as set forth in the First Demand Notice. A true and correct copy of the First Demand

Notice is attached hereto and marked as Exhibit D.

22. Borrower failed to perform the Required Repairs, constituting an Event of Default

under the Loan Documents.

23. On August 9, 2019, counsel for the Lender sent a demand letter to Borrower notifying

it of its default under the Loan Documents, accelerating all amounts owing thereunder, and

demanding payment (the "Second Demand Notice"). A true and correct copy of the Demand

Notice is attached hereto and marked as Exhibit E.

24. Despite the Second Demand Notice, Borrower has failed to pay the amounts owing

under the Loan Documents.

25. As of August 30, 2019, after all credits have been applied under the Loan Documents,

Borrower is indebted to Lender under the Note in the following amounts, plus accruing interest,

costs, expenses and attorneys' fees: $2,704,867.84 in principal, $20,496.89 in accrued interest,

$2,962.30 in expenses, $80,955.03 in Prepayment Premium, less credits in the aggregate amount

of $309,303.93, totaling $2,509,294.88 plus interest from and after August 30, 2019 at the default

rate set forth in the Loan Documents (collectively, the "Indebtedness").

26. As of the date hereof, Borrower has failed to pay the amounts owing under the Loan

Documents.

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COUNT I: SUIT ON THE NOTE

27. Lender hereby incorporates paragraphs 1 through 26 above as though fully set forth

herein.

28. Under the terms of the Loan Documents, Borrower was obligated to perform all terms

and conditions set forth therein including, but not limited to, keeping the Real Estate in good repair

and marketable condition and performing all repairs within all timeframes required by Lender.

29. Lender and Original Lender have performed all obligations required under the Loan

Documents.

30. Borrower remains in default for failing to perform the Required Repairs.

31. The entire Indebtedness is now due and owing.

32. Borrower remains in default for failing to pay the Indebtedness.

33. Lender has incurred and will continue to incur attorneys' fees and collection costs in

the collection of the Indebtedness and enforcement of the Lender's rights and remedies under the

Loan Documents.

34. As of August 30, 2019, the Borrower is indebted under the Loan Documents in the

amount of the Indebtedness.

35. Pursuant to the Loan Documents, Borrower agreed to pay attorneys' fees incurred by

Lender in collecting the amounts owing under the Loan Documents and in enforcing Lender's

rights and remedies thereunder.

36. Lender has been damaged in the amount of the Indebtedness as a direct and proximate

result of Borrower's default.

WHEREFORE, Lender prays for judgment, in rem and not in personam, against Borrower

in the sum of $2,509,294.88, plus interest from and after August 30, 2019 at the default rate of

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interest as provided in the Loan Documents and other damages arising and sums due and owing

pursuant to the Loan Documents; and for the costs of this action, including attorney's fees as

allowed by law, plus post judgment interest and such other and further relief as is just.

COUNT II: FORECLOSURE OF MORTGAGE

37. Lender hereby incorporates paragraphs 1 through 36 above as though fully set forth

herein.

38. Lessee is named as a defendant herein by reason of a Lease Agreement by and between

Borrower (or predecessor-in-interest to Borrower) and Lessee dated August 17, 2005 (the

"Lease"), covering certain premises of the Real Estate more fully described in the Lease.

39. On or about May 27, 2014, Lender and Lessee executed a Subordination, Non-

Disturbance and Attornment Agreement ("SNDA"), whereby Lessee agreed to subordinate the

Lease to the Mortgage on the condition that it is assured of continued occupancy of the Premises

under the terms of the Lease and the SNDA.

40. Any right, title, interest, and/or lien of the Lessee in, to or on the Real Estate is junior

and inferior, subject and subordinate to the mortgage lien of Lender pursuant to the SNDA.

41. Any right, title, interest, and/or lien of the Borrower in, to or on the Real Estate is

junior and inferior, subject and subordinate to the mortgage lien of Lender pursuant to the

Mortgage.

42. Under the terms of the Mortgage, the Borrower contractually waived its right of

redemption with respect to the Real Estate.

43. Accordingly, the Borrower's right of redemption with respect to the Real Estate should

be extinguished pursuant to Kan. Stat. Ann. § 60-2414(a).

44. Subject only to the payment of real estate taxes that may be due with respect to the

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Real Estate, if any, Lender's interest and rights in the Real Estate are superior to any other interest

in such real estate.

