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19 <br /> St. Anthony City Council and HRA <br /> Fannie Mae Loan—Northwest Quadrant Redevelopment <br /> June 1, 2004 <br /> Page 3 <br /> requirement and proof of construction financing from a lending institution are met, it will provide <br /> reassurance to the City and HRA that there is a market for the product the developer is constructing <br /> and the corresponding price points they have set. <br /> Under#2,the City and HRA were always at risk of repaying the loan if it was drawn upon. Again, <br /> the loan was going to be repaid through land sale proceeds and a General Obligation TIF bond <br /> when the development was finished being constructed. The City/HRA's only risk would be if the <br /> developer for some reason did not move forward with the development after meeting the presale <br /> and construction financing requirements or quit constructing the development half way (or at <br /> another point) through construction. The likely hood of the developer not moving forward after <br /> meeting the presale requirement is low since they have invested considerable dollars in completing <br /> architectural drawings and plans for submittal to the City for approval, they have been working on <br /> meeting the presale requirement and are nearing finalization of their construction financing. <br /> That would leave the scenario in which the developer walks away from the development prior to <br /> completing it. To analyze this risk the question that the City and HRA need to answer is: Would <br /> the City move forward with acquiring this land for redevelopment if this developer defaults during <br /> the construction phase? It is assumed that the answer to that is yes. The City and HRA have <br /> committed extensive resources to assure that the Northwest Quadrant Redevelopment Plan would <br /> be implemented. If the developer was to "walk away", the City and HRA would have the right to <br /> the unfinished project and could select another developer to step in and finish the development, or <br /> propose an alternative solution. <br /> 3. What are the terms of the loan agreement <br /> Following are the loan agreement terms: <br /> 1. The loan is a non-revolving loan and the City/HRA can draw the funds down at anytime <br /> 2. Loan maturity is 36 months <br /> 3. The loan is taxable <br /> 4. Loan proceeds 'will be utilized to acquire and demolish property in the Northwest <br /> Quadrant Redevelopment Area <br /> 5. Loan has a variable interest rate based upon the three (3) month LIBOR (currently 1.26) <br /> plus 175 basis points(total of 3.01%). Interest rate is set on day of closing. <br /> 6. Interest rate will be reset quarterly on the first day of each calendar quarter (January 1, <br /> April 1, July 1 and October 1) <br /> 7. Quarterly payments of interest to be paid in arrears on the fist day of each calendar quarter <br /> and calculated on an actual/360 basis <br />