Loading...
HomeMy WebLinkAbout07-12-2010 EDA PacketAGENDA ECONOMIC DEVELOPMENT AUTHORITY MEETING MONDAY, JULY 12, 2010 6:15 City Council Chambers 1. Call to Order and Roll Call 2. Consideration of Minutes of January 11, 2010 3. Consideration of Resolution No. 10-01 Approving a First Amendment to Contract for Private Development and Subordination Agreement between the Lino Lakes Economic Development Authority and Lino Lakes Housing Limited Partnership, Mary Alice Divine 4. Adjourn EDA MINUTES January 11, 2010 DRAFT DATE TIME STARTED TIME ENDED MEMBERS PRESENT MEMBERS ABSENT OTHERS PRESENT: : January 11, 2010 . 7:15 p.m. . 7:22 p.m. : Commissioners Gallup, O'Donnell, Roeser, Reinert, Rafferty . None : Mary Divine, Mike Grochala The meeting was called to order at 7:15 p.m. by President Gallup. CONSIDERATION OF THE MINUTES OF NOVEMBER 23, 2009 EDA Member Reinert moved to approve the November 23, 2009 minutes. EDA Member O'Donnell seconded the motion. Motion carried with one abstaining. CONSIDERATION OF ANNUAL APPOINTMENTS Mary Divine, Economic Development Coordinator, informed the members that each year the EDA is required to hold an annual meeting and make a number of appointments; the list was before the authority for consideration. EDA Member Reinert moved to appoint EDA Member Rafferty as President of the EDA for 2010, EDA Member O'Donnell seconded the motion. Motion carried unanimously. EDA Member Reinert moved to appoint EDA Member O'Donnell as Vice President. EDA Member Gallup seconded the motion. Motion passed unanimously. EDA Member O'Donnell moved to appoint EDA Member Reinert as Treasurer. EDA Member Rafferty seconded the motion. Motion passed unanimously. EDA Member Reinert moved to approve the remaining appointments as recommended by staff . EDA Member O'Donnell seconded the motion. Motion carried unanimously. ADJOURNMENT There being no further business, EDA Member Rafferty moved to adjourn. EDA Member Roeser seconded the motion. Motion carried unanimously. Meeting adjourned at 7:22 p.m. 1 STAFF ORIGINATOR: MEETING DATE: TOPIC VOTE REQUIRED: BACKGROUND: AGENDA ITEM 1 Mary Alice Divine July 12, 2010 Consider Resolution No. 10-01, Approving a First Amendment to Contract for Private Development and Subordination Agreement between the Lino Lakes Economic Development Authority and Lino Lakes Housing Limited Partnership Simple Majority (3/5 Vote Required) As you know, the Lino Lakes Economic Development Authority (EDA) entered into a Contract for Private Development with Cottage Homesteads of Willow Ponds Limited Partnership, dated October 3, 1995. Under the Contract, the Authority provided tax increment financing assistance to the developer of a 48-unit rental affordable housing development known as the Cottage Homestead of Willow Ponds. In addition, the City imposed a separate covenant requiring that 47 of the units be occupied by at least one person who is at least 55 years old, which remains in effect until 2026. Lino Lakes Housing Limited Partnership plans to acquire the project from the original developer, and in connection with that acquisition is obtaining a HUD loan insured by the Federal Housing Administration. As condition of making the HUD Loan, HUD has required that the EDA subordinate its rights under the Contract and the City Senior Covenant. HUD has requested an amendment to the Contract, which inserts nationally standard subordination language that HUD requires in its mortgage transactions. Generally, the HUD language means that the Contract and the City Senior Covenant is subordinate to the HUD Mortgage. This means that if the HUD Mortgage were foreclosed, HUD could eliminate the City Senior Covenant and dispose of the Property without that encumbrance. The EDA has interest in retaining this project as senior housing and staff and attorneys worked with HUD to ensure a measure of security before agreeing to subordinate the covenant. HUD has agreed to include its own senior covenant that requires that 47 units be occupied by at least one person who is at least 62 years of age. The HUD Senior Covenant remains in place as long as the HUD Loan and HUD Mortgage are in place (35 years if the loan goes to term). The Developer has also agreed to replace the original City Senior Covenant with a new one that imposes the 55 age restriction through February 1, 2045 (roughly the same term as the HUD Loan). The City's covenant remains in place even if the HUD Mortgage is paid off early. In addition, HUD agreed to add the following language in the HUD Regulatory Agreement: "Developer shall not modify [the HUD Senior Covenant] without prior written consent of the Authority, which consent shall not be unreasonably withheld, conditioned or delayed." This means that if either HUD or the developer requests an amendment to the HUD Senior Covenant, the EDA may withhold consent to that as long as its decision to