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EDA 05/12/03OFFICIAL FILE COPY CITY OF NEW HOPE EDA MEETING City Hall, 4401 Xylon Avenue North Monday, May 12, 2003 President W. Peter Enck Commissioner Sharon Cassen Commissioner Don Collier Commissioner Mary Gwin-Lenth Commissioner Steve Sommer 2. 3. 4. Call to Order Roll Call Approval of Regular Meeting Minutes of April 28, 2003 Resolution Releasing Second Mortgage in Favor of the Housing and Redevelopment Authority in and for the City of New Hope on Property at 3625 Flag Avenue North Resolution Approving Bass Lake Road Apartments Housing Development Agreement, Regulatory and Operating Agreement and Property Management Agreement for the PPL/Bass Lake Apartments Project at 7610 Bass Lake Road and Authorizing the President and Executive Director to Sign Said Agreements (Improvement Project No. 707) 6. Adjournment CITY OF NEW HOPE 4401 XYLON AVEN~E NORTH NEW HOPE, MINNESOTA 55428 EDA Minutes Regular Meeting April 28, 2003 City Hall CALL TO ORDER ROLL CALL APPROVE MINUTES SECTION 8 HOUSING CONTRACTS Item 4 MOTION Item 4 IMP. PROJECT 729 Item 5 EDA RESOLUTION 03~02 Item 5 New Hope EDA Page 1 President Enck called the meeting of the Econormc Development Authority to order at 7:57 p.m. Present: W. Peter Enck, President Sharon Cassen, Commassioner Don Collier, Commissioner Mary Gwin-Lenth, Commissioner Steve Sommer, Commissioner Motion was made by Commissioner Collier, seconded by Cornmassioner Sommer. to approve the Regular Meeting Minutes of March 10, 2003. All present voted in favor. Motion carried. President Enck introduced for discussion Item 4, Motion Approving Revision to Section 8 Administrative Services Contract Between the Metropolitan Council and the City of New Hope. Motion was made by Commissioner Sommer, seconded by Comrmssioner Gwin- Lenth, to approve a revision to the Section 8 Administrative Services Contract with the Metropolitan Council. All present voted in favor. Motion carried. President Enck introduced for discussion Item 5, Resolution Authorizing an Exclusive Negotiation Period Between the New Hope Economic Development Authority and the Ryland Group, Inc. for the Winnetka Avenue Area (Improvement Project No. 729). Mr. McDonald, Community Development Specialist, reported that the proposed resolution is in follow up to direction provided at the April 21, 2003, City Council work session and recommended by the city's financial consultant. The resolution states that 1) following the request for proposals by the City and consideration of the proposals received, The Ryland Group, Inc. was chosen as the City's tentative developer/builder for the site; 2) in its proposal, Ryland proposes to invest additional time, expertise and money to continue to work with the City to refine the site plan and examine the economic feasibility of development on the site; 3) Ryland has requested that the City provide a 90-day exclusive negotiation period with Ryland with respect to development of the site. Mr. McDonald stated Krass Monroe, P.A. will assist the EDA with financial analyses. The EDA requested the Community Development Director to provide regular updates regarding the negotiation process with Ryland Group, Inc. Commissioner Collier introduced the following resolution and moved its adoption "RESOLUTION AUTHORIZING AN EXCLUSIVE NEGOTIATION PERIOD BETWEEN THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITy AND THE RYLAND GROUP, INC. FOR THE WINNETKA AVENUE AREA". The motion for the adoption of the foregoing resolution was April 28, 2003 ADJOURNMENT seconded by Commissioner Gwin-Lenth, and upon vote being taken thereon, the following voted m favor thereof: Enck. Cassen, Collier. GWm-Lenth. Sommer: and the following voted against the same: None: Abstained: None; Absent: None: whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. Motion was made by Commissioner Collier, seconded by comrmssioner Gwin- Lenth. to adjourn the meeting. All present voted m favor. Motion carried. The New Hope EDA adjourned at 8:l0 p.m. Respectfully subrmtted, Valerie Leone City Clerk New Hope EDA Page 2 April 28, 2003 EDA REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section Community Development :~ / 5-12-03 EDA By: Ken Doresky, Community ? Item No. Development Specialist By 4 RESOLUTION RELEASING SECOND MORTGAGE IN FAVOR OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE ON PROPERTY AT 3625 FLAG AVENUE NORTH ACTION REQUESTED Staff recommends that the EDA approve the attached resolution prepared by the City Attorney releasing a second mortgage in favor of the Housing and Redevelopment Authority for the City on the property located at 3625 Flag Avenue North. POLICY/PAST PRACTICI= In the past, the City has provided mortgage satisfactions for properties that have complied with all mortgage terms. BACKGROUND In 1982, the City of New Hope Housing and Redevelopment Authority (HRA) purchased 3625 Flag Avenue North as rental property. The HRA owned several single-family homes and rented them to Iow- and moderate- ~ncome households. In the late 1980's the City discontinued the program and sold the homes. On February 29, 1988, the City of New Hope HRA sold the subject property to Mark and Kathleen Pupeza. As part of the purchase price, the New Hope HRA held a second mortgage in the amount of $20,100. The second mortgage note provided that the loan would be forgiven in its entirety if the buyers owned and occupied the property for a period of fifteen (15) years from the date of closing. City staff received the attached correspondence from the owners on March 25, 2003 requesting that the City release the mortgage satisfaction. Mark and Kathleen Pupeza have satisfied all of the terms of the second mortgage note and thereby are entitled to a release of the second mortgage in favor of the HRA in and for the City of New Hope. Attached, please find the May 2, 2003, City Attorney correspondence regarding the subject. The correspondence states, "Please refer to paragraph 4 of the second mortgage note on page 2 of that document. Said paragraph relates to "cancellation of debt." Basically, it indicates our second mortgage will be forgiven if the owners remain in the property for 15 years. The Pupezas have complied with this term. Therefore, our second mortgage should be released." h\RFA\PLANNING\Housin \3625\Q- Morta a e Satistaction.doc Request for Action Staff recommends approval of this resolution. ATTACHMENTS · Resolution · Location Map · City Attorney Correspondence, 5-2-03 · Property Owner Correspondence, 3-25-03 · Loan Documents Page 2 5-12-03 CITY OF NEW HOPE EDA RESOLUTION NO. 03 - RESOLUTION RELEASING SECOND MORTGAGE IN FAVOR OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE ON PROPERTY AT 3625 FLAG AVENUE NORTH BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows: WHEREAS, the Housing and Redevelopment Authority in and for the City of New Hope sold the single-family residential property at 3625 Flag Avenue North to Mark A. Pupeza and Kathleen A. Pupeza, husband and wife as joint tenants, on February 29, 1988; and WHEREAS, as part of the purchase price, the New Hope HRA took back a second mortgage in the amount of $20,100.00 to secure a loan in the same amount to permit the Pupezas to purchase the property; and WHEREAS, the second mortgage note provided that said loan would be forgiven in its entirety if the Buyers owned and occupied the property for a period of fifteen (15) years from the date of the closing on February 29, 1988; and WHEREAS, the Buyers Mark and Kathleen Pupeza have complied with this term and all other terms of the second mortgage note; and WHEREAS, the Economic Developmem Authority in and for the City of New Hope has assumed the interest for this second mortgage from the New Hope HRA by an assignment of said interest from the New Hope HRA to the New Hope EDA; and WHEREAS, the second mortgage should be released and satisfied based on the fact the Buyers have complied with all of the terms of the second mortgage note. NOW, THEREFORE, BE IT RESOLVED AS FOLLOWS: That the Buyers Mark A. and Kathleen A. Pupeza have satisfied all of the terms of the second mortgage note and thereby are entitled to a release of the second mortgage in favor of the Housing and Redevelopmem Authority in and for the City of New Hope against their property. o That the Satisfaction of Mortgage attached hereto as Exhibit A is hereby approved and the New Hope EDA President and Executive Director are hereby authorized and directed to sign the attached Satisfaction of Mortgage on behalf of both the Housing and Redevelopment Authority in and for the City of New Hope and the Economic Development Authority in and for the City of New Hope. That the Executive Director and~or his designated representative is hereby authorized and directed to record the Satisfaction of Mortgage against the rifle to this property including payment of the recording fee to accomplish this purpose. 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' : . . -- ...~ -. _ ., ~- t"BOONE ........ ~ ......... . 3624 3~25 . ~ '~' 3e~4T ~ - - ~ " .... · .. ...... , ............ : ..........~-,' - ,. ~' ~ ,CIR'3~: . ~m '~'; ~' :' 3~ 38~7 ' ' 3e~TM,:;'~"::,~'~ ............. '~ '- , ~e"- ~ ................ ~' ~,~ ~. 3B16 :~lg :~. _~',_-,~ · ............. ~ ..... : ~ ; ~ ~ ' · 3~ ~'~ F ..................... ~ ~ ~3~ :. ..... , .............. ~ .......................~ ..... ~ ..... . . . ~ ~ .. ~ ~.. ~ ~ ~' ~ ~'~[~ ....... .... ............................................ ~. ................................................................... . ~ ...........~ ........ ~ ~ , ..... ~'~'": ....................... ~ .'"~'T"~"'~"~?~'~"~':;'"~:-"~'~''''~'~''''z'~ ~'~'~ ........ : ..... Z" 38TH A~ N :'~......~ ~ ~:; [:~ _~_:_: ~ - o: ~ ~ ~. ' .......... ~": ....................................................... -~' ...... g~ ', Z~"'"-f ~ ~) ~ ~: [: [. ~ :~: ........ . ;. ...... : ~Bglg~ ~ ~]2 . ~701 : ..... ...................... : : · -.~:'.~ ...... .' ,,,~ } r'~'r-"~-~ ."~:. ~ ;~ .......... ~ t ............ ~ ......... ..~,.~_ :::S~_..~,~,:::~[;:~ .......... ~ ~.~.~..~..~ ..... -.. ..... . ........ ~;.~- ......... : ~,~ ~ ~ ~; ........... ~,~. ... -.-:~:~::'"~:..~?H~L~O~O cT'~': .................. .~ ........... : ...... ~ ............. , , ~' ~" L~?..~a:-'.'~'~..-., ........ ~ r'-Z-?'~'-~ ........ .'-.. ~ ~ ~ ~ , ~ : /~':' .......... '...~a-.~ ~a' '"~ ~ '".~ ~.,-t~~'- -~ ~ :' ~ ' ~ 35~ .... ~s~;'-. ~-'-s~:~..~ ? ,:t~-:'~: ............... :::.., ~ ................... : ~ ............ ~Z ......... .~. . ,, ,~ ~ ,- .... .. ]~ ~ ~ '"~----.~".-.~ ............... : ...... DOUGLAS J. DEBNER: GORDON L JENSEN~ GLEN A. NORTON STEVEN A. SONDILM.L STACY A. WOODS OF COUNSEL LORd,S Q. BRYnESTAO JENSEN & SONDRALL, P.A. Attorneys/it Law 8525 EDINBROOK CROSSING, STE. 201 BROOKLYN PARK. MINNESOTA 55443-1908 TELEPHONE (763) 424-8811 · TELEF,LX (763) 493-5193 e-mail iaw~jensen-sondrall.com May 2, 2003 Ken Doresky Community Development Specialist City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Re: Mortgage Satisfaction Request/3625 Flag Avenue North Property Owners: Mark and Kathleen Pupeza Our File No.: 99.11117 Dear Ken: In follow up to your March 27, 2003 letter, I did research the issue of the EDA's second mortgage on the referenced property. Please f'md enclosed a copy of said second mortgage and the second mortgage note relating thereto. Please refer to paragraph 4 of the second mortgage note on page 2 of that document. Said paragraph relates to "cancellation of debt". Basically, it indicates our second mortgage will be forgiven if the owners remain in the property for 15 years. The Pupezas have complied with this term. Therefore, our second mortgage should be released. Also enclosed is a Resolution and Satisfaction of Mortgage that should be adopted by the New Hope EDA which will comply with paragraph 4 of the mortgage note and release this second mortgage currently on the title to this property. Please contact me if you have any further questions or comments regarding this matter. Very truly yours, Steven A. Sondrall, City Attorney, City of New Hope JENSEN & $ONDRALL, P.A. After Hours Extensiea #147 Enclosures 'Real Properly Law S~eClahs! Cerhfied By The P:~AIIom~SASt, L~m~CNH99.11117.001.K~i~r.doc March 25, 2003 Mark Pupeza 3625 Flag Avenue North New Hope, MN 55427 Kirk McDonald Director of Community Development City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Mr. McDonald; In February of 1988 my wife Kathleen and I bought a house from the city of New Hope. The City holds a second mortgage on the property in the amount of $20,000.00. The conditions of the purchase were that if we did not sell or rent the property for fifteen years that the City would then forgive the $20,000.00 mortgage that it holds. We have fulfilled the conditions of the purchase agreement and are requesting that the City send us a document indicating that the terms of the mortgage have been satisfied. I believe that the City is also responsible to file a copy of this document with the County as well. Sincerely, Mark Pupeza JS Form No. $1%-M - SATISFACTION OF MORTGAGE By Corpora.on with Change of Name or Idenmy Pursuam to Minn. StaL ~507 41 Date: Ma>' __, 2003. THAT CERTAIN MORTGAGE owned by the undersigned, a municipal corporation under the laws of the State of Minnesota, dated February 29, 1988, executed by Mark A. Pupeza and Kathleen A. Pupeza, as Mortgagors, to The Housing and Redevelopment Au~ority in and for the Citx of New Hope, as Mortgagee, and filed for record March 4. 