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• <br />• <br />• <br />Kennedy <br />Graven <br />CHARTERED <br />470 US Bank Plaza <br />200 South Sixth Street <br />Minneapolis MN 55402 <br />(612) 337 -9300 telephone <br />(612) 337 -9310 fax <br />http://www.kennedy-graven.com <br />MEMORANDUM <br />TO: Mayor and Council Members <br />Mary Alice Divine <br />FROM: Stephen Bubul <br />DATE: June 28, 2010 <br />RE: Cottage Homesteads of Willow Pond <br />Background <br />As you know, the Lino Lakes Economic Development Authority ( "Authority ") entered <br />into a Contract for Private Development with Cottage Homesteads of Willow Ponds <br />Limited Partnership, dated October 3, 1995 (the "Contract "). Under the Contract, the <br />Authority provided certain tax increment financing assistance to the developer of a 48- <br />unit rental housing development known as the Cottage Homestead of Willow Ponds (the <br />"Project'). The Contract imposed certain income limitations on tenants (as required <br />under the tax increment statute for this housing district). In addition, the City imposed a <br />separate covenant requiring that 47 of the units be occupied by at least one person who is <br />at least 55 years old (the "City Senior Covenant "), which remains in effect until 2026. <br />Lino Lakes Housing Limited Partnership (the "Developer ") plans to acquire the project <br />from the original developer, and in connection with that acquisition is obtaining a loan <br />(the "HUD Loan ") insured by the Federal Housing Administration ( "FHA "), which is a <br />division of the United States Department of Housing and Urban Development ( "HUD "). <br />The "HUD Loan is secured by a mortgage (the "HUD Mortgage "). <br />As condition of making the HUD Loan, HUD has required that the Authority subordinate <br />its rights under the Contract and the City Senior Covenant. To accomplish that, HUD has <br />requested an amendment to the Contract, which inserts (as a new Article IX) nationally <br />standard subordination language that HUD requires in its mortgage transactions. <br />Generally, the HUD language means that the Contract and the City Senior Covenant is <br />subordinate to the HUD Mortgage. This means that if the HUD Mortgage were <br />370912v3 SJB LN 140 -25 <br />