withhold is reasonable. Since the Authority has clearly indicated a goal of long-term senior use of the Property (in exchange for the City's tax increment assistance), it would be reasonable for the Authority to withhold consent of any attempt to simply eliminate the HUD Senior Covenant. OPTIONS: 1. Approve Resolution No. 10-01 2. Deny approval of Resolution No. 10-01 LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 10-01 RESOLUTION APPROVING A FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT AND SUBORDINATION AGREEMENT BETWEEN THE LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY AND LINO LAKES HOUSING LIMITED PARTNERSHIP BE IT RESOLVED By the Board of Commissioners ("Board") of the Lino Lakes Economic Development Authority ("Authority") as follows: Section 1. Recitals. 1.01. The Authority administers Development District No. 1 (the "Project)" and Tax Increment Financing District No. 1-5 (the "TIF District") pursuant to Minnesota Statutes, Sections 469.124 to 469.134 ("Development District Act") and Sections 469.174 to 469.179 (the "TIF Act"). 1.02. The Authority and Cottage Homesteads of Willow Ponds (the "Original Developer") entered into a into a Contract for Private Development dated October 3, 1995 (the "Contract"), under which the Authority provided certain tax increment assistance to help develop a 48-unit housing facility known as the Cottage Homestead of Willow Ponds (the "Project"). 1.03. Lino Lakes Housing Limited Partnership (the "Developer") proposes to acquire the Project from the Original Developer, and in connection with that acquisition is obtaining a loan (the "HUD Loan") insured by the Federal Housing Administration, a division of the United Stated Department of Housing and Urban Development ("HUD"). 1.04. HUD has required that the Authority subordinate its rights under the Contract and related agreements, and to have end has requested that the Authority enter into a First Amendment to Contract for Private Development and Subordination Agreement between the Authority and Developer (the "First Amendment"). 1.05. The Board has reviewed the First Amendment and determined that it is in the best interests of the Authority to approve the same. Section 2. Authority Approval; Further Proceedings. 2.01. The First Amendment as presented to the Board is hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the President and Acting Executive Director, provided that execution of the documents by such officials shall be conclusive evidence of approval. 2.02. The President and Acting Executive Director are hereby authorized to execute on behalf of the Authority the First Amendment and any documents referenced therein requiring execution by the Authority, and to carry out, on behalf of the Authority its obligations thereunder. 370939v1 SJB LN 140-25 Approved by the Board of Directors of the Lino Lakes Economic Development Authority, this 12th day of July, 2010. ATTEST: Secretary President 370939v1 SJB LN140-25 2 (Space Above Reserved for Recording Information) FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT AND SUBORDINATION AGREEMENT This FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT AND SUBORDINATION AGREEMENT (this "Agreement") is effective as of July 1, 2010 by and between LINO LAKES HOUSING LIMITED PARTNERSHIP, a Minnesota limited partnership ("Developer") and LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic of the State of Minnesota (the "Authority"). RECITALS: A. Developer is the fee owner of certain real property known as Cottage Homesteads of Willow Pond located at 101 Willow Pond Trail in the City of Lino Lakes, County of Anoka, State of Minnesota as legally described on Exhibit A attached hereto and incorporated herein by reference (the "Project"). B. Developer's predecessor -in -interest, Cottage Homesteads of Willow Ponds Limited Partnership, a Minnesota limited liability company (the "Prior Developer"), and the Authority entered into that certain Contract for Private Development dated October 3, 1995, and recorded in the office of the County Recorder, Anoka County, Minnesota, on October 3, 1995, as Document No. 1185222, as assigned to Developer under that certain Assignment of Partnership Interests and Company Interests dated May 1, 2010 and recorded in the office of the County Recorder, Anoka County, Minnesota, on , as Document No. , (together with all subsequent amendments, modifications, renewals and extensions thereof, collectively referred to herein as the "Development Contract"). C. Dougherty Mortgage LLC, a Delaware limited liability company ("Lender") has agreed to make a loan to Developer in the original principal amount of $2,791,100.00 (the "HUD Loan") which loan shall be insured by the Federal Housing Administration (the "FHA") of the United States Department of Housing and Urban Development ("HUD") under Section 207 pursuant to Section 223(f) of the National Housing Act of 1934, as amended, pursuant to the Commitment to Insure Upon Completion dated February 18, 2010 (FHA Project No. 092- 11264), as amended (the "FHA Commitment"). 