1988. as Document No. 1912646. in th~ office of the Registrar of Titles of Hennepin County, Minnesota, is. with the indebtedness therebx secured, fully paid and satisfied. The undersigned has changed its name or identity from The Housing and Redevelopment Authority in and for the City of New Hope to The Economic Development Authority in and for the City of New Hope as a result of conversion of articles of incorporation or charter from ~ederal to state, stat~ to federal, or from one form of entity to another. THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By: W. Peter Enck Its President By: Daniel J. Donahue Its Executive Director STATE OF MINNESOTA COUNTY OF HENNEP1N SS. The foregoing instrument was acknowledged before me this day of May. 2003. by W. Peter Enck and Daniel J. Donahue, the President and Executive Di'--'~ector, respectively, of The Economic Development Authority in and for the City of New Hope, a municipal corporation under the laws of the State of Minnesota, on behalf of the corporation. Notary Public THIS INSTRUMENT DRAFTED BY: Jensen & Sondrall, P.A. 8525 Edinbrook Crossing, Suite 201 Brooklyn Park, MN 55443 (763) 424-8811 JS Form No. 51~A-M - SATISFACTION OF MORTGAGE By Corpora,on with Change of Name or 10entity Pursuant to M~rm. Stnt. ,~507.41 Date: May __, 2003. THAT CERTAIN MORTGAGE owned by the undersigned, a municipal corporauon under the laws of the State of Minnesota, dated February 29, 1988, executed by Mark A. Pupeza and Kathieen A. Pupeza, as Mortgagors, to The Housing and Redevelopment Au~ori .ty in and for the City of New Hope, as Mortgagee, and filed for record March 4, 1988, as Document No. 1912646, in th~ office of the Registrar of Titles of Hennepin CountT, Minnesota, is, with the indebtedness thereby secured, fully paid and satisfied. The undersigned has changed its name or identity from The Housing and Redevelopment Authority in and for the City of New Hope to The Economic Development Authority in and for the City of New Hope as a result of conversion of articles of incorporation or charter from ~ederal to state, stat~' to federal, or from one form of entity to another. THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By: W. Peter Enck Its President By: Daniel J. Donahue Its Executive Director STATE OF MINNESOTA COUNTY OF HENNEPIN SS. The foregoing insmanent was acknowledged before me this day of May, 2003, by W. Peter Enck and Daniel J. Donahue, the President and Executive Di'-~ctor, respectively, of The Economic Development Authority in and for the City of New Hope, a municipal corporation under the laws of the State of Minnesota, on behalf of the corporation. Notary Public ITHIS IN~-rRUMENT DRAFi'i~D BY: J~ns~n & Sondr~l, P.A. 8525 Edinbrook Crossing, Suite 201 Brooklyn Park, MN 55443 (763) 424-8811 MINNESOTA Title Insurance Com;eny of Minnesota 400 Second Avenue South M~nnelpoi~s, M~nnesol~ 55401 Case #271-4276918 PAY 0118023 17.1 910 ~CLOSER NO~./ ORDER NO 278 590306 TO THE ORDER OF HOUSING & ILEDEVELOPMENT AUTHORITY ' DATE ..... ' ......... -..U,. AMOUNT IN AND FOR THE CITY OF NEW HOPE 2/29/88 $56,145.90 TITLE INSURANCE COMPANY OF MINNESOTA CUSTODIAL ACCOUNT '.ESCROW DEPOSITS , :-. .... .:.:~:.:,~...~,,~ ' · ~..: I,'O ~ IBO 2311' I:Oq ~OOOO ~q~: OO,,,h ?,,, 2Obi,' TITLE INS. CO. OF MINNESOTA DETACH AND RETAIN THIS STATEMENT IDENTIFICATION CLOSER 278~L ORDER NO. 590306 DESCRIPTION Case #271-4276918 Proceeds for: 3625 PUPEZA, Mark A. Flag Avenue North, Nev Hope, Hn PREPARED BY 55427 BY AMOUNT TOTAL CHECK AMOUNT $56,145.90 HC 1031 ',,.g./ L ~ L~ U U u D~strict Court No.(s) 3rans~er 4rom No.(s) Originally re~Istered Volume(s) 0995 Page(s) 0301317 0622~5~ STATE o~ FIIIItIESOTA, COUHTY o~ HEIINEPIN. REGZSTRATZON · This is to certify that: Hous~n9 & Redevelopment Authority in and for the City of New Hope. 4401Xylon Avenue North. City of Hew!Hope, County of Hennepln, State o~ is(are) non the owner(s) of an estate in!fee simple of anO ~n the the County of Hennepin and State of Hinnesota, to Lot 23, Block 1, Northwood Terrace 1st Addition, according to the p record in the office of the Registra~ o~ Titles in and for said County. Subject to an easement for public high.ay, together with the right temporary sno~ fences upon said easement and the lands ad)acent thereto, Certificate recorded in Sub~ect to utility and drainageieasement5 as sho~n on plat; (See Subject to the encumbrances, liens nd and subject to the fo[[o, ing o~ "An act conce.nlng the regis;.ation o~ ]and a~:d~{:~;;.f.i't~'.':~h~ret'o,, o~ the ,,~ ~dx or specia~ assessment ~or uhich the "['~nd has not : certificate o~ title. S. Any ]ease ~or a period not exceedin9 three years, ~hen there is actua under the lease. 4. AIl rights in public highuays upon' the )and. 5. Such right o( appeal or ~' 6. The rights o~ any person in Possession under deed or contract for dee certificate of tit]e. Form/go. 1529--S£COIeD MORTGAG£.-.~. c~ tl;bis tort IatI , mdeth s day of 19~.~-~. by Mark A. Pupeza and Kathleen .6. Pupeza, Irt the veaF o£ Hennepin County and State oL l~innesota part les of the first par: ):ercinaftcr desiL, nated as ~iortgagor-~, toThe Ho~sin~ a~d Redevelopment Au~ovig, ~ of New Hope, a ~nne~ta municip~ ~corporation, of 44~1 Xy)~ toe. lie ~Affh~m0.'Coun[y O~ Hennepin and New Hope Slate Of ~e~ part)' of thc second part. heremaiter des~nated as Mortgagee W~TN'ESSETH: Teat said Mortgagor S hereby mort~a~e~znd convcy~to stid Mort~a~ee the i,lio,'i~ descr,:ed prcmises situate in the County of He~ep~ and State of 5linncsota. ~t 13, Block 1, Nor~wood Ye~aee ~rst Addi~on Section Number Township Number Range :(umber T('I I~i:\\'E AND TO HOLD THE SAME, to~ether with all the bereditaments and appurtenances thereunto belnn~in~ or in any wise appertaining unto tfie said Mortgagee. it~ successor~ ur assigns. FOR- EVER Tiffs mort~a;te is 8ivan m consideration of and as security for tbs payment of TW~ Thousand One H~O ~d no/10~s ' ' Dollars f$20,100.00 · receipt whcrcoi is hereby acknowledged, aud is junior and subte([ueat to 3 ~rgt ~oft~a~e on said premises ~ Sev~ Tholed ~d no/10~s ......... Dollars ~$5T,000.00 ) made by said mort~aR'or~in favor of~~ Preferred ~o~n~e Corporation .'h~:d the said mortgagor_do__covenant with the Mortgagee. its success.rs ~,r a~s~ns, a~ follows: That ~he~iawfuilv seized of said premises; second, that , ~ ha~,~ood right to convev the same: third, that'the assr: are free from all encumbrances, except the first mortgak, e here~, detcribed: an~l fonrth, that tile said Mortgagee. its successors or assigns, shall quietly enjoy and possess the ~ame; and that lite said S . Mort~a~or~wfll W.hRRANT .~N'D DEFEND the titJc to the same a~ainst aH latvful claims. And the said ~lort~ago~further covenant~with the Mortgagee hereto, ns successors or assigns, to ~y the said first mortgage and intercsl thereon, us the same iull, duc. and to pay the insurance and pay ull taxes le~'it.d or ai~tsscd a~aiust th~ aioresaid premises, or any part thereof, as they periorm all of the covenanls here n and in said first mort~a-e c~ntained · and in case ~f become duc. an~ to ' ' ' ' · . failure to do so. the ~lorlgagee hcrein, its successors or assigns, may pay such first mort~aL, e or the interest tfiereo, as the same falls dee. nr the taxes and assessments or insurance, and the sum or sums which may be so paid by the · hlortga~ee herein, its successors or as~,~)=, m payment of suci~ first mortgage or thc u~terest thereon, or payment of such taxes and assessments or insurance, shall bear iuterest /rom the time of such payment at the rate of.~per cent per anutun.~~~and shall be deemed and are hereby declared to be au additional liev upon said premises aboYe described, and the amotmt which sh'tll be ~o paid. wtth interest thereon, as aforesaid, shall he collectible as a part oi and in the same manner as the origin;ti debt which this mortgage is ~iven to secnre. PROVIDED. NEVERTHEL.ESS. That if the Mort~aL, or~herein.. ~ei~ heirs, executors, admin- istrators or aa~i~i, shall pay to the Mortgagee herein, its succes*ors or assigns, the sum ~e Hundred ~d no/I0~hs. Dollars ~0,100.00 accordin~ to one certain promissory note. bearin~ even date herewith, with interest after matnritv at per cent per aunum, ~~ and due ~~~ as stated in ~e Mo~ N~e, aRaehed he~ ~d ~eo~rnted by referee, ~ieh b~ote may be amended $ from ~e ~ ~me wi~out ~e ~co~ing ~d amendm~.19 $ due due due due due 19 19 19 19 ~a~'''S ::, r,':. t~e~.z' !,, ,r~. ~,.i,::Ir.:!tTal.,r~. cxr.-m.~r~ rr a~f~un,. The Second ~ort~aDe Note attnche~ h~eto, is made in part of ~is Se~nd ~ort~a~e. I?; WIYN'ES~ WHEREOF.~ ha~creun~ set ~eir hand. and / h!l Fmtm No. 32-M--QUIT CLAIM DEED Coition of Pirmersftip No delinquent taxes and transfer entered; Certificate of Real Estate Value:' ( ) filed ( ) not required Gertifieate of Real Estate Value No. 19 County Auditor by Deputy STATE DEED TAX DUE tlEREON: $ Date: Fe~'~'~ r,~,~ Z.~ (reserved for recording data) FOR VALUABLE CONSIDERATION, The }lousing and Redevelopment ~uthorit~ in end for the Ct~ of New Hope , a,. _ cornovRtton under the laws of Minnesota , Grantor, hereby conveys and quitclaims to - Mark A. Pupezn and Kathleen A. PUp~zn , Grantees as joint tenants, real property in H~nnp?i~ County, Minnesota, described as follows: Lot 13, Block 1, Northwood Terrace 1st Addition, according to the plat thereof on file or of record in the office of the ~egistrar of Titles in and for said County. Subject to on easement for public highway, together with the rip. hi to construct and maintain temporary snow fences upon said easement and [he lands adjacent thereto, es contained in Final Certificate recorded in Book 406 of l~iseellsneous Itecords, pare 12. Subject to utility and drainsRe easements as shown on plat. (if mo~e HaKe Is nfldKI, continue on hick) together with all hereditaments and appurtenances belonging thereto. The Housing and 1Redevelopment Authority in and for_the City of New Hoo~ / Its Ci~t~mnn Its ~} Seeret~n~y=_Ty~asurer // STATE OF MINNESOTA } By ~~_~ ~/)~ COUNTY OF HENN£FIN ss. Its ExecutiVe D~rector The foregoing was acknowledged before me this ~ day of~ ~ , me,~; a.?m.a.n Sec_re_tar -Treasurer and Executive Di~ ' o! .T e_Housin an~ent ~.'.U--th'~i~n Sr~ for ~e~ under the laws of MinnR~ot~ ' , on behalf o! the eorp~ {~,~j~ NOIARY PUBLIC--MINNESOTA I I SIGNATURE OF' PERSOH TAKING ACKNOWLEDGMENT ======================= ] Mark A. Pupezfl 3625 Flog Avenue North THIS INSTRUMENT WAS DRAFTED BY (NAME AND A DDRF..S~): CORFtICK · SONDEALL 3811 West Broadway Pmbbinsdale, Minnesota 55422 Fo~ ~lo. 152~--$£COND MORTGAGF--m · C*r~ I~--~-/. by Mark A. Pupeza and K~hleen .~. Pupeza, In the year of Hennepin County and State of l¥innesota part iesof tile first par:. l:ereinaiter desi,..nated ax .'dortga..~or-~, toThe Housin~ and Redevelopment ~ u~oei~- in ~nd foe the ~ of New Hope, a a~nne~ta munieipa] ~corvorat on of 4401 ~ylfln AVeeno ~n~h~,O.' COOllty Oi Bennepin and New Hope ~tate of, Mmne~ par~y o~ thc second part. heremai~cr dcs~natcd a~ Mortgagee ~VITNES~ETH: 3 h~t ~aid Mortgagor ~ hereby mortgage__and convey~o sa~d Mortgagee ~hc f;~lk,~vi~:~. Otscr,.e~J prem:~ situate in the County of Hennep~ and State of Minnesota, to-w~t: ~t la, Block 1, No~wood Terrace ~ret Addition Section .Number Township Number RanL, e Number ( TO H:\VE AND TO HOLD THE SAME, to~ether with all the hereditaments and appurtenances therennto belonring or in any wise appertaining' unto tile said ~lortga~ee. its suceessor~ or assl~'ns, FOR- EVER Tiff.- mort.,_,a.,.:c is :.~ive,; In consideration of and aa security /or tile payment si Twenty Thousand One Hundred and no/100tha ' Dollars ($20,100.00 ) · receipt whereof is hereby acknowledged, and is junior and subsequent to a first mortgage on said premises of Flfqr 8even Whouslmd and no/100th$ --Dollars ('$$?,000.00) made hy said nlort~-a,~orS~i~ favor of:l~r~gf~a~Tt~ Preferred ~ort~affe Cot:lOrn:inn .'\:Id the sa~d m~rts.'a~for-~do~covenant with the *lort~a~ee. its successors t,r -',~sL~.llS a,¢ {ollows: That --~he~Y.~r..~iaw/uil:. scizc(l uf said premises; second, that rh~ halr~ Rood riffht to convey the same: third, that'ihz .,ams are free from all encumbrances, except the first mortgaffe hereil: described: an~l fourth, that tile ~aids'\J°rtffagee'. Its successors or assigns, shall quietly enjoy and possess thc same; and tits: the said Mort~a.,~or~vlll \VARIg. ANT AND DEFEND tile title to the same efta'ins: all lawful claims. And tile said ,Mort~a~'o~_~ fir:her covenunt~with tile ~lort~a,Jee herem. i s .succes,ors or assiffns, to pa)- the said first :nor:gaffe and mteres! thereon, ,a~ the sallie /aTl~ due. and to pa)' the m~urance and pay all taxes levied or a~essed a~ainst tile atoresaid premises, or any part thereof s , perform all st the covenants herein and n ~a ~ first mort a - ---'. -~ , . a. the} become due. an~l to ' ' '' ' ' ~ ~ ~u~ta~lletl; al1(: in case of iailure to do so. tile · Jorl,,.:a~ee Iwrt'm. it~ :)ticcessors or a~s,L,n~, may pa3- such first mort~a.k,e or the interest thereon ;ts the same fa!la due. or the taxe~ and as~e~snlents or iiisurance, dud tile sum or slims which ina3. he so paid hv tile · \iort.,..'a.,..,ee herein, its s,.icce~.~ors or ah:-,.nl:, in payment o£ alii'il first nlort~age or tile interest thereon. 'or in payment of such taxes and assessments or insurance, shall bear interest from the time of such payment at the rate of. per cell: per annum.~~j$.Xand shall be deemed and are hereby declared to he all additional list, upon said premise~ above described, and tile amonnt which sh'HI be so paid. with interest thereon, as aforesaid, shall be collectible as a part of and in the same manner ax tile orig'in;d debt which this Tnort~a~ffe is given lc, .~ecure. PROVIDED. NEVERTHELESS, That if the .'~lort.,Oa~or..~Sberein,. their heirs, executors, admin- istrators or asai:,,ns, shall pay to the -~Iort.L,a.