06/07/2010 Council Packet - Laserfiche WebLink

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• • • 10 IT MUST BE NOTED HERE BASED ON THE FACT THE CURRENT 157 MORTGAGE LOAN BECOMES DUE AND PYABLE IN EARLY 2012, THE SAME TYPE OF LENDER SUBORDIANTION REQUIREMENTS WILL /MAY BE REQUIRED OF THE CITY AS THOSE PERSERNTED TODAY. To manage the future risk of not having sufficient funds to invest in physical replacements, the buyer is required to fully fund capital needs in cash of $130,000 in a special reserve, making $30,000 in improvements this year and setting aside $15,275 per year in a special reserve fund managed by the lender, a doubling of the current annual replacement reserve requirement. • Of the restrictive covenants, the MHFA income, rent and disability limitations impede market performance vs. the City's senior occupancy preference. As stated above, the Lino Lakes senior market is very strong thus the City covenant is not viewed as a market limitation but an advantage. The three MHFA restrictions, however, need to viewed as market restrictions. • Be aware of the typical actions the owner would take if the project were to experience economic stress. A series of remedies would be applied well in advance to foreclosure. First, and as expressed herein, the owner would broaden its capacity to fill the units by not following MHFA covenants and leasing to all seniors, regardless of income, possibly raise rents, and fill the units with non - disabled tenants. After fifteen years it is the policy of MHFA to permit relaxation of its covenants if economic stress takes place. Please refer to Attachment F, MHFA's tax credit compliance manual on the same. To the extent the project is foreclosed, MHFA covenants would be eliminated thus it is in their best interest to work with owners to avoid economic failure due to their restrictions. Please note here MHFA has agreed to subordinate its restrictive land use covenant to the proposed lender, similar to the request made to the City.