368750v2 SJB LN I40-25 D. The HUD Loan will be evidenced by that certain Mortgage Note (the "HUD Note") executed by Developer in favor of Lender in the original principal amount of the Loan and will be secured in part by (i) that certain Mortgage dated July 1, 2010 (the "HUD Mortgage") executed by Developer in favor of Lender, and by (ii) the Regulatory Agreement for Multifamily Housing Projects dated July 1, 2010 (the "HUD Regulatory Agreement") executed by and between Landlord and the Secretary of Housing and Urban Development. The HUD Note, the HUD Mortgage, the HUD Regulatory Agreement and all other loan and security documents executed in connection with the Loan are collectively referred to herein as the "HUD Loan Documents." E. As a condition to the making of the Loan to Developer, Lender and HUD require that the Development Contract be amended to include certain HUD provisions and that the Development Contract be subordinated to the Loan and the HUD Loan Documents. F. In connection with the assignment of the Development Contract from the Prior Developer to Developer, the parties have further agreed to modify the Development Contract in certain respects as described herein. G. In addition, the parties have determined to replace certain restrictive covenants (referred to in the Development Contract as the "Covenants") with a new Declaration of Covenant and Restriction of even date herewith, in the form attached as Exhibit B to this Agreement (the "Replacement Covenant"). NOW, THEREFORE, in consideration of foregoing recitals and of the mutual covenants and agreements hereinafter set forth, it is agreed by and between Developer and the Authority as follows: 1. Status of Development Contract. This Development Agreement remains in full force and effect, and is not modified except as expressly provided in this Agreement. Should there be any conflict or inconsistency between this Agreement and the Development Contract, the terms and conditions of this Agreement shall prevail. 2. Amendment to Development Contract. The Development Contract is hereby amended to add following Section 8.7 of the Development Contract entitled "Subordination" the following Article 9: ARTICLE IX HUD REQUIREMENTS Section 9.1. Notwithstanding anything in this Agreement to the contrary, except the requirements in 26 U.S.C. 42(h)(6)(E)(ii), this Agreement is expressly subordinate to (i) the Mortgage Note dated as of dated July 1, 2010 (the "HUD Note") executed by the Developer in favor of Dougherty Mortgage LLC, a Delaware limited liability company ("Lender"), (ii) the Mortgage dated July 1, 2010 (the "HUD Mortgage") executed by the Developer in favor of Lender, (iii) the Regulatory Agreement for Multifamily Projects dated July 1, 2010 (the "HUD 368750v2 SJB LN140-25 Regulatory Agreement") executed by and between the Developer and the Secretary for Housing and Urban Development ("HUD"), and (iv) all other documents executed by the Developer, Lender and/or HUD in connection with the HUD Note (collectively the "HUD Loan Documents"), and is subordinate to all applicable HUD mortgage insurance (and Section 8 of the U.S. Housing Act of 1937, if applicable) regulations and related administrative requirements. In the event of any conflict between the provisions of this Agreement and the provisions of applicable HUD regulations, related HUD administrative requirements, or HUD Loan Documents, the HUD regulations, related administrative requirements or HUD Loan Documents shall control. Section 9.2. In the event of foreclosure or transfer of title by deed in lieu of foreclosure, any and all land use covenants contained herein shall automatically terminate except those requirements set out in 26 U.S.C. 42(h)(6)(E)(ii). Section 9.3. Failure to comply with the covenants contained herein will not serve as a basis for default on any of the HUD Loan Documents. Section 9.4. The covenants contained in this Agreement are not included in any of the HUD Loan Documents. Section 9.5. Enforcement of the covenants contained herein will not result in any claim against the Property, the proceeds from the HUD Mortgage, any reserve or deposit required by HUD in connection with the HUD Mortgage transaction, or the rents or other income from the Property other than from available Surplus Cash, as defined in the HUD Regulatory Agreement. Section 9.6. So long as the Property is subject to a mortgage insured or held by HUD, no amendment shall be made to this Agreement without the prior written consent of HUD. Section 9.7. This Agreement may not be foreclosed upon or sold, transferred, assigned or pledged, without the prior written of consent of HUD of such foreclosure, conveyance, assignment or pledge. Section 9.8. No action shall be taken in accordance with the rights granted herein or prohibiting the Developer from taking any action except in strict accordance with the U.S. Housing Act of 1937 (the "Housing Act"), applicable mortgage insurance regulations, the HUD Loan Documents, or applicable public housing regulations under Sections 5 and 9 of the Housing Act, or if applicable, Section 8 of the Housing Act and the regulations thereunder. Section 9.9. The covenants contained in this Agreement shall not be construed to conflict with any applicable HUD mortgage insurance regulation, applicable public housing regulations, or Section 8 of the Housing Act and the regulations thereunder. 