~ee hereto, its successors or assigns, the sum of One Hundred end no/I00ths ......... Dollars ($~0,100.00 according to one certain promissory note. I)earin~ even date herewith, with interest after maturity at per cent per annum, Itiqtal~x'lea{l{~. and due ~~a{{ll~X.~ as stated in the Second Mortgage lqote, attached hereto end incorporated b r $ from time Io tim Y efex~enee, which l~ote may be emended e without the record/nE offusatd amendments. due due $ dee due due 19 19 19 19 19 JJK~I~'~X~'JJ:X'J~I~I:]L~ att~rne~"~ iee~. and to pay th,: nvertflgs ii an~. t,, tim r~, h~eto, is made in part of ~is Se~nd I: 'vI':N'E.c~ \VHF-REOF, da)- o~ / ~y C~mm~?~?, Cxm~s &or. ~;. 1990 THIS INSTRUMENT WAS DRAFTED BY CO~ & SOND~T,T. 3811 ~est B~adway ~obb~adale 61~/533-2~41 t~eT ha.--Yq~ere,mt~ set their hand._8and seal__ thi~ 2J:j~- , I9~ . h!! SECOND MORTGAGE NOTE For value received, the undersigned promises to pay to The Housing and Redevelopment Authority in and for the City of New Hope, (the "HRA") the sum of Twenty Thousand One Hundred and no/100ths Dollars ($20,100.00), with interest at at rate of per cent per annum from the date of an Event of Maturity of this Second Mortage Note (the "HRA Note") until the HRA Note is paid in full, under the following terms and conditions. 1. Definitions. Event of Maturit~ means the date upon which any one or more of the following take place, whether voluntary or involuntary. All or any part of the Premises securing this Note by Second Mortgage is sold, transferred, or otherwise conveyed (whether by deed, contract for deed, lease for a term of more than one year, or otherwise); or ii. Ail or any part of the Premises is no longer occupied by Mortgagor as his or her homestead; or iii. Ail or any part of the Premises is leased, sub-leased, or otherwise temporarily vacated (unless approved in writing by the HRA) for a period or periods which, cumulatively, exceed one year; or iv. All or any part of the loan evidenced by the HRA Note and Second Mortgage is assigned or transferred; for assumption of payment or any other reason; or Any default under the terms and conditions of the Second Mortgage on the Premises, or the commencement of Mortgage foreclosure proceedings on the First Mortgage on the Premises. vi. Should either (i) or (ii) above occur as to all Mortgagors due to the death of the same, and at least one of the Mortgagor,s children resides on the Premises, this shall not constitute an Event of Maturity during such residence by the child of Mortgagor. 1 vii. Should either (ii) or (iii) above occur for any reason as to all but one of the original Second Mortgagors, and the remaining mortgagor remains in possession of the Premises, this shall not constitute an Event of Maturity during such possession by the remaining Mortgagor. Mortgagor. The purchaser or purchasers of the Premises from the HRA. Premises. Property upon which a purchase money first mortgage has been placed to secure the loan of money to buy and which property also is encumbered by the Second Mortgage of the HRA, which secures this HRA Note, being premises located in the State of Minnesota, County of Hennepin, described as: Lot 13, Block 1, Northwood Terrace First Addition. Second Mortgage. Second lien mortgage encumbrance on the Premises, given to secure the performance of this HRA Note, and to maintain the right of redemption of the HRA in the event of default by the Mortgagors on the purchase money first mortgage. 2. payment of Interest and Principal. An Event of Maturity shall take place as of the date such event actually occurs, and interest shall be due and payable on the first day of each month thereafter, whether or not the HRA has given notice of such Event of Maturity, or whether or not the HRA has actual or constructive notice of such Event of Maturity. Principal shall be due upon the happening of an Event of Maturity. 3. Notice. The HRA agrees to notify the Mortgagor at the mailing address of the Premises by certified mail, return receipt requested of any Event of Default which comes to its attention, or at the last known address of the Mortgagor, if different than the Premises. Notice shall not be given to any Mortgagor who is not a last known resident of the Premises, according to the records of the NRA. 4. Cancellation of Debt. If an Event of Maturity has not occurred by a date fifteen (15) years from the date of this HRA Note, and if mortgagor has kept all covenants and agreements in both First and Second Mortgages, and has made all payments of sums of money and interest and taxes and assessments and insurance as required by First and Second Mortgages, for a period of fifteen (15) years from the date of this HRA Note, then this HRA Note shall be null and void and all sums secured by the Second Mortgage shall be forgiven. 5. Amendments. The terms of this HRA Note may be amended by a written agreement signed by the HRA and Mortgagors, and such amendment need not be recorded with the appropriate County authorities to be effective. IN WITNESS WHEREOF, Mortgagor has executed this Second Mortgage Note on the day first written above. Mortgagor Mortgagor EDA REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section Community Development 5-12-03 EDA By: Ken Doresky, Community ,~r Item No. Development Specialist By: -~ RESOLUTION APPROVING BASS LAKE ROAD APARTMENT HOUSING DEVELOPMENT AGREEMENT. REGULATORY AND OPERATING AGREEMENT AND PROPERTY MANAGEMENT AGREEMENT FOR THE PPL/BASS LAKE APARTMENTS PROJECT AT 7610 BASS LAKE ROAD AND AUTHORIZING THE PRESIDENT AND EXECUTIVE DIRECTOR TO SIGN SAID AGREEMENTS (IMPROVEMENT PROJECT NO. 707) ACTION REQUESTED Staff recommends that the EDA approve the attached resolution prepared by the City Attorney approving three routine agreements (Housing Development Agreement, Regulatory and Operating Agreement and Property Management Agreement) between the Minneapolis Public Housing Authority (MPHA), New Hope EDA and Project for Pride in Living (PPL) for the Bass Lake Road Apartments project at 7610 Bass Lake Road. POLICY/PAST PRACTICE City goal #2 is to pursue the maintenance and redevelopment of commercial and residential properties withir; the City. The City Council has been addressing the residential portion of this goal through the City's many housing activities, including partnering with different agencies and organizations on housing projects. In the past, the City has been requested to approve similar agreements in multi-partner redevelopment projects. As the EDA is aware, projects of this size require a variety of funding partners and usually require the expertise of an experienced development agency, such as PPL. Often times, other jurisdictions and agencies approve funding, contingent upon the City's consent and project participation. BACKGROUND Staff is requesting Council and EDA approval of the attached resolution prepared by the City Attorney approving three routine agreements with the Minneapolis Public Housing Authority (MPHA) for the PPL rehabilitation project at 7610 Bass Lake Road (11 unit rehabilitation). This project is being handled in the same manner as the previous PPL redevelopment project, the Bass Lake Court Townhomes. Please see the following comments offered by the City Attorney regarding the requested action: "This is basically a housekeeping item despite the length of the documents. The attached agreements are required by HUD and the MPHA to permit funding of the project. These documents are virtually identical to the ones we used on the Bass Lake Town Home development in 1998. MOTION BY ~}~ SECOND BY ~.~,./L~ TO: o o': - - 4 h\RFA\PLANNING\Housin \7610 BLR\Q-Re ulato A reement EDA. doc Request for Action Page 2 5-12-03 We have already entered into a development agreement with PPL. This development agreement is confirmed by the attached Housing Development Agreement. All plans for the remodeling of the apartment complex need to be approved by the City per our development agreement. Commencement of construction on the redevelopment project must begin by the end of the year. It also requires PPL to develop and operate 4 Metropolitan Housing Opportunity Program (MHOP) units for the term of the Annual Contributions Contract (ACC). It is my understanding the term of this contract is 40 years. However, our right to collect taxes on these units will be limited to 5% of the "shelter rents" for the term of the ACC. I have not run the number on this amount but suffice to say the taxes the City will collect against these units will be nominal. The Housing Development Agreement requires the MPHA, the EDA and PPL to enter into the Operating and Regulatory Agreement attached to the resolution. This agreement simply establishes the operating subsidy which will be paid to PPL on an annual basis. We also have agreed to allow PPL to transfer their interest in the development to Bass Lake Apartments, LLC. This is a new entity in which PPL has the controlling interest. As a result, there will be a Property Management Agreement between those entities. The EDA is only approving this agreement, we do not need to sign it." On December 9, 2002, the EDA approved resolutions approving an Initial Agreement and Cooperation Agreement between the MPHA and the EDA for the PPL/Bass Lake Road Apartments project at 7610 Bass Lake Road. The Initial Agreement indicated that the EDA was willing to participate with the MPHA and PPL in the proposal process to HUD for funding of the MHOP units and required the EDA to enter into a Housing Development Agreement with the MPHA and PPL that, among other things, established design specifications for the units, confirmed amenities in and around the development and required PPL to execute a Regulatory and Operating Agreement and provide Declaration of Restrictive Covenants relating to the operation of the units. The Cooperation Agreement indicated that the City, in its capacity as the taxing authority, will not assess real estate taxes against the four MHOP units within the development for the entire 40-year exemption period. In lieu of real estate taxes, the Owner will pay the EDA a PILOT. This amount will be calculated as 5% of the "Shelter Rent" as that term is defined in the Agreement. Shelter Rent is approximately 30% of the income of the occupants of the four MHOP units. As a result, the rental payment will be quite Iow. The EDA will be required to pay the PILOT to the County for distribution to the various taxing bodies as if it were the actual real estate tax payment. On May 13, 2002, the EDA approved a redevelopment and loan agreement with PPL for partial funding and participating in 7610 Bass Lake Road Redevelopment Project. The project will include complete rehabilitation of the building's exterior and interior, as well as, several site improvements, including: Exterior: The building exterior will be completely renovated, including painting, the repair or replacement of the soffits, fascia, gutters and downspouts, brick and mortar repair, and the repair or replacement of the windows and exterior doors and roof. Interior: The interior work will include updating the existing units in their present configuration. New cabinets, counters and appliances will be provided in the kitchens. The plumbing and electrical will be updated. The boiler will be replaced. The walls will be repaired and painted and new carpet will be installed throughout. · Site Improvements: The landscaping will be improved, a playground added, the drive expanded and resurfaced, the walkways repaired, and garages added for each unit. On February 25, 2002, the City Council approved a resolution prepared by the City Attorney authorizing the acquisition of 7610 Bass Lake Road by eminent domain. Project for Pride in Living, Inc. and the owners had Request for Action Page 3 5-12-03 executed a purchase agreement on the property and the owners requested a "friendly condemnation" resolution to insure they will be able to utilize the full rights of Section 1033 of the Internal Revenue Code. Those rights relate to an extended time limit of reinvestment for tax purposes. PPL purchased the property through a direct transaction, therefore it was not necessary for the City to commence a condemnation proceeding pursuant to that resolution. On October 2, 2001 staff presented this rehabilitation proposal to the Livable Communities Task Force. Staff prepared an information packet for the Task Force, gave a short presentation on the project and requested that the Task Force review the proposal and provide written input on the project at the following meeting. The overwhelming input and direction from the Task Force was to proceed with the project. On June 27, 2001, the EDA requested that staff investigate additional financing options for the project. Staff presented those options at the September 17, 2001 Council work session. At the work session, the majority of the Council voted to approve the rehabilitation project contingent on decreasing the City's contribution to $218,000 with the addition of a fourth MHOP unit and obtaining Livable Community Task Force input on the project. Also, the Council elected to contribute $5,000 for playground equipment on the site. PPL ensured the Council that an additional $5,000 could be raised to match the City's contribution for playground equipment. Rehabilitation activities are expected to begin in this spring. Staff recommends approval of this resolution. FUNDING The total cost of this project is approximately $1.32 million. The financing is a combination of a traditional bank mortgage, investments from the City of New Hope and Hennepin County HOME and AHIF funds. Four