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' HORSEY MEMORANDUM PRIVILEGED & CONFIDENTIAL ATTORNEY - CLIENT COMMUNICATION TO: Mayor and City Council Michael Mornson, City Manager CC: Stacie Kvilvang, Ehlers & Associates Jerry Gilligan, Dorsey & Whitney LLP FROM: Jay R. Lindgren DATE: February 22, 2010 RE: Silver Lake Village Options BACKGROUND The City and the HRA (both referred to herein as the "City ") entered into agreements ( "Redevelopment Agreement ") with Apache Redevelopment, LLC ( "Apache') regarding redevelopment of portions of the area commonly known as Silver Lake Village. Certain rights and obligations of Apache regarding housing development within Silver Lake Village were subsequently assigned to a secondary developer, Silver Lake Homes I, LLC ( "Silver Lake Homes "). For ease of reading, Apache and Silver Lake Homes are sometimes referred to herein interchangeably as "Developer." A number of defaults under the Redevelopment Agreement by Apache and /or Silver Lake Homes have occurred and are continuing. These defaults include: Failure to make principal and interest payments on the Fannie Mae loan in the amount of $748,381; Failure to reimburse City expenses for consulting fees in the amount of $140,629.35; and Failure to timely pay real estate taxes on portions of Silver Lake Village. The City accepted a mortgage (the "Mortgage') on certain property commonly known as the Phase 1 B Property (sometimes referred to herein as the "Property ") from Apache as security for Apache's obligations to repay the Fannie Mae loan and pursuant to the Redevelopment Agreement. The loan documents have been amended and extended, partially due to the economic downturn. In April 2009, Fannie Mae required that the City assign to it the Mortgage, as additional security and in consideration of Fannie Mae further extending the maturity date of DORSEY 8 WHITNEY LLP