368750v2 SJB LN I40-25 3. Replacement Covenant. Upon execution of this Agreement, Developer agrees to execute and deliver to the Authority the Replacement Covenant in substantially the foiiii attached hereto as Exhibit B. Developer shall, at its cost, record the Replacement Covenant with the office of the County Recorder for Anoka County. The Replacement Covenant is intended to replace and supersede the Covenants in all respects. 4. HUD Regulatory Agreement. Developer shall not modify Section 24 of the HUD Regulatory Agreement without prior written consent of the Authority, which consent shall not be unreasonably withheld, conditioned or delayed. 5. Successors and Assigns. Each agreement, and each and every covenant, agreement, and other provisions hereof shall be binding upon each of the parties hereto and their successors and assigns 6. Governing Law. This Agreement is made and executed in the State of Minnesota and shall be governed by the laws of said State. 7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall, be deemed an original, but all of which shall constitute one instrument. 368750v2 SJB LN 140-25 IN FURTHERANCE WHEREOF, the parties hereto have caused this First Amendment To Contract for Private Development and Subordination Agreement to be executed as of the date and year first above written. DEVELOPER: LINO LAKES HOUSING LIMITED PARTNERSHIP, a Minnesota limited partnership By: Lino Lakes Housing, LLC, a Minnesota limited liability company Its: General Partner By: Charles E. Riesenberg Its: Chief Manager STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of , 2010, by Charles E. Riesenberg, the Chief Manager of LINO LAKES HOUSING, LLC, a Minnesota limited liability company, the General Partner of LINO LAKES HOUSING LIMITED PARTNERSHIP, a Minnesota limited partnership, on behalf of the limited partnership. Notary Public 368750v2 SJB LN140-25 LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY By: Its: STATE OF MINNESOTA ) )ss. COUNTY OF The foregoing instrument was acknowledged before me this day of 2010, by , the of LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic of the State of Minnesota, on behalf of said public body. Notary Public THIS INSTRUMENT WAS DRAFTED BY: Winthrop & Weinstine P.A. (ALD) 225 South Sixth Street, Suite 3500 Minneapolis, MN 55402 5310565v3 368750v2 SJB LN 140-25 EXHIBIT A LEGAL DESCRIPTION OF PROJECT The real property situated in Anoka County, Minnesota and legally described as follows: Lot Eleven (11), Block One (1), Willow Ponds of Lino Lakes, according to the plat and survey thereof on file and of record in the office of the County Recorder in and for Anoka County, Minnesota 368750v4 SJB LN 140-25 EXHIBIT B DECLARATION OF COVENANT AND RESTRICTION This Declaration of Covenant and Restriction (this "Declaration") is made as of this day of , 2010 by Lino Lakes Housing Limited Partnership, a Minnesota limited partnership "Declarant"). RECITALS WHEREAS, Declarant owns Lot Eleven (11), Block One (1), Willow Ponds of Lino Lakes, according to the plat and survey thereof on file and of record in the office of the County Recorder in and for Anoka County, Minnesota (the "Subject Property");. and WHEREAS, pursuant to that certain Contract for Private Redevelopment dated October 3, 1995 (the "Development Contract") between the Lino Lakes Economic Development Authority (the "Authority") and Cottage Homesteads of Willow Ponds Limited Partnership (the "Prior Developer"), the Prior Developer was required to imposed certain covenants and restrictions on the Subject Property pursuant to that certain Declaration of Covenant and Restriction dated as of August 23, 1995 (the "Covenants"); and WHEREAS, Declarant is the assignee and successor in interest to the Prior Developer with respect to the Subject Property and the Development Contract; and WHEREAS, pursuant to a First Amendment to Contract for Private Redevelopment and Subordination Agreement between Declarant and the Authority dated as of July 1, 2010 (the "First Amendment"), the Declarant was required to execute this Declaration to replace and supersede the Covenants in all respects; and WHEREAS, the Subject Property is improved with four buildings containing twelve multi -family residential units each, for a total of 48 units; and WHEREAS, of the 48 units, 47 are used for occupancy by residents (the "Occupied Units"), and one unit is used as a community room; and WHEREAS, the Authority requires that the Occupied Units be restricted as set forth herein; NOW, THEREFORE, Declarant hereby declares and imposes on the Subject Property the following covenant and restriction: 1. For the purposes of complying with the requirements imposed by the Authority, Declarant hereby declares that each of the 47 Occupied Units shall, to the extent occupied and not vacant, be occupied by at least one occupant who is fifty-five (55) years of age or older. 