affordable units will be paid for by the Metropolitan Housing Opportunities Program (MHOP), which was created to increase the supply of rental housing outside of the central cities. The City's portion of funding for the project is as follows: Total loan: $223,000 (30 year 0% interest deferred loan with a balloon payment due June 1, 2032). Sources: o $ 78,000 CDBG, and; o $145,000 EDA. Staff has made it clear to PPL and the NCRC that the amount of EDA funding for this project is firm and will not increase. A'I-rACHMENTS · Resolution · City Attorney Correspondence, 5-6-03 · Location Map · Housing Development Agreement · Regulatory and Operating Agreement · Property Management Agreement CITY OF NEW HOPE EDA RESOLUTION NO. 03 - RESOLUTION APPROVING BASS LAKE APARTMENT HOUSING DEVELOPMENT AGREEMENT, REGULATORY AND OPERATING AGREEMENT AND PROPERTY MANAGEMENT AGREEMENT FOR THE PPL/BASS LAKE APARTMENTS PROJECT AT 7610 BASS LAKE ROAD AND AUTHORIZING THE PRESIDENT AND EXECUTIVE DIRECTOR TO SIGN SAID AGREEMENTS BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows: WHEREAS, the Economic Development Authority has entered into a December 9, 2002 Initial Agreement, as amended, with the Minneapolis Public Housing Authority (UMPHA"), which Agreement basically defines the relationship between the MPHA, the EDA and Bass Lake Apartments, LLC (hereinafter "PPL") with respect to the planning, construction, ownership and operation of 4 MHOP units within an 11-unit multifamily housing project at 7610 Bass Lake Road known as the Bass Lake Apartments; and WHEREAS, the Initial Agreement further indicates the MPHA and EDA will cooperate to submit a proposal to HUD for development funds, to assist PPL in the development, construction and operation of three (3) replacement and one (1) incentive MHOP units of housing; and WHEREAS, the Initial Agreement requires the EDA, MPHA and PPL to enter into a Housing Development Agreement to establish design specifications for the units, confn'm amenities in and around the development, establish a float system for the MHOP units within the development rather than specify specific units and require PPL to execute a Regulatory and Operating Agreement and a Property Management Agreement relating to the operation of the development; and WHEREAS, the attached Housing Development Agreement, Regulatory and Operating Agreement and Property Management Agreement attached hereto as Exhibits A, B and C are now prepared and ready for execution by the respective authorized officials of the MPHA, EDA and PPL. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope, Minnesota, as follows: e The Housing Development Agreement, Regulatory and Operating Agreement and Property Management Agreement in the forms attached hereto as Exhibits A, B and C are hereby approved. That the President and Executive Director are hereby authorized and directed to sign the Housing Development Agreement, Regulatory and Operating Agreement and Property Management Agreement as proposed in the attached Exhibits A, B and C. That the Executive Director is hereby authorized and directed to take all appropriate steps necessary to implement the terms and conditions of the Housing Development Agreement, Regulatory and Operating Agreement and Property Management Agreement. Adopted by the Economic Development Authority in and for City of New Hope, Hennepin County, Minnesota this 12'~ day of May, 2003. W. Peter Enck, President Attest: Daniel J. Donahue, Executive Director P:~Auomey~Cnh Rmohaiona~C, NH.,n~DA R~ App ~ Lake A{W.doc 2 DOUGLAS J. DEBNERs GORDON L. JENSEN~ GLEN A. NORTON STEVEN A. $ONDRALL WILLIAM C. STILAIT: STACY A. WOODS OF COUNSEL LORENS Q. BRYNESTAD ~Rcal Property Law Specialist Ccrli£~d By The Minnesota State Bar Association 2Qualified ADR Neutral 'Acin~tted in iowa JENSEN & SONDRALL, P.A. Attorneys At Law 8525 EOINBROOK CROSSING, STE. 201 BROOKLYN PARK, MINNESOTA 55443-1968 TELEPHONE (763) 424-8811 ® TELEFAX (763) 493-5193 e-mail law~j ensen-sondrall.com VIA FACSIMILE AND REGULAR MAIL May 6, 2003 Ken Doresky Community Development Specialist City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 RE: PPL 7610 Bass Lake Road 11 Unit Multifamily MHOP Project Our File: 99.11166 Dear Ken: Attached for consideration at the May 12, 2003 EDA meeting is the following proposed resolution: "RESOLUTION APPROVING BASS LAKE APARTMENT HOUSING DEVELOPMENT AGREEMENT, REGULA TOR YAND OPERATING AGREEMENT AND PROPERTY MANAGEMENT AGREEMENT FOR THE PPL/BASS LAKE APARTMENTS PROJECT AT 7610 BASS LAKE ROAD AND AUTHORIZING THE PRESIDENT AND EXECUTIVE DIRECTOR TO SIGN SAID AGREEMENTS" As we have discussed, the referenced agreements are attached to the resolution for EDA review. This is basically a house keeping item despite the length of the documents. The attached agreements are required by HUD and the MPHA to permit funding of the project. These documents are virtually identical to the ones we used on the Bass Lake Town home development in 1998. We have already entered into a development agreement with PPL. This development agreement is confirmed by the attached Housing Development Agreement. All plans for the remodeling of the apartment complex need to be approved by the City per our development agreement. Commencement of construction on the redevelopment project must begin before the end of the year. It also requires PPL to develop and operate 4 MHOP units for the term of the Annual Contributions Contract (ACC). It is my understanding the term of this contract is 40 years. However, our right to collect taxes on these units will be limited to 5 % of the "shelter rents" for the term of the ACC. I have not run the numbers on this amount but May 6, 2003 Page 2 suffice it to say the taxes the City will collect against these units will be nominal. The Housing Development Agreement requires the MPHA, the EDA and PPL to enter into the Operating and Regulatory .Agreement attached to the resolution. This agreement simply establishes the operating subsidy which will be paid to PPL on an annual basis. We also have agreed to allow PPL to transfer their interest in the development to Bass Lake Apartments, LLC. This is a new entity in which PPL has the controlling interest. As a result, there will be a Property Management Agreement between those entities. The EDA is only approving this agreement. We do not need to sign it. If you need any further information or clarification on these documents or the resolution please contact me. Very truly yours, Steven A. Sondrall, City Attorney, City of New Hope JENSEN & SONDRALL, P.A. sas@jen~en-sondrall.com After Hours Exmnsmn #147 CC.' 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",,. r ~6 ~ .........~ ~ .' ...... ~ ............ ~ .................... ~'... ~ : ... ~ ' e ;' i i~ ~ :~Z ....... :- ......... i ~ ~ [ 5~9 "~,"' ." ~ ''' e ........................... ~ 5~9 !~y ~ ~ 5~9 i~; 5~ ~ ~ ~ ~o ?'-"~a-']a~a ~-~;']~F'~'~-;'"~;"~ ~;--:~--::..-~-~ ~'~"': ~"'"? ?.-..,..,.E '""., ? .......................... : ....... : L.._ : ~ :: ~ ~ :- ~ o~o ~ L.~. ~ ~ i S~2 m ~ ~ ......... ~ ~- ........ ~ .......... ~ ~ .............. ~ ........... ~0:. i ; ..............: ............ 5~ _ : ............... 5324 , ~1 / ; 5~2 5325 ;~ ........ ' ~ :,. ~: ~ 7940 5437 5431 .5427 5411 EXECUTION COPY 04/23/2003 HOUSING DEVELOPMENT AGREEMENT By and Between THE MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS and BASS LAKE APARTMENTS LLC and THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE This document was drafted by: HOLMES & ASSOCIATES, LTD. Two Carlson Parkway, Suite 155 Minneapolis, Minnesota 55447 (612) 249-0858 (612) 249-0777 (fax) C:\WINDOWS\TEMP\I 0DEVAGR. DOC HOUSING DEVELOPMENT AGREEMENT TABLE OF CONTENTS PARTIES RECITALS Section 1.1. ARTICLE I Definitions Definitions ................................................................................................. 2 Section 2.1. Section 2.2. Section 2.3. Section 2.4. ARTICLE II Representations and Warranties General Representations .......................................................................................... 5 Representations and Warranties of the MPHA ........................................................ 5 Representations and Warranties of the EDA ........................................................... 5 Representations and Warranties by the Owner ........................................................ 5 Section 3.1. Section 3.2. Section 3.3. Section 3.4. Section 3.5. ARTICLE III The Development Description ............................................................................................................... 8 Construction ............................................................................................................. 8 Construction Plans ................................................................................................... 8 Commencement and Completion of Construction ................................................... 9 Certificate of Completion ...................................................................................... 10 Section 4.1. Section 4.2. ARTICLE IV The Public Housing Units Described ............................................................................................................... 11 Interchangeable Units ............................................................................................. 11 Section 5.1. Section 5.2. ARTICLE V Public Assistance Funds Description ................................................................................................. 12 Development Funds ............................................................................................... 12 C:\WINDOWS\TEMP\IODEVAGRI.DOC i HOUSING DEVELOPMENT AGREEMENT Section 5.3. Section 5.4. Section 5.5. Operating Subsidy .................................................................................................. 12 Payments in Lieu of Taxes ..................................................................................... 13 Payment Limitations .............................................................................................. 13 Section 6.1. ARTICLE VI Additional Regulatory Requirements Additional Regulatory Requirements ..................................................................... 14 Section 7.1. Section 7.2. ARTICLE VII Mortgage Finanein~ Mortgage Financing and/or Equity ........................................................................ 16 Authorities' Option to Cure Default on Mortgage ................................................. 16 Section 8.1. Section 8.2. ARTICLE VIII Insurance Insurance Damage or Destruction Section 9.1. Section 9.2. Section 9.3. ARTICLE IX Encumbrances[ Sale; Indemnification Encumbrances ........................................................................................................ 20 Sale ......................................................................................................................... 20 Indemnification .................................................................................................. 20 Section 10.1. Section 10.2. Section 10.3. Section 10.4. ARTICLE X Events of Default Event of Default Defined ....................................................................................... 22 Remedies Upon Default ......................................................................................... 22 No Remedy Exclusive ............................................................................................ 22 No Additional Waiver Implied by One Waiver ..................................................... 22 C:\WINDOWS\TEMP\I 0DEVAGRI.DOC ii HOUSING DEVELOPMENT AGREEMENT ARTICLE XI Additional Provisions Section 11.1. Section 11.2. Section 11.3. Section 11.4. Section 11.5. Section 11.6. Section 11.7. Section 11.8. Section 11.9. Section 11.10. Section 11.11. Duration of Agreement Assignment Recording of Agreement ........................................................................................ 23 Amendment ............................................................................................................ 23 Authorities .............................................................................................................. 23 Conflict of Interests; MPHA and EDA Representatives Not Individually Liable .......................................................................................... 23 No Merger .............................................................................................................. 24 Notices and Demands ............................................................................................ 24 Counterparts ........................................................................................................... 24 Law Governing ...................................................................................................... 24 Severability ............................................................................................................ 