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cord � � d/ie `vanaaa 515 Little Canada Road, Link Canada, MN 5511'7 -1600 (651) 766 -4029 / FAX: (651) 766 -4048 www.ei.little-canada.mn.us MEMORANDUM MAYOR Bill 131escncr COUNCIL Rich Montour John Reis Michael McCraw Shelly Boss ADMINISTRATOR Joel R. Hanson '['0: iVlayor B1esener & Members of the City Council FROM: Joel Hanson, City Administrator DATE: November 18, 2011 RE: Subordination Agreement for Refinancing The Lodge at Little Canada, LLC The Lodge at Little Canada is in the process of refinancing their mortgage. The lender is asking the City (EDA) to approve a Master Subordination Agreement (copy attached). Our development agreement with The Lodge does provide for subordination of our interests to the primary lender, but one of the provisions could prove troublesome. Specifically, we are being asked to subordinate all of our restrictive covenants in the tax increment financing (TIP) documents. However, Mary Ippel of Briggs and Morgan has advised the lender's attorney that we can not subordinate our interests under Section 7.2 of' the Development Agreement. This provision requires compliance with income limits for tenants to enable this area to be a valid "housing district" under TIP laws. Ms. Ippel is working to resolve this issue with the lender prior to Monday's meeting. To meet the timeline desired by The 1,odge, we would need to approve the Subordination Agreement at Monday's meeting. Assuming Ms. 1ppel is successful in modifying the document to meet the City's needs, staff would recommend approval of a revised Subordination Agreement, subject to approval of Mary Ippel of Briggs & Morgan to ensure we maintain compliance with Till' laws and subject to the developer reimbursing the City for the costs associated with the review and approval of this document. Cc: Mary Ippel George Sherman Anne Stephenson 1