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City Council Regular Meeting Minutes October 14, 2008 Page 5 lie 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. 6 Councihneniber Stifle requested information regarding this HUD financed project in comparison 7 to the private bank financed project that was recently reported on in the newspaper. Mr. Pratt 8 stated there is a significant difference in these projects. The loan on this project that is insured 9 under the authority of HUD is a non-recourse loan to the seniors. The seniors arc not left to go 10 out and arrange for their own financing, it is underwritten by HUD. In the Gramercy situation the 1 l people were left to get a loan for a share in a building on their own; a share is a different type of 12 vehicle for ownership and it has been hard to have that underwritten. Mr. Pratt stated the 13 difference is significant in that there is no underlying overall blanket mortgage under the 14 Gramercy method of financing a building. This 1IUD program, and there arc now 40 of them in 15 the Twin City area, has become the steadfast understood method because it becomes an 16 instrument of HUD to address the senior housing needs, which is the demographic mix with this 17 project. 18 19 Mayor Faust pointed out that with the Gramercy project the presold threshold was only set at 20 30%. The Silver Lake Village project has a presold requirement of 70% before construction on 21 the building can begin. Councilmember Stille noted at that time the membership fees should be 22 sufficient to cash now the loan. 23 24 Mr. Pratt stated the Gramercy project consisted of more expensive homes, while this project 25 includes an affordability component. The experience lie has had in the last two plus years of 26 selling houses here is that the people here want to be able to move, possibly laterally at this time. 27 As people grow older and Look at their resources and pensions, they begin to look at life in a 28 different way. They may be able to get those folks that want to stay in St. Anthony a place for 29 them to come, and to be able to do so in this fashion with HUD's full underwriting. 30 31 Mayor Faust noted the options before the Council are: 1) Do nothing and proceed with 32 foreclosure; 2) Direct staff to negotiate with Fannie Mae for a one year extension. 33 34 City Attorney Lindgren advised that there may be other options within the first option. 35 36 Councilmember Stille stated these things happen in an environment like this. Mr. Pratt has done 37 a remarkable job continuing to keep the project viable in terms of generating sales. He 38 commented on possible changes Fannie Mae may attach to the loan if it is extended, such as 39 raising the rate. 40 41 Ms. Kvilvang provided information on the LIBOR and the possibility of a requirement for a 42 payment on the principal if the Fannie Mae loan is extended. If a payment on principal is 43 required it would be paid by the developer. 44 45 Mayor Faust stated his recommendation is to direct staff to negotiate with Fannie Mae for a one 46 year extension and to present the information to Council in November. 5