25 TESTIMONIUM SIGNATURES EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E Legal Description Declaration of Restrictive Covenants Certificate of Completion Title Insurance Commitment Davis-Bacon Wage Rate C:\WINDOWS\TEMP\10DEVAGRi.DOC iii HOUSING DEVELOPMENT AGREEMENT HOUSING DEVELOPMENT AGREEMENT THIS AGREEMENT, made this __ day of ,2003 by, between, and among the MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS, a public body corporate and politic under the laws of the State of Minnesota (hereinafter referred to as the "MPHA"), BASS LAKE APARTMENTS LLC, a Minnesota limited liability company (hereinafter referred to as the "Owner"), and the ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE, a public body corporate and politic under the laws of the State of Minnesota (hereinafter referred to as the "EDA"). WITNESSETH: WHEREAS, the parties to this Agreement have participated in negotiations concerning an 11-unit multi-family housing facility (the "Development") to be rehabilitated and constructed in the City of New Hope, Minnesota; and WHEREAS, the MPHA and the United States Department of Housing and Urban Development ("HUD") are parties to a Mixed-Finance Amendment to Consolidated Annual Contributions Contract dated , 2003 (the "ACC Amendment") pursuant to which the MPHA has been granted funding for Public Housing Units within Mixed-Finance Developments throughout the Minneapolis-St. Paul metropolitan area; and WHEREAS, the MPHA and the EDA have entered into that certain Initial Agreement dated December 18, 2002, for the purpose of seeking the inclusion of Public Housing Units within the Development; and WHEREAS, the parties to this Agreement have proposed to include four (4) Public Housing Units within the Development and to fund the development of the four (4) Public Housing Units in accordance with the terms and conditions of this Agreement. WHEREAS, the MPHA, EDA and the Owner will entered into a Regulatory and Operating Agreement (the "Regulatory Agreement") providing for the maintenance and operation of the Public Housing Units and the payment of operating subsidy by the MPHA. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: C:\WINDOWSXTEMP\IODEVAGRi.DOC I HOUSING DEVELOPMENT AGREEMENT ARTICLE I Definitions Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears from the context: "Act" means the United States Housing Act of 1937, as amended. "Authorities" means the MPHA and the EDA collectively. "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. "ACC" means the Annual Contributions Contract between the MPHA and HUD. "ACC Amendment" means the Mixed-Finance Amendment to Consolidated Annual Contributions Contract between the MPHA and HUD which define the terms of Mixed Finance Developments. "Certified Costs" means the Owner's cost of rehabilitating and constructing four (4) Public Housing Units, which shall equal (i) the sum of all site acquisition, relocation, demolition, construction and equipment, on-site utilities, non-dwelling facilities, construction period insurance premiums and other costs necessary to develop the Development, (ii) divided by 17 (the number of bedrooms in the Development), (iii) multiplied by 8 (number of Public Housing Unit bedrooms). "City" means the City of New Hope, Minnesota. "Closing" means delivery of the Development Funds to the Owner which shall occur upon the closing of the Mortgage and submission of evidentiary documents to MPHA and HUD. "Construction Plans" means the Construction Plans submitted in connection with Article III of this Agreement. "Cooperation Agreement" means the agreement between the MPHA, the EDA, and the City exempting the Public Housing Units fi.om property taxes and providing for payments in lieu of taxes (PILOT). "County" means the County of Hennepin, Minnesota. "Development" means the 11-unit multi-family housing facility to be rehabilitated and constructed upon the Development Site, which shall contain four (4) Public Housing Units. C:\WINDOWS~TEMP\I 0DEVAGRI .DOC 2 HOUSING DEVELOPMENT AGREEMENT "Development Cost Budget" means the line item budget approved bv the MPHA and HUD for the rehabilitation, construction and development of the Public Housing Units. "Development Funds" means funds derived by the MPHA from HUD and to be paid to the Owner for Certified Costs of four (4) Public Housing Units within the Development. "Development Site" means the property legally described in Exhibit A to this A~eement upon which the Development will be constructed. "EDA" means the Economic Development Authority in and for the City of New Hope. "Event of Default" means an action by the Parties as provided in Article X of this Agreement. "HUD" means the United States Department of Housing and Urban Development. "Initial Operating Deficit Account" means an account maintained by the MPHA during the Initial Operating Period into which all rental income from the Public Housing Units is deposited and from which expenses of the Public Housing Units are paid. "initial Operating Period" or "IOP" means the period between DOFA and EIOP and is the period during which operating costs of the Public Housing Units are charged to the development or capital budget, after which such costs are paid from Operating Subsidy. "Management Agreement" means the agreement between the Owner, the EDA, the MPHA and Project for Pride in Living, Inc., or any approved successor management company, for the management of the Development, including the Public Housing Units. "Mortgage" means that certain first mortgage made by the Owner, as mortgagor, and Franklin National Bank, as Mortgagee, or any successor mortgage which is secured, in whole or in part, by the Development Site and which is a permitted encumbrance pursuant to Section 9.1. "MPHA" means the Minneapolis Public Housing Authority in and for the City of Minneapolis. "Mixed Finance Development" means the development of Public Housing Units through the use of both public and private financing in accordance with HUD regulations and the ACC Amendment. "Net Proceeds" means any proceeds paid by an insurer to Owner or the Authorities under a policy or policies of insurance required to be provided and maintained by the Owner pursuant to Article VIII and remaining after deducting all expenses (including fees and disbursements of counsel) incurred in the collection of such proceeds. C:\WINDOWS\TEMP\IODEVAGRi.DOC 3 HOUSING DEVELOPMENT AGREEMENT "Operating Subsidy" means funds derived by the MPHA from HUD to be paid to the Owner to reimburse the Owner for all or a part of the difference between the cost of operating and income derived from the Public Housing Units. "Owner" means Bass Lake Apartments LLC, a Minnesota limited liability company having its principal office at 1925 Chicago Avenue South, Minneapolis, Mirmesota 55404, Attention: Barbara McCormick. "Parties" mean the MPHA, the EDA, and the Owner collectively. "Public Assistance" means the total financial assistance paid to the Owner by the MPHA in accordance with Article V of this Agreement for the purpose of funding the development and operation of the Public Housing Units. "Public Housing Units" means the four (4) residential units within the Development that will be reserved for low-income public housing pursuant to this Agreement and the Regulator), Agreement and will be eligible to receive both the Public Assistance under this Agreement and the Operating Subsidy under the Regulatory Agreement. "Regulatory Agreement" means the agreement by, between, and among the Parties setting forth the rights and obligations of each with respect to the day-to-day operation of the Public Housing Units and the operating subsidy payable by the MPHA in connection therewith. "Restrictive Covenant" means the Declaration of Restrictive Covenants attached as Exhibit B to this Agreement which obligates the Owner to operate and maintain the Public Housing Units in accordance with the Act, the ACC, the ACC Amendment and all federal, state and local laws and regulations. "State" means the State of Minnesota. "Unavoidable Delays" means delay in the performance of obligations hereunder due to acts of God, acts of the public enemy, acts of the federal government, acts of the other party, fire, floods, epidemics, quarantine restrictions, strikes, freight embargoes, unusually severe weather or delays of subcontractors due to such causes or any other cause beyond the reasonable control of a party. C:\WINDOWS\TEMP\I 0DEVAGR1.DOC 4 HOUSING DEVELOPMENT AGREEMENT ARTICLE II Representations and Warranties Section 2.1. General Representations. The Parties to this Agreement acknowledge and understand that the purpose of this Agreement is to provide for the development of the Public Housing Units within the Development in accordance with the terms hereof and the ACC Amendment and all federal and state laws and regulations. Section 2.2. Representations and Warranties of the MPHA~ The MPHA represents and warrants the following: (a) The MPHA is a public body corporate and politic duly organized and existing under the laws of the State. (b) The MPHA is a party to the ACC Amendment which grants HUD funding to the MPHA for the development and operation of Public Housing Units in Mixed Finance Developments. (c) The MPHA shall provide Public Assistance to the Owner in accordance with the provisions of this Agreement and the ACC Amendment. (d) This Agreement constitutes a valid and binding obligation upon the MPHA and is enforceable according to its terms. Section 2.3. Representations and Warranties of the EDA. The EDA represents and warrants the following: (a) The EDA is a public body corporate and politic duly organized and existing under the laws of the State. (b) This Agreement constitutes a valid and binding obligation upon the EDA and is enforceable according to its terms. Section 2.4. Representations and Warranties by the Owner. The Owner represents and warrants the following: (a) The Owner is a Minnesota limited liability company duly organized and in good standing under the laws of the State, is not in violation of any provisions of its Articles of Organization or Member Control Agreement or, to the best of its knowledge, the laws of the State or federal government, and has all necessary power and authority to enter into this Agreement and to carry out its obligations hereunder. C:\WINDOWS\TEMP\IODEVAGRi.DOC 5 HOUSING DEVELOPMENT AGREEMENT (b) (c) (d) (e) (0 (g) (h) (i) The Owner will construct, or cause to be constructed, the Development in accordance with the terms of this Agreement and all local, State and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations), as contemplated in Construction Plans approved by the Authorities. The Owner has received no notice or communication fi.om any local, State or federal official that the activities of the Owner, the MPHA, or the EDA with respect to the Development may be or will be in violation of any environmental law or regulation. The Owner is aware of no facts the existence of which would cause it to be in violation of any local, state or federal environmental law, regulation or review procedure or which would give any person a valid claim under the Minnesota Environmental Policy Act or the Minnesota Environmental Rights Act with respect to the Development Site. The Owner will use all reasonable efforts to obtain, in a timely manner, all required permits, licenses and approvals, and meet in a timely manner, all requirements of all applicable local, state and federal laws and regulations which must be obtained or met before the Development and the Public Housing Units may be lawfully constructed. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a material breach of, the terms, conditions or provisions of any restriction or any evidences of indebtedness, agreement or instrument of whatever nature to which the Owner is now a party or by which it is bound, or constitutes a default under any of the foregoing. The Owner will cooperate with the Authorities with respect to any litigation commenced with respect to this Agreement or the Development. The Owner has full authority and financial capacity to execute and perform this Agreement to completion. The Owner will comply with the requirements set forth in the ACC Amendment as they relate to the development of the Public Housing Units and the eligibility and payment of Public Assistance to the Owner in connection therewith. The Development constitutes a permitted use under the zoning ordinances of the City. C:\WINDOWS\TEMP\I 0DEVAGRI.DOC 6 HOUSING DEVELOPMENT AGREEMENT (J) (k) (1) Upon execution of this Agreement, the Owner will execute the Restrictive Covenant and the Regulatory Agreement. In the event that there occurs an Event of Default by the Owner under the terms of this Agreement and the MPHA and~'or the EDA incurs legal fees or other costs or expenses in connection with the enforcement of any term or provision of this Agreement or the recovery of any damages as a result of the Event of Default, the Owner agrees that it will, upon demand by the MPHA and/or the EDA, pay the amount of such costs and expenses, including reasonable attorneys' fees. The Owner possesses or will possess fee simple title to the Development Site, free and clear of any encumbrances except for the encumbrances set forth in Section 9.1 hereof. C:\WINDOWS\TEMP\IODEVAGRi.EK)C 7 HOUSING DEVELOPMENT AGREEMENT ARTICLE III The Development Section 3.1. Description. The Development consists of an 11-unit multifamily, rental, housing project for families to be constructed upon the Development Site located on Bass Lake Road in the City of New Hope, Minnesota. Section 3.2. Construction. The Owner agrees that it will construct, or cause to be constructed, the Development on the Development Site in accordance with the approved Construction Plans and at all times prior to the termination of the ACC Amendment will operate and maintain, preserve and keep the Development or cause the Development to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition. Section 3.3. Construction Plans. (a) The Development and all of the units therein shall comply with the design and construction standards for public housing units set forth in 24 CFR 941.203. (b) The Owner shall submit Construction Plans to the Authorities for the proposed Development