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H 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 City Council Regular Meeting Minutes October 14, 2008 Page 5 He stated there is a lot to be proud of at Silver Lake Village and they continue in their effort to get the job accomplished. Mayor Faust thanked Mr. Pratt for the Thursday night concerts put on by Silver Lake Village. Councilmember Stille requested information regarding this HUD financed project in comparison to the private bank financed project that was recently reported on in the newspaper. Mr. Pratt stated there is a significant difference in these projects. The loan on this project that is insured under the authority of HUD is a non - recourse loan to the seniors. The seniors are not left to go out and arrange for their own financing, it is underwritten by HUD. In the Gramercy situation the people were left to get a loan for a share in a building on their own; a share is a different type of vehicle for ownership and it has been hard to have that underwritten. Mr. Pratt stated the difference is significant in that there is no underlying overall blanket mortgage under the Gramercy method of financing a building. This HUD program, and there are now 40 of them in the Twin City area, has become the steadfast understood method because it becomes an instrument of HUD to address the senior housing needs, which is the demographic mix with this project. Mayor Faust pointed out that with the Gramercy project the presold threshold was only set at 30 %. The Silver Lake Village project has a presold requirement of 70% before construction on the building can begin. Councilmember Stille noted at that time the membership fees should be sufficient to cash flow the loan. Mr. Pratt stated the Gramercy project consisted of more expensive homes, while this project includes an affordability component. The experience he has had in the last two plus years of selling houses here is that the people here want to be able to move, possibly laterally at this time. As people grow older and look at their resources and pensions, they begin to look at life in a different way. They may be able to get those folks that want to stay in St. Anthony a place for them to come, and to be able to do so in this fashion with HUD's full underwriting. Mayor Faust noted the options before the Council are: 1) Do nothing and proceed with foreclosure; 2) Direct staff to negotiate with Fannie Mae for a one year extension. City Attorney Lindgren advised that there may be other options within the first option. Councilmember Stille stated these things happen in an environment like this. Mr. Pratt has done a remarkable job continuing to keep the project viable in terms of generating sales. He commented on possible changes Fannie Mae may attach to the loan if it is extended, such as raising the rate. Ms. Kvilvang provided information on the LIBOR and the possibility of a requirement for a payment on the principal if the Fannie Mae loan is extended. If a payment on principal is required it would be paid by the developer. Mayor Faust stated his recommendation is to direct staff to negotiate with Fannie Mae for a one year extension and to present the information to Council in November.