WHEREFORE, Lender prays that the Mortgage be foreclosed with respect to the Real

Estate, and that the Court enter a journal entry that: (a) directs the Sheriff of Wyandotte County,

Kansas to sell the Real Estate according to the law; (b) declares and finds that the Borrower and

Lessee are barred from any right, title, interest or lien in, to, or on, the Real Estate; (c) ordering

and directing that the Borrower's right of redemption be extinguished with respect to the Real

Estate or; and (d) ordering and directing that the proceeds from the sale of the Real Estate be

applied as follows:

(i) To the payment of the costs of this action, including said foreclosure

sale;

(ii) To the payment of any and all taxes and assessments, and interest and

penalties thereon, that may be found with respect to the Real Estate on the

date of sale;

(iii) To the payment of all or a portion of the Indebtedness, together with

interest thereon;

(iv) The remainder, if any, to be paid into the Court and distributed

according to the priorities established by the Court in this case.

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STINSON LLP By: __/s/ Nicholas J. Zluticky______ Nicholas J. Zluticky KS # 23935 1201 Walnut, Suite 2900 Kansas City, MO 64106 Telephone: (816) 842-8600 Facsimile: (816) 691-3495 [email protected] ATTORNEY FOR PLAINTIFF

EXHIBIT A

EXHIBIT B

Fannie Mae PAY TO THE ORDER OF WITHOUT RECOURSE.

ARBOR COMMERCIAL FUNDING, LLC, a New York limited liability company

By:

Name: Michelle Mann Title: Authorized Signatory

Dated: May 22, 2014

Fannie Mae Commitment Number: 814411

Multifamily Note — Multistate Form 6010 Page 6 Fannie Mae 06-12 0 2012 Fannie Mae 519361.01630100742785 DOC V2 DLB

EXHIBIT C

EXHIBIT D

Tom Montemage VP, Risk Management

Arbor Realty Trust, Inc. 3370 Walden Avenue, Suite 114

Depew, NY 14043 April 9, 2019 Via Federal Express Next Business Day Delivery, U.S.P.S. Certified Mail – Return Receipt Requested and U.S.P.S. First Class Mail KM-T.E.H. Realty 6, LLC c/o T.E.H. Management 501 Washington Street, Suite 404 Reading, PA. 19601 Attention: Michael Fein, Manager Re: NOTICE OF DEMAND FOR CURE (the “Notice”)

Lender: Fannie Mae Mortgaged Properties: 2100 N. 57th Street, Kansas City, Kansas 66104 Mortgage Loan Number: 1717462021 (the “Mortgage Loan” or the “Loan”) Servicer: Arbor Commercial Funding I, LLC Multifamily Note (the “Note”) dated as of May 22, 2014 in the principal amount of $2,966,000.00 made by KM-T.E.H. Realty 6, LLC (“Borrower”), payable to the order of Arbor Commercial Funding, LLC (“Original Lender”), which Note is secured by, inter alia, certain real property more particularly described in the: Multifamily Mortgage, Assignment of Leases and Rents and Security Agreement and Fixture Filing of even date therewith (the “Security Instrument”), covering certain real and personal property located at 2100 N. 57th Street, Kansas City, Kansas 66104 more particularly described in the Security Instrument (the “Mortgaged Property” or the “Property”), which Property is known as Crestwood Apartments. The Loan is serviced by Arbor Commercial Funding I, LLC (the “Servicer”).

Dear Mr. Fein: Fannie Mae (“Fannie”) acquired the Mortgage Loan from the Original Lender by Assignment dated May 22, 2014 executed by the Original Lender in favor of Fannie. The Note and Security Instrument, together with any and all other documents or instruments evidencing or securing any and all of the obligations in connection with the Note and Security Instrument, are hereinafter collectively referred to as the “Loan Documents”. On January 8, 2019, an inspection was conducted on the Mortgaged Property, whereby certain deficiencies were noted as per the Property Condition Assessment (“PCA”) attached hereto as Exhibit A. This PCA contains more specific information related to the current deficiencies in physical condition of the Mortgaged Property. Please note that this may not be an exhaustive list and is subject to change pursuant to the results of a more in-depth structural analysis. Fannie Mae and/or the Servicer reserve all rights to notify Borrower of any additional items and costs that come to Fannie Mae and/or Servicer’s attention at any time. Notice is hereby given that Borrower has failed to maintain the Mortgaged Property pursuant to the terms of Section 6 of the Security Instrument, which failure is as identified and set forth in the attached PCA, and which failure to maintain after proper notice had been given may constitute an Event of Default as specified in Section 14 of the Security Instrument.

