11-10-2004 Council Workshop Agenda

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MEMORANDUM TO: Joel Hanson, Administrator City of Little Canada FROM: Jenny Boulton DATE: November 9, 2004 RE: HADC Montreal Courts A couple of weeks ago we received a call from Dan Nelson, an attorney at Best & Flanagan who represents HADC Montreal Courts, a nonprofit corporation which acted as the Borrower of the proceeds of the City's Multifamily Housing Revenue Bonds (Housing Alternatives Development Company Project), Series 1997A and Series 1997B issued to finance the acquisition and rehabilitation of an approximately 444 -unit multifamily rental housing development known as Montreal Courts located at 396 Labore Road. Mr. Nelson indicated that HADC now intends to sell Montreal Courts to a for - profit entity and apply the sale proceeds to pay off the Bonds. The City is a party to a Loan Agreement with HADC pursuant to which HADC is prohibited from selling Montreal Courts except to a nonprofit entity which assumes HADC's obligations under the Loan Agreement. However, with certain limited exceptions, the provisions of the Loan Agreement terminate when the Bonds are paid off and the restrictions on sale are no longer enforceable. The City is also a party to a Regulatory Agreement with HADC and U.S. Bank National Association, the Trustee for the Bonds, which provides for the operation of Montreal Courts as a low and moderate income housing facility. Unlike the Loan Agreement, the Regulatory Agreement is effective for at least 15 years and does not terminate simply because the Bonds are paid off. However, unlike the Loan Agreement, the Regulatory Agreement does not limit HADC's ability to transfer Montreal Courts. Mr. Nelson indicated he intended to prepare an assignment of the Regulatory Agreement and HADC would be asking for the City's consent to the assignment. Prior to granting this consent we suggested that the City consider whether it wanted to use this opportunity to require resolution of any outstanding issues at Montreal Courts as a condition to granting consent to the assignment of the Regulatory Agreement. As it turns out, the City has several issues it would like resolved and HADC has been asked to contact the City to discuss those issues. Although the City is in a position to condition its consent to the assignment of the Regulatory Agreement on resolution of the City's concerns regarding Montreal Courts, if the City denies such consent because HADC is unable or unwilling to meet the City's requirements, HADC may still proceed with the sale of Montreal Courts. This is because the City acted merely 1706977v1 5