368750v4 SJB LN 140-25 2. The foregoing covenant and restriction shall expire on February 1, 2045 (the "Declaration Termination Date"). 3. By no later than February 1 of each year through the Declaration Termination Date, Declarant shall deliver to the Authority written evidence in a form reasonably satisfactory to the Authority, demonstrating that the Subject Property complies with the requirements of this Declaration. 4. Notwithstanding anything in this Declaration to the contrary, except the requirements in 26 U.S.C. 42(h)(6)(E)(ii), this Declaration is expressly subordinate to (i) the Mortgage Note dated as of dated July 1, 2010 (the "HUD Note") executed by the Developer in favor of Dougherty Mortgage LLC, a Delaware limited liability company ("Lender"), (ii) the Mortgage dated July 1, 2010 (the "HUD Mortgage") executed by the Developer in favor of Lender, (iii) the Regulatory Agreement for Multifamily Projects dated July 1, 2010 (the "HUD Regulatory Agreement") executed by and between the Developer and the Secretary for Housing and Urban Development ("HUD"), and (iv) all other documents executed by the Developer, Lender and/or HUD in connection with the HUD Note (collectively the "HUD Loan Documents"), and is subordinate to all applicable HUD mortgage insurance (and Section 8 of the U.S. Housing Act of 1937, if applicable) regulations and related administrative requirements. In the event of any conflict between the provisions of this Declaration and the provisions of applicable HUD regulations, related HUD administrative requirements, or HUD Loan Documents, the HUD regulations, related administrative requirements or HUD Loan Documents shall control. 5. In the event of foreclosure or transfer of title by deed in lieu of foreclosure, any and all land use covenants contained herein shall automatically terminate except those requirements set out in 26 U.S.C. 42(h)(6)(E)(ii). 6. Failure to comply with the covenants contained herein will not serve as a basis for default on any of the HUD Loan Documents. 7. The covenants contained in this Declaration are not included in any of the HUD Loan Documents. 8. Enforcement of the covenants contained herein will not result in any claim against the Property, the proceeds from the HUD Mortgage, any reserve or deposit required by HUD in connection with the HUD Mortgage transaction, or the rents or other income from the Property other than from available Surplus Cash, as defined in the HUD Regulatory Agreement. 9. So long as the Property is subject to a mortgage insured or held by HUD, no amendment shall be made to this Declaration without the prior written consent of HUD. 10. This Declaration may not be foreclosed upon or sold, transferred, assigned or pledged, without the prior written of consent of HUD of such foreclosure, conveyance, assignment or pledge. 368750v4 SJB LN 140-25 11. No action shall be taken in accordance with the rights granted herein or prohibiting the Developer from taking any action except in strict accordance with the U.S. Housing Act of 1937 (the "Housing Act"), applicable mortgage insurance regulations, the HUD Loan Documents, or applicable public housing regulations under Sections 5 and 9 of the Housing Act, or if applicable, Section 8 of the Housing Act and the regulations thereunder. 12. The covenants contained in this Declaration shall not be construed to conflict with any applicable HUD mortgage insurance regulation, applicable public housing regulations, or Section 8 of the Housing Act and the regulations thereunder. [Signature Page to Follow] 368750v4 SJB LN140-25 LINO LAKES HOUSING LIMITED PARTNERSHIP, a Minnesota limited partnership By: Lino Lakes Housing, LLC, a Minnesota limited liability company Its: General Partner By: Charles E. Riesenberg Its: Chief Manager STATE OF MINNESOTA ) )ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of , 2010, by Charles E. Riesenberg, the Chief Manager of LINO LAKES HOUSING, LLC, a Minnesota limited liability company, the General Partner of LINO LAKES HOUSING LIMITED PARTNERSHIP, a Minnesota limited partnership, on behalf of the limited partnership. Notary Public 368750v4 SJB LN 140-25