1. Demand is hereby made for: Borrower to correct its failure to maintain the property and immediately implement corrections and procedures in accordance with the following proposed schedule for a cure of all the deficiencies noted in the attached PCA:

KM-T.E.H. Realty 6, LLC April 9, 2019 Page 2 of 6

a. Within Thirty (30) days of the date of this letter, Borrower or Key Principal must (i) deposit with

Servicer, on behalf of Fannie, an amount equal to $4,300.00 (the “Life Safety Cost”) to cover a portion of the amounts shown on Exhibit A and in the PCA that are listed as Life Safety, which deposit will be held by Servicer, on behalf of Fannie, as additional security for the Loan while Borrower pursues correction of such repairs; and (ii) fully repair the items listed as Life Safety in the PCA, and provide Fannie and/or Servicer access to the Mortgaged Property following completion of the repairs for an inspector to inspect the Mortgaged Property and confirm that such repairs have been completed in good workmanlike fashion to the satisfaction of Fannie and/or Servicer. At this time Fannie is conditionally waiving the requirement for Borrower to deposit with Servicer the full amount of $4,300.00, to be held on behalf of Fannie. As an accommodation to Borrower, Fannie will allow funds in the amount of $4,300.00, with Borrower authorization, to be obtained from the Replacement Reserve Account (as defined in the Loan Agreement). Said funds shall be authorized to be released and applied from the Replacement Reserve Account within thirty (30) days of the date hereof. In the event that Borrower shall not have released and authorized the use of the Replacement Reserve Funds within thirty (30) days of the date hereof, an amount equal to $4,300.00 will be immediately due from Borrower to be held by Servicer, on behalf of Fannie, as additional security for the Loan while Borrower pursues correction of such repairs. Please note that this may not be an exhaustive list and is subject to change pursuant to the results of a more in-depth structural analysis. Fannie and the Servicer reserve all rights to notify Borrower of any additional items and costs that come to Fannie or Servicer’s attention at any time.

b. Within Thirty (30) days of the date of this letter, Borrower or Key Principal must (i) deposit with

Servicer, on behalf of Fannie, an amount equal to $175,750.00 (the “Critical Repair Cost”) to cover a portion of the amounts shown on Exhibit A and in the PCA that are listed as Critical Repairs, which deposit will be held by Servicer, on behalf of Fannie, as additional security for the Loan while Borrower pursues correction of such repairs; and (ii) fully repair the items listed as Critical Repairs in the PCA within Six (6) months of the date hereof, and provide Fannie and/or Servicer access to the Mortgaged Property following completion of the repairs for an inspector to inspect the Mortgaged Property and confirm that such repairs have been completed in good workmanlike fashion to the satisfaction of Fannie and/or Servicer. At this time Fannie is conditionally waiving the requirement for Borrower to deposit with Servicer the full amount of $175,750.00, to be held on behalf of Fannie. As an accommodation to Borrower, Fannie will allow funds in the amount of $155,313.79, with Borrower authorization, to be obtained from the Replacement Reserve Account (as defined in the Loan Agreement) and $20,436.21 with Borrower authorization, to be obtained from the Required Repairs Funds being held in the Required Repairs Account (as defined in the Loan Agreement). Said funds shall be authorized to be released and applied from the Replacement Reserve Account and the Required Repairs Account within thirty (30) days of the date hereof. In the event that Borrower shall not have released and authorized the use of the Replacement Reserve Funds and Required Repairs Funds within thirty (30) days of the date hereof, an amount equal to $175,750.00 will be immediately due from Borrower to be held by Servicer, on behalf of Fannie, as additional security for the Loan while Borrower pursues correction of such repairs. Please note that this may not be an exhaustive list and is subject to change pursuant to the results of a more in-depth structural analysis. Fannie and the Servicer reserve all rights to notify Borrower of any additional items and costs that come to Fannie or Servicer’s attention at any time.

c. Within Thirty (30) days of the date of this letter, Borrower or Key Principal must (i) deposit with

Servicer, on behalf of Fannie, an amount equal to $10,000.00 (the “Deferred Maintenance Cost”) to cover the amounts shown on Exhibit A and in the PCA that are listed as Deferred Maintenance, which deposit will be held by Servicer, on behalf of Fannie, as additional security for the Loan while Borrower pursues correction of such repairs; and (ii) fully repair the items listed as Deferred Maintenance in the PCA within Twelve (12) months of the date hereof, and provide Fannie and/or Servicer access to the Mortgaged Property following completion of the repairs for an inspector to inspect the Mortgaged Property and confirm that such repairs have been completed in good


workmanlike fashion to the satisfaction of Fannie and/or Servicer. At this time Fannie is conditionally waiving the requirement for Borrower to deposit with Servicer, the full amount of $10,000.00 to be held on behalf of Fannie. As an accommodation to Borrower, Fannie will allow funds in the amount of $10,000.00, with Borrower authorization, to be obtained from the Replacement Reserve Account (as defined in the Loan Agreement). Said funds shall be authorized to be released and applied from the Replacement Reserve Account within thirty (30) days of the date hereof. In the event that Borrower shall not have released and authorized the use of the Replacement Reserve Funds within thirty (30) days of the date hereof, an amount equal to $10,000.00 will be immediately due from Borrower to be held by Servicer, on behalf of Fannie, as additional security for the Loan while Borrower pursues correction of such repairs. Please note that this may not be an exhaustive list and is subject to change pursuant to the results of a more in-depth structural analysis. Fannie and the Servicer reserve all rights to notify Borrower of any additional items and costs that come to Fannie or Servicer’s attention at any time.

d. Please note that this may not be an exhaustive list and is subject to change pursuant to the results of a

more in-depth structural analysis. Fannie and/or the Servicer reserve all rights to notify Borrower of any additional items and costs that come to Fannie or Servicer’s attention at any time.

