CC WORKSESSION 08302010 - Laserfiche WebLink

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HORSEY The foreclosure period will still take approximately 14 months to complete after a default notice is served, but a receiver can be appointed to take over the Property promptly after the six month cure period has lapsed. During the cure period, the HRA can identify a replacement redeveloper, and such redeveloper can take control over the Property as receiver. Though a court action is usually required to obtain the appointment of the receiver, the HRA will then have the benefit of implementing the new redeveloper's plans much more quickly than the requisite 14 months required in a foreclosure. I also recommend proceeding with the foreclosure action to regain fee title to the Property in a timely manner. Option Four: Walk Away from the Project. A fourth option is for the City to start the default process with the Developer and to cease City payments to Fannie Mae. This would likely result in a Fannie Mae foreclosure on the Property. In addition, the City has pledges its general obligation to the Fannie Mae loan, so Fannie Mae is likely to seek a judgment against the City. Therefore, though the City does legally have the option of walking away from the project and defaulting on the loan, this option risks exposure for breach of contract and other legal claims. Due to the potential liabilities and risk of damage to the credit of the City, we have determined that the HRA choosing to default under its obligations is not a desirable course of action. RECOMMENDATION The City should serve a renewed notice of default on the Developer as soon as possible. Doing so now gives the City maximum flexibility whether or not it chooses to continue to work with Apache. During the 180 cure period which the Developer has under the Redevelopment Agreement, the HRA should pay off the Fannie Mae loan and determine whether it wants to continue working with Apache as master redeveloper. Paying off the Fannie Mae loan will allow the City to take control of the Property at approximately the same time as the Developer's cure period has expired. This strategy best protects the City's asset going forward, even if the Developer cures the current defaults. 5 DORSEY & WHITNEY LLP