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of the Borrower, to finance the acquisition, construction, and equipping of a 71 -unit assisted living facility located at 2919 Randolph Street NE (commonly known as RiverVillage East) in the City of Minneapolis. The City of Minneapolis loaned' the proceeds of the 2002 Nursing Home Bonds to the Borrower to (a) refinance the acquisition, construction, and equipping of the 150 -bed skilled nursing facility located at 900 2nd Street NE (commonly known as Catholic Eldercare on Main) in the City of Minneapolis; and (b) refinance the acquisition, construction, and equipping of a 51 -unit assisted living multifamily rental housing facility located at 909 Main Street NE (commonly known as MainStreet Lodge) in the City of Minneapolis. The facilities financed and refinanced with the proceeds of the Notes will be owned and operated by individual affiliates of the Borrower. The Lauderdale Note is proposed to be privately placed with Northeast Bank (the "Lender"). If the Lauderdale Note is authorized to be issued by the City Council, it will be issued as a conduit revenue bond secured solely by the revenues derived from a loan agreement (the "Loan Agreement") to be executed by the City and the Borrower and from other security provided by the Borrower. The Lauderdale Note will not constitute a general or moral obligation of the City and will not be secured by or payable from any property or assets of the City (other than the interests of the City in the Loan Agreement) and will not be secured by any taxing power of the City. The Lauderdale Note will not be subject to any debt limitation imposed on the City and the issuance of the Lauderdale Note will not have any adverse impact on the credit rating of the City, even in the event that Borrower encounters financial difficulties with respect to the facilities to be financed and refinanced with the proceeds of the Lauderdale Note. The Lauderdale Note is proposed to be issued as a tax-exempt obligation, the interest on which is not includable in gross income for federal income tax purposes. Tax-exempt obligations are usually not eligible for purchase by banks and other financial institutions, but Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), permits each issuer of tax-exempt obligations to designate up to $10,000,000 of tax-exempt bonds as "qualified tax-exempt obligations" (sometimes referred to as "bank -qualified bonds") that are eligible for purchase by banks and other financial institutions. In order to issue bank -qualified bonds, the issuer must not expect to issue more than $10,000,000 of bonds (other than private activity bonds that are not qualified 501(c)(3) bonds) in a calendar year. The Borrower has requested that the City designate the Lauderdale Note as a qualified tax-exempt obligation for purposes of Section 265(b)(3) of the Code. Under the terms of the Loan Agreement, the Borrower will pay all of the City's fees and expenses and pay the City its administrative fee required for bond issuance. The Lauderdale Note was intended to be issued in October but the time schedule has been delayed due to some planning issues that have arisen. There is a potentially historic building on the site where the TCU Facility will be built which may need to be moved, and planning approvals have been delayed until this issue is resolved. The Borrower still intends to close this year, but the drafting of note documents has been delayed until this issue is resolved. We will ask to come back to the City Council once this issue is resolved to obtain final approval for the documents related to the Lauderdale Note. I will attend the City Council meeting on September 9, 2014, and can answer any questions that may arise during the meeting. Please contact me with any questions you may have prior to the City Council meeting. Sincerely, Julie A. Eddington 449408v1 JAE MN475-38 2