2. Until further notice, Borrower shall increase its monthly deposits into the Replacement Reserve (as defined in

the Multifamily Loan and Security Agreement) by an amount of $867.99 per month, so that the amount deposited per month by Borrower is equal to $4,639.66 per month, to increase the balance of the Replacement Reserve to keep up with ongoing maintenance of the Mortgaged Property following completion of the repairs noted above.

3. Within Thirty (30) days of the date of this letter, Borrower to provide all information listed attached hereto as

Exhibit B.

Borrower is advised that Servicer, on behalf of Fannie, retains the right to approve all contracts or work orders with materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or materials in connection with the required repairs noted in the PCA as Life Safety, Critical Repair and Deferred Maintenance. Servicer further retains the right to approve contractors, materialmen and subcontractors or other parties providing labor and materials in connection with repairs. The Servicer’s or Fannie’s acceptance of any payment on the Mortgage Loan should not be considered an approval of the property condition or a novation, modification, or renewal of the Mortgage Loan. Notwithstanding the acceptance of any payments or any other amounts at any time by the Servicer, Fannie does not waive any default which may exist under the Note and related Loan Documents executed in connection with the Note. Furthermore, acceptance of any payment shall not act as a waiver of, nor prevent Fannie Mae from exercising any right, remedy, or power available to Fannie, including, without limitation, all rights, remedies, and powers granted under the Security Instrument and any related Loan Documents and at law or in equity. Fannie reserves all rights and remedies provided for under the Loan Documents including but not limited to (i) acceleration of the Loan, (ii) the right to foreclose the Security Instrument by judicial proceeding, (iii) the right to obtain the appointment of a rent receiver without notice, and (iv) invoke any and all other remedies permitted by Kansas law or provided in the Security Instrument or in any other Loan Document. Fannie further reserves its right to foreclose the Security Instrument for any portion of the Indebtedness which is then due and payable, subject to the continuing lien of the Security Instrument for the balance of the Indebtedness. Fannie further reserves the right to collect all costs and expenses permitted by Kansas law, including attorneys’ fees, costs of documentary evidence, abstracts, title reports, statutory costs and any additional allowance made pursuant to Civil practice Law and Rules. The rights and remedies stated herein are in addition to Fannie’s rights and remedies under Kansas law. This Letter is written without prejudice to Fannie’s other rights and remedies, all of which are expressly reserved.


Very truly yours, Tom Montemage Vice President cc: Fannie Mae John Natalone David Lovullo Alan M. Steinmetz Mario Arena Enclosure


EXHIBIT A

ITEM # DESCRIPTION LIFE SAFETY CRITICAL REPAIR

DEFERRED MAINTENANCE

1 Playground Equipment $800.00

2 Sidewalks $3,000.00

3 Carbon Monoxide Detectors $500.00

4 Sidewalk Stairs $750.00

5 Asphalt Pavement $150,000.00

6 Exterior Cladding Materials $15,000.00

7 Renovate Down Unit- Unit 57016A $10,000.00

8 Landscaping and Retaining Walls $10,000.00

9 *Wooden Dumpster Enclosures

10 **ADA Parking at Leasing Office

$4,300.00 $175,750.00 $10,000.00

*Wooden dumpster enclosures need repair, with damaged/missing boards existing. **Signage or paint is needed to indicate a van accessible parking space. A ramp should be installed to a l low wheelchair access to the Leas ing Office.

SUBTOTALS:

TOTAL COST: $190,050.00


EXHIBIT B

INFORMATION REQUIRED TO BE FURNISHED BY BORROWER

A. Project Information 1. Physical Condition Copies of all work plans, bids, executed contracts or correspondence that relates to life safety, critical repair and deferred maintenance remediation efforts at the Property, including the renovation of Units 5702-A through 5702-H. The submission must include a proposed repair/improvement timeline and cost estimate by item/use. The scope of work must be identical to the scope detailed in the site’s January 8, 2019 Property Condition Assessment, in addition to the renovation of the above units. 2. Copy of proof of loss related to the casualty event at Building 5702 B. Financial Information 1. Project Operating Statements and Information a. Provide a copy of a current rent roll b. Provide a 2018 operating statement c. Provide a current aging of accounts payable statement 2. Other

Provide a copy of a current personal financial statement for Michael Fein, as Guarantor (dated within 180 days of the submission)

EXHIBIT E