within thirty (30) days of the Agreement Date. The Construction Plans shall provide for the construction of the Development and shall be in conformity with this Agreement and all applicable State and local laws and regulations. The Authorities shall approve the Construction Plans in writing if, in the reasonable discretion of the Authorities: (i) the Construction Plans conform to the terms and conditions of this Agreement; (ii) the Construction Plans conform to all applicable federal, State and local law, ordinances, rules and regulations, (iii) the Construction Plans are adequate to provide for the construction of the Development and (iv) the Construction Plans shall comply with Section 3.3 hereof. Such Construction Plans shall, in any event, be deemed approved unless rejected in writing by the Authorities, in whole or in part, within twenty (20) days after their receipt by the Authorities. Any rejection shall set forth in detail the reasons therefor, and shall be made within twenty (20) days after the receipt of the Construction Plans by the Authorities. If the Authorities reject the Construction Plans in whole or in part, the Owner may submit new or corrected Construction Plans within thirty (30) days after written notification to the Owner of the rejection. The provisions of this Section relating to approval, rejection and resubmission of corrected Construction Plans shall continue to apply until the Construction Plans have been approved by the Authorities or until this Agreement has been terminated pursuant to the terms hereof. Approval by the Authorities shall not be unreasonably withheld. Said approval shall constitute a conclusive determination that the Construction Plans (and the Development, if constructed in C:\WINDOWS\TEMP\I 0DEVAGRI.DOC 8 HOUSING DEVELOPMENT AGREEMENT accordance with said plans) comply with the provisions of this Agreement relating thereto. (c) The Owner shall submit to the Authorities for their approval any substantial changes of single items over $5,000 in the Construction Plans. The Authorities shall approve changes in the Construction Plans in writing if, in the reasonable discretion of the Authorities: (a) the changed Construction Plans confom~ to the terms and conditions of this Agreement; (b) the changed Construction Plans conform to all applicable federal, State and local law, ordinances, rules and regulations; (c) the changed Construction Plans are adequate to provide for the construction of the Development; (d) the changed Construction Plans comply' with Section 3.3. hereof, (e) the changed Construction Plans do not provide for expenditures in excess of the funds available to the Owner for the construction of the Development; and (f) no Event of Default has occurred. No approval by the Authorities of changes to the Construction Plans shall relieve the Owner of the obligation to comply with the terms of this Agreement, applicable federal, state and local laws, ordinances, rules and regulations, or to construct the Development. Such changed Construction Plans shall, in any event, be deemed approved unless rejected in writing by the Authorities, in whole or in part within ten (10) days of receipt. Any rejection shall set forth in detail the reasons therefore. Approval by the Authorities shall not be unreasonably withheld. Said approval shall constitute a conclusive determination that the changed Construction Plans (and the Development, if constructed in accordance with said plans) comply with the provisions of this Agreement relating thereto. Section 3.4. Commencement and Completion of Construction. (a) Subject to Unavoidable Delays, the Owner shall complete the construction of the Development on or before December 31, 2003. All work with respect to the Development to be constructed or provided by the Owner on the Development Site shall be in conformity with the Construction Plans as submitted by the Owner and approved by the Authorities. During the construction of the Development, the Owner shall make available to the Authorities such inspection opportunities and project information, including cost certifications, as they may from time to time request. (b) The Owner agrees for itselfi its successors and assigns, and every successor in interest to the Development Site, or any part thereof, that the Owner, and such successors and assigns, shall promptly begin and diligently prosecute to completion the development of the Development Site through the construction of the Development thereon, and that such construction shall in any event be commenced and completed within the period specified in this Section 3.4, subject to Unavoidable Delays. Until construction of the Development has been completed, the Owner shall make reports, in such detail and at such times as may C:\WINDOWS\TEMP\IODEVAGRi.DOC 9 HOUSING DEVELOPMENT AGREEMENT reasonably be requested by the Authorities as to the actual progress of the Owner with respect to such construction. (c) The Owner agrees to notify the MPHA in writing (a) when the Public Housing Units become substantially complete and available for occupancy, and (b) when 95% of the Public Housing Units first become occupied. For purposes of this subclause "substantially complete" shall mean upon the later of (a) the issuance of the Certificate of Completion by the Authorities, or (b) the issuance of a certificate of occupancy by the City. During the lOP, operating expenses for the Public Housing Units will be paid by the MPHA from the Initial Operating Deficit Account to the extent contained as a line item of the Development Cost Budget. The Owner will submit all rental income from the Public Housing Units to the MPHA for deposit into the Initial Operating Deficit Account. Section 3.5. Certificate of Completion. (a) It is the intention of the Authorities to rely upon the inspections, punch lists, cost certifications and other lender directives of the Mortgagee throughout the construction and rehabilitation phase. The Owner shall forward to the Authorities, or cause the Mortgagee to forward to the Authorities, copies of all written communications to the Owner regarding these matters. Promptly after substantial completion of the Development in accordance with those provisions of the Agreement relating solely to the obligations of the Owner to construct the Development (including the dates for beginning and completion thereof), the Authorities will furnish the Owner with a Certificate of Completion in the form attached hereto as Exhibit C so certifying. Such certification by the Authorities shall be a conclusive determination of satisfaction and termination of the agreements and covenants in the Agreement with respect to the obligations of the Owner, and its successors and assigns, to construct the Development and the dates for the beginning and completion thereof. Such certification and such determination shall not constitute evidence of compliance with ongoing obligations under this Agreement or satisfaction of any obligation of the Owner to any Holder of a Mortgage, or any insurer of a Mortgage, securing money loaned to finance the Development, or any part thereof. (b) If the Authorities shall refuse or fail to provide any certification in accordance with the provisions of this Section 3.5, the Authorities shall, within thirty (30) days at, er written request by the Owner, provide the Owner with a written statement, indicating in adequate detail in what respects the Owner has failed to complete the Development in accordance with the provisions of the Agreement, or is otherwise in default, and what measures or acts will be necessary, in the opinion of the Authorities, for the Owner to take or perform in order to obtain such certification. C:\WlNDOWS\TEMP\i 0DEVAGRI.DOC l 0 HOUSING DEVELOPMENT AGREEMENT ARTICLE IV The Public Housing Units Section 4.1. Described. Upon completion of the Development, and for the term of the ACC, the Owner shall set aside four (4) Public Housing Units within the Development for the term of the ACC Amendment. All four (4) Public Housing Units will be two-bedroom units. Section 4.2. Interchangeable Units. Any unit within the Development shall be eligible to constitute a Public Housing Unit at any given time, at the Owner's discretion, provided: (a) The Public Housing Units to be reserved within the Development shall consist of four (4) two-bedroom units; (b) The Public Housing Units shall be comparable to the non-Public Housing Units with respect to size, location, internal and external appearance and amenities; and (c) The two-bedroom units being utilized as the Public Housing Units shall float throughout the Development. C:\WINDOWS\TEMPXl 0DEVAGRI.DOC 1 1 HOUSING DEVELOPMENT AGREEMENT ARTICLE V Public Assistance Section 5.1. Funds Description. The funds payable to the Owner with respect to the development and operation of the four (4) Public Housing Units consists of the following components: (a) The lesser of (i) the Certified Costs or (ii) $469,000; (b) Operating subsidy in accordance with the Regulatory Agreement. Section 5.2. Development Funds. (a) Payment. The Development Funds described in Section 5.1 (a) of this Agreement shall be disbursed pursuant to the following terms: (i) The MPHA shall pay the amount set forth in Section 5.1(a) to the Owner during Construction pursuant to a Disbursement Agreement to be entered into at Closing, to which the MPHA, EDA and Owner are parties. (ii) The Owner shall deposit in the "Operating Subsidy Reserve" provided for in Article V of the Regulatory Agreement, an amount equal to three (3) years' estimated Operating Subsidy, which shall be payable in accordance therewith. (iii) The Development Funds paid to the Owner pursuant to this Article V shall be used only for eligible costs actually incurred by the Owner with respect to the Public Housing Units as provided in the ACC Amendment. (iv) The MPHA shall segregate and maintain an Initial Operating Deficit Account to be funded from the Development Budget and utilized during the Initial Operating Period for the payment of Public Housing Unit operating expenses. (b) Payment Conditions. Payment of Development Funds as provided in this Article V is conditioned upon each of the following: (i) The approval by HUD of all evidentiary materials required to be provided under the ACC Amendment, including this Agreement. C:\WINDOWS\TEMP\IODEVAGRI.DOC 12 HOUSING DEVELOPMENT AGREEMENT (ii) The satisfaction of all conditions precedent to the MPHA's authority to draw down the Public Assistance from HUD, as provided in the ACC Amendment. (iii) The Owner's compliance with the terms and conditions of this A~eement, including the regulatory requirements set forth in Article VI. No payment of Public Assistance shall be required if there exists an Event of Default. (iv) The written approval by HUD of the MPHA's proposal for the development and operation of the Public Housing Units provided for in this Agreement. (v) For final payment, the issuance of Certificate of Completion by the Authorities pursuant to Section 3.5. Section 5.3. Operating Subsidy. Simultaneously with the execution of this Agreement, the parties hereto have entered into the Regulatory Agreement. The MPHA shall pay to the Owner the Operating Subsidy in accordance with the Regulatory Agreement. Section 5.4. Payments in Lieu of Taxes. Minnesota Statutes, § 469.040 provides for the exemption of the Public Housing Units from property taxation and that payments in lieu of taxes in the amount of five percent (5%) of "shelter rents," as defined therein, be paid as though property taxes. Owner shall make the appropriate calculations and shall remit such payments in lieu of taxes at such times and in such manner as though such payments were property taxes, except the obligation to do so shall be a direct and personal obligation of the Owner. A copy of each payment shall be mailed to the Authorities. Failure by the Owner to timely remit such payments or notify the Authorities thereof shall constitute a default hereunder. Section 5.5..Payment Limitations. (a) The payment of Public Assistance to the Owner shall not be deemed to be an assignment of the grant funds paid by HUD to the MPHA, and the Owner shall not succeed to any rights or benefits of the MPHA under the ACC Amendment or the ACC, or attain any privileges, authority, interests, or rights under the ACC Amendment or the ACC. (b) Nothing contained in the ACC Amendment, the ACC, or in any agreement or contract between the Parties, nor any act of HUD or the Parties, shall be deemed or construed to create any relationship of third-party beneficiary, principal and agent, limited or general partnership, joint venture, or any association or relationship involving HUD, except between HUD and the MPHA as provided under the ACC Amendment and the ACC. C:\WINDOWS~TEMP\IODEVAGRi.DOC 13 HOUSING DEVELOPMENT AGREEMENT ARTICLE VI Additional Regulatory Requirements Section 6.1. Additional Regulatory Requirements. The Development shall be subject to and the Owner shall comply with the following regulatory, requirements and shall provide evidence of such compliance as deemed necessary by the MPHA: (a) The labor and wage requirements set forth in the Davis-Bacon Act, 40 U.S.C. 276a et seq. The Owner shall provide such records and information as reasonably requested by the MPHA in order to confirm Owner's compliance with this clause. Attached as Exhibit E is the Davis-Bacon Wage Rate decision issued as of execution of this Agreement. (b) All Federal statutory, regulatory, and executive order requirements applicable to public housing and the activities undertaken by the Owner under this Agreement pertaining to civil rights, equal opportunity, and nondiscrimination, as those requirements now exist, or as they may be enacted, promulgated, or amended from time to time. Such requirements include, but are not limited to, the following: (i) The Fair Housing Act, 42 U.S.C. 3601-19, and regulations issued thereunder, 24 CFR Part 100; Executive Order 11063 (Equal Opportunity in Housing) and regulations issued thereunder, 24 CFR Part 107; the fair housing poster regulations, 24 CFR Part 110, and advertising guidelines, 24 CFR Part 109. (ii) Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d, and regulations issued thereunder relating to nondiscrimination in housing, 24 CFR Part 1. (iii) Age Discrimination Act of 1975, 42 U.S.C. 6101-07, and regulations issued thereunder, 24 CFR Part 146. (iv) Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794, and regulations issued thereunder, 24 Part 8; the Americans with Disabilities Act, 42 U.S.C. 12181-89, and regulations issued thereunder, 28 CFR Part 36; and the elderly and handicapped requirements of Section 209 of the Housing and Community Development Act of 1974. (v) Section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. 1701u, and its implementing regulations at 24 CFR Part 135. C:\WINDOWS\TEMP\IODEVAGR1.DOC 14 HOUSING DEVELOPMENT AGREEMENT (c) In the event that any other federal, state, or local government assistance is received, or can reasonably be expected to be received, by the Owner with respect to the Public Housing Units within the Development in addition to the Public Assistance under this Agreement, the Owner shall comply with the requirements of Section 102 of the Housing and Urban Development Reform Act of 1989. (d) The Uniform Relocation and Property Acquisitions Act in the event there are an3.' "displaced persons," as that term is defined therein, as a result of the Development. (e) 24 CFR §§ 941.202, 941.203, 941.205, 941.207, 941.208, 941.209, 941.306, 941.402, 941.404, and 941.501. C:\WINDOWS\TEMP\I 0DEVAGRI .DOC 15 HOUSING DEVELOPMENT AGREEMENT ARTICLE VII Mort£aee Financing Section 7.1. Mortgage Financing and/or Equity. (a) Prior to commencement of construction of the Development, the Owner shall provide to the Executive Directors of the Authorities evidence of one or more commitments for mortgage financing or equity, or both, which is sufficient for the construction of the Development. Such commitments may be provided as short term financing, long term mortgage financing, a bridge loan with a long term take- out financing commitment, or any combination of the foregoing. Such commitment or commitments for short term or long term mortgage financing shall be subject only to such conditions as are normal and customary in the mortgage banking industry. The Executive Directors of the Authorities, together with such legal and financial advisors to the Authorities as the Executive Directors shall choose, shall review such information as is submitted pursuant to Section 7.1(a). If the Executive Directors of the Authorities find that the financing and/or equity is sufficiently committed and adequate in amount to provide for the construction of the Development, then the Authorities shall notify the Owner in writing of its approval. Such approval shall not be unreasonably withheld and either approval or rejection shall be given within fifteen (15) days from the date when the Authorities are provided the evidence thereof. A failure by the Authorities to respond to such evidence of financing shall be deemed to constitute an approval hereunder. If the Authorities reject the evidence of financing as inadequate, they shall do so in writing specifying the basis for the rejection. In any event, the Owner shall provide adequate evidence of financing prior to commencement of construction of the Development. Section 7.2. Authorities' Option to Cure Default on Mortgage. In the event that there occurs a default under any Mortgage, the Owner shall cause the Authorities to receive copies of any notice of default received by the Owner from the holder of such Mortgage. Thereafter, the MPHA or the EDA shall have the right, but not the obligation, to cure any such default on behalf of the Owner within such cure periods as are available to the Owner under the Mortgage documents. C:\WINDOWS\TEMP\IODEVAGR1.DOC 16 HOUSING DEVELOPMENT AGREEMENT ARTICLE VIII lllSUl'aH~P Section 8.1. Insurance. The Owner shall agree to provide and maintain at all times from the date of its possession of property which comprises the Development Site and thereafter throughout the period of this Agreement the insurance coverages set forth in this section, and to otherwise comply with the provisions that follow. (a) Builders' Risk. Builders' Risk Insurance, written on a Completed Value coverage form (non-reporting), in an amount equal to one hundred percent (100%) of the insurable value of the Development at the date of completion. Such coverage shall become effective concurrent with the beginning of the process of construction, and shall continue until replaced by the permanent all risk Property Insurance described below. Coverage shall be provided on an "all risk" basis. (b) Workers' Compensation. Workers' Compensation insurance in compliance with all applicable statutes. Such policy shall include Employer's Liability coverage in at least such amount(s) as are customarily provided in workers' compensation policies issued in Minnesota. The Owner shall further agree to require all contractors and subcontractors involved in the project to maintain Workers' Compensation insurance in compliance with all applicable statutes, and to monitor (by requirements for and review of Certificates of Insurance or by other reasonable means) the compliance of such contractors and subcontractors with such Workers' Compensation insurance requirements. (c) General Liabili_ty. Occurrence-Based Commemial General Liability insurance, providing coverage on an "occurrence", rather than on a "claims made" basis, which policy shall include coverage for the Completed Operations Hazard, and which shall also include a Broad Form General Liability Endorsement GL 0404 (Insurance Services Office form designation), or an equivalent form (or forms), so long as such equivalent form (or forms) affords coverage which is in all material respects at least as broad. The Owner shall agree to maintain total liability policy limits of at least $1,000,000, applying to liability for Bodily Injury, Personal Injury, and Property Damage, which total limits may be satisfied by the limits afforded under its Occurrence-Based Commercial General Liability Policy (which Policy is to include the Broad Form Endorsement coverage specified above), or by such Policy in combination with the limits afforded by an Umbrella Liability Policy (or policies); provided, however, that the coverage afforded under any such Umbrella Liability Policy shall be at least as broad as that afforded by the underlying Occurrence-Based Commercial General Liability Policy (including Broad Form coverage). C:\WINDOWSXTEMP\IODEVAGRi.DOC 17 HOUSING DEVELOPMENT AGREEMENT Such Occurrence-Based Commercial General Liability Policy and Umbrella Liability Policy (or policies) may provide aggregate limits for some or all of the coverages afforded thereunder, so long as such aggregate limits have not, as of the date of the Owner's possession of the Development Site, been reduced to less than the total required limits stated above, and further, that the Umbrella Liability Policy provides coverage from the point that such aggregate limits in the underlying Occurrence-Based Commercial General Liability Policy become reduced or exhausted. An Umbrella Policy which "drops down" to respond immediately over reduced underlying limits, or in place of exhausted underlying limits, but subject to a deductible amount, shall be acceptable in this regard so long as such deductible amount does not cause the Owner's total deductible for each occurrence to exceed the amount shown in the provision immediately below. The Owner's liability insurance coverage may be subject to a deductible (or "retention" or similar provision) requiring the Owner to remain responsible for a stated amount of each covered loss. (d) Property Insurance. All risk property insurance in an amount not less than the full insurable replacement value of the Development. The term "full insurable · replacement value" shall mean the actual replacement cost of the Development (excluding foundation and excavation costs and costs of underground flues, pipes, drains, and other items customarily omitted from replacement cost valuation for insurance purposes), without deduction for depreciation. Net Proceeds of insurance shall be paid as required by the Mortgage and related documents. Section 8.2. Damage or Destruction. (a) In the event of damage to the Development which permanently diminishes the total number of residential units: (i) thirty-six percent (36%) of the remaining units, in as near as practicable the same bedroom mix as the original Development, shall constitute Public Housing Units; and (ii) thirty-six percent (36%) of the Net Proceeds payable to the Owner shall be paid to the MPHA for the purpose of constructing or acquiring replacement Public Housing Units. (b) In the event of partial or total destruction of the Development and the application of Net Proceeds to the reconstruction thereof, the ratio of Public Housing Units to other units, including bedroom mix, shall be the same in the reconstructed development as in the original development. C:\WINDOWS\TEMP\I 0DEVAGRI .DOC 18 HOUSING DEVELOPMENT AGREEMENT (c) In the event of total destruction and the application of Net Proceeds to the Mortgage rather than to reconstruction, thirty-six percent (36%) of the Net Proceeds shall be paid to the MPHA for the purpose of constructing or acquiring replacement Public Housing Units. C:\WINDOWS\TEMP\IODEVAGR1.DOC 19 HOUSING DEVELOPMENT AGREEMENT ARTICLE IX Encumbrances; Sale; Indemnification Section 9.1. Encumbrances. The Public Housing Units shall not be encumbered, except for (a) the Mortgage, (b) the Declaration of Restrictive Covenants, (c) such security interests as shall be required by the EDA, the County, County HRA and the MPHA, as a part of anv loan or grant to the Development, and (d) such title matters as are set forth in the title insurance commitment attached hereto as Exhibit D. Section 9.2. Sale. There shall be no disposition of the Public Housing Units during and for a period of ten (10) years after the end of the period in which the Public Housing Units receive operating subsidy under the Regulatory Agreement. Section 9.3. Indemnification. (a) The Owner shall release from and covenants and agrees that the Authorities and the governing body members, officers, agents, servants and employees thereof shall not be liable for and agrees to defend, indemnify and hold harmless the Authorities, and the governing body members, officers, agents, servants and employees thereof against any loss or damage to property or any damages, injury to, or death of any person occurring at or about or resulting from the acquisition of, and from any defect in the construction and operation of the Development, provided, however, that this release and indemnification shall not apply to an entity or individual named in this paragraph if the loss, damage, injury or death was caused by such entity or individual. (b) Except for any misrepresentation or breach of any covenant hereunder or any willful or wanton misconduct or negligence of the following named parties, the Owner agrees to protect and defend the Authorities and the governing body members, officers, agents, servants and employees thereof, now or forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, and operation of the Development. (c) The Authorities and the governing body members, officers, agents, servants and employees thereof shall not be liable for any damage or injury to the persons or property of the Owner or its officers, agents, servants or employees or any other person who may be on or about the Development, due to any act of negligence of any person or entity other than the Authorities and the governing body members, officers, agents, servants and employees thereof. C:\WINDOWS\TEMP\IODEVAGR1.DOC 20 HOUSING DEVELOPMENT AGREEMENT (d) All covenants, stipulations, promises, agreements and obligations of the Authorities contained herein shall be deemed to be the covenants, stipulations. promises, agreements and obligations of the Authorities and not of any governing body member, officer, agent, servant or employee of the Authorities in the individual capacity thereof. (e) As a condition of the indemnification covenant, the Owner shall have the right to defend any claim or suit for any loss or damage to property or any damages, injury to, or death of any person occurring at or about or resulting from the acquisition of, from any defect in the construction and operation of the Development. provided, however, that this right to defend shall not apply to an entity or individual named in Section 9.3(a), if the loss, damage, injury or death was caused by such entity or individual. C:\WINDOWS\TEMP\I ODEVAGRI.DOC 2 ] HOUSING DEVELOPMENT AGREEMENT ARTICLE X Events of Default Section 10.1. Event of Default Defined. Event of Default shall mean any failure by an3' party to this Agreement to observe or perform any covenant, condition, obligation or agreement to be observed or performed on its part under this Agreement or according to any governing laxv, regulation, or other agreement referenced herein. Section 10.2. Remedies Upon Default. (a) Upon the occurrence of an Event of Default, the non-defaulting party shall notify the defaulting party of: (i) the nature of the default; (ii) the actions required to cure the default; and (iii) the time within which the defaulting party shall respond with a showing that all required actions to cure the default have been taken. (b) If the defaulting party fails to respond or take corrective action to the satisfaction of the non-defaulting party within thirty (30) days of receipt of such notice, the non-defaulting party shall have the right to exercise any remedy available to it by reason of the default, if any, including legal and equitable remedies available in any court having proper jurisdiction. The MPHA and EDA shall have the right to exercise any remedies available under the ACC Amendment and/or the ACC. Section 10.3. No Remedy Exclusive. No remedy conferred in this Article X is intended to be exclusive of any other available remedy or remedies. Each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or hereafter existing at law or in equity. No delay or omission to exercise any remedy accruing upon any default shall impair any such remedy or be construed to be a waiver thereof. Any such remedy may be exercised fi.om time to time and as often as may be deemed expedient. Section 10.4. No Additional Waiver Implied by One Waiver. In the event any default under this Agreement shall be waived by the non-defaulting party, such waiver shall be limited to the particular default so waived and shall not be deemed to waive any other concurrent, previous, or subsequent default. C:\WINDOWS\TEMP\I 0DEVAGRI.DOC 22 HOUSING DEVELOPMENT AGREEMENT ARTICLE XI Additional Provisions Section 11.1. Duration of A~'eement. This Agreement shall continue in full force and effect for the entire term of the ACC Amendment or for such shorter period as may be a~eed to by the Parties in writing and consented to by HUD. Section 11.2. Assignment and Release. (a) This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Parties, provided, the Owner may not sell or assign its rights or obligations under this Agreement without the prior written consent of the MPHA, the EDA and HUD. Such consent shall not be unreasonably withheld. (b) In the event that HUD agrees to enter into an annual contributions contract directly with the EDA, which said contract includes Development Funds and/or Operating Subsidy for the Public Housing Units, simultaneously with the execution of said contract the MPHA shall be forever released from all responsibilities' and obligations contained in this Agreement, without further action of the parties hereto, and this Agreement shall exist solely as an agreement between the Owner and the EDA. Section 11.3. Recording of Agreement. This Agreement and/or any other document containing the ongoing obligations of the parties described herein may be recorded by the MPHA with the County Recorder and/or Registrar of Titles for the County of Hennepin. The Parties understand and acknowledge that terms and conditions of this Agreement, or such other document containing the ongoing obligations of the parties described herein, including the requirements with respect to Public Housing Units, shall run with the land for the entire term of this Agreement as set forth in Section 11.1. Section 11.4. Amendment. This Agreement may be modified or amended only by a written instrument signed on behalf of each of the Parties. Section 11.5. Authorities. Each of the Parties warrants that it has full authority to execute this Agreement, and each individual signing this Agreement on behalf of the Parties warrants that he/she has full authority to sign on behalf of the party he/she represents and binds such party by such signature. Section 11.6. Conflict of Interests; MPHA and EDA Representatives Not Individually Liable. No member, official, or employee of the MPHA or the EDA shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official, or employee participate in any decision relating to this Agreement which affects his/her personal interests or C:\WINDOWS\TEMP\IODEVAGRi.DOC 23 HOUSING DEVELOPMENT AGREEMENT the interests of any corporation, partnership, or association in which he/she is, directly or indirectly, interested. No member, official, or employee of the MPHA or the EDA shall be personally liable to the Owner, or any successor in interest, in the event of any default or breach by the MPHA or the EDA or for any amount which may become due to the Owner or successor or on any obligations under the terms of this Agreement. Section 11.7. No Merger. None of the provisions of this Agreement are intended to or shall be merged by reason of any deed transferring any interest in the Development Site and any such deed shall not be deemed to affect or impair the provisions and covenants of this Agreement. Section 11.8. Notices and Demands. Except as otherwise expressly provided in this Agreement, any notice, demand, or other communication under this Agreement between the Parties shall be deemed given if: (i) delivered personally or by courier; (ii) telecopied with proof of transmission; or (iii) sent by overnight express delivery or registered or certified mail, postage prepaid, return receipt requested to the party at the following respective address (or at such other address with respect to each party as that party may, from time to time, designate in writing and forward to the other parties as provided in this Section): To the MPHA: Minneapolis Public Housing Authority in and for the City of Minneapolis 1001 North Washington Avenue Minneapolis, Minnesota 55401 Attention: Executive Director To the EDA: Economic Development Authority in and for the City of New Hope 4401 Xylon Avenue North New Hope, MN 55428-4898 Attention: Executive Director To the Owner: Bass Lake Apartments LLC 1925 Chicago Avenue South Minneapolis, Minnesota 55404 Attention: Project for Pride in Living, Inc. Barbara McCormick, Vice President All such notices and other communications shall be deemed to be received on the date of receipt thereof by the party to which such notice or communication is directed. Section 11.9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. C:XWINDOWS\TEMP\IODEVAGRi.DOC 24. HOUSING DEVELOPMENT AGREEMENT Section 11.10. Law Governing. This Agreement will be governed and construed in accordance with the laws of the State of Minnesota. Section 11.11. Severabilitv. If any provision of this Agreement is declared void or otherwise unenforceable, that provision shall be deemed to have been severed from this Agreement and the remainder of this Agreement shall otherwise remain in full force and effect. C:\WINDOWSXTEMP\iODEVAGRi.DOC 25 HOUSING DEVELOPMENT AGREEMENT IN WITNESS WHEREOF, the parties have executed this A~eement as of the date first written above. MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS By Comell L. Moore Its Chairman And by. Cora McCorvey Its Executive Director STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) On this ~ day of April, 2003, before me, a notary public, personally appeared Comell L. Moore and Cora McCorvey, the Chairman and Executive Director, respectively, of the Minneapolis Public Housing Authority in and for the City of Minneapolis, a public body corporate and politic under the laws of the State of Minnesota (the "MPHA"), named in the foregoing instrument and acknowledged said instrument on behalf of the MPHA. Notary Public C:\WINDOWS\TEMP\IODEVAGRI.DOC HOUSING DEVELOPMENT AGREEMENT ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By Its And by. Its STATE OF MINNESOTA ) ) ss COUNTY OF ) The foregoing instrument was acknowledged before me this ~ day of , 2003, by and , the and , respectively, of the Economic Development Authority in and for the City of New Hope, a public body corporate and politic under the laws of the State of Minnesota, on behalf of such public body. Notary Public C:\WINDOWS~TEMP\I 0DEVAGR I.DOC HOUSING DEVELOPMENT AGREEMENT BASS LAKE APARTMENTS LLC BY: PROJECT FOR PRIDE IN LIVING, INC. ITS SOLE MEMBER By. Barbara McCormick Its Vice President STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) On this day of ,2003, before me, a notary public, personally appeared Barbara McCormick, the Vice President of Project for Pride in Living, Inc., the sole member of Bass Lake Apartments LLC, a Minnesota limited liability company, named in the foregoing instrument and acknowledged said instrument on behalf of the company. Notary Public C:\WINDOWS\TEMP\IODEVAGRi.DOC HOUSING DEVELOPMENT AGREEMENT EXHIBIT A Legal Description The East 1/3 of Lot 35, lying South of the North 1138.67 feet thereof, excepting the West 30 feet and the South 33 feet thereof, Auditor's Subdivision 226, Hennepin County, Minnesota. C:\WINDOWS\TEMP\I 0DEVAGRI .DOC A- 1 HOUSING DEVELOPMENT AGREEMENT EXHIBIT B Declaration of Restrictive Covenants [To be supplied by the Department of Housing and Urban Development] C:\WINDOWSXTEMP\I 0DEVAGRI.DOC B- I HOUSING DEVELOPMENT AGREEMENT EXHIBIT C Certificate of Completion The undersigned hereby certifies that Bass Lake Apartments LLC, a Minnesota limited liability company (the "Owner") has fully and completely complied with its obligations under Article I~ of Housing Development Agreement by, between and among the Minneapolis Public Housing Authority in and for the City of Minneapolis, the Economic Development Authoritv in and for the City of New Hope and the Owner dated , 2003 with respect to construction of the "Development" (located on the real property legally described in Attachment A hereto) in accordance with the "Construction Plans" as such terms are defined therein, and the Owner is released and forever discharged from its obligations under the above-referenced Article III. MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS By Its Chairman By Its Executive Director STATE OF MINNESOTA ) ) ss COUNTY OF .) On this ~ day of ,20. , before me, a notary public, personally appeared and Cora McCorvey, the Chairman and Executive Director, respectively, of the Minneapolis Public Housing Authority in and for the City of Minneapolis, a public body corporate and politic under the laws of the State of Minnesota (the "MPHA"), named in the foregoing instrument and acknowledged said instrument on behalf of the MPHA. Notary Public C:\WINDOWS\TEMP\IODEVAGR1.DOC C-1 HOUSING DEVELOPMENT AGREEMENT ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By. Its And by. Its STATE OF MINNESOTA ) ) ss COUNTY OF ) The foregoing instrument was acknowledged before me this ~ day of , 20 , by and , the and , respectively, of the Economic Development Authority in and for the City of New Hope, a public body corporate and politic under the laws of the State of Minnesota, on behalf of such public body. Notary Public C:\WINDOWS\TEMP\I 0DEVAGR.DOC C-2 HOUSING DEVELOPMENT AGREEMENT ATTACHMENT A Legal Description The East 1/3 of Lot 35, lying South of the North 1138.67 feet thereof, excepting the West 30 feet and the South 33 feet thereof, Auditor's Subdivision 226, Hennepin County, Minnesota. C:\WINDOWS\TEMP\10DEVAGR.DOC C-3 HOUSING DEVELOPMENT AGREEMENT EXHIBIT D Title Insurance Commitment C:\WINDOWS\TEMP\I 0DEVAGR.DOC D- 1 HOUSING DEVELOPMENT AGREEMENT EXItIBIT E Davis-Bacon Wa~oe Rate C:\WINDOWS\TEMP\IODEVAGR. DOC E- 1 HOUSING DEVELOPMENT AGREEMENT EXECUTION COPY 04/23/2003 REGULATORY AND OPERATING AGREEMENT BY, BETWEEN AND AMONG THE MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS, THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE AND BASS LAKE APARTMENTS LLC Dated: ,2003 This document drafted by: HOLMES & ASSOCIATES, LTD. Two Carlson Parkway, Suite 155 Minneapolis, MN 55447 612-249-0888 (Telephone) 612-249-0777 (Facsimile) C:\WINDOWS\TEMI~,I I REGOPRAG.DOC REGULATORY AND OPERATING AGREEMENT TABLE OF CONTENTS REGULATORY AND OPERATING AGREEMENT Page PREAMBLE Section 1.1 Section 2.1. Section 2.2. Section 2.3. Section 2.4. Section 3.1. Section 3.2. Section 3.3. Section 3.4. Section 3.5. Section 3.6. Section 3.7. Section 4.1. Section 4.2. Section 4.3. Section 4.4. Section 4.5. Section 4.6. Section 4.7. Section 4.8. Section 4.9 Section 4.10. Section 4.11. Section 5.1. Section 5.2. Section 5.3. ARTICLE I Definitions Definitions ...................................... -~ ARTICLE II Authority Units Owner Commitment ................................................................................................. 4 Authority Units Described ....................................................................................... 4 Casualty and Condemnation .................................................................................... 4 Excess Insurance Proceeds ....................................................................................... 4 ARTICLE 1II Operation of Authority Units Legal Compliance .................................................................................................... 6 Administrative Flexibility ........................................................................................ 6 Management ............................................................................................................. 6 Waiting Lists ............................................................................................................ 7 Managing Agent Responsibilities ............................................................................ 7 Lease Forms ........................................... ,~ Grievance Procedures ............................ iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii~ ARTICLE IV Development Operating Subsidy Further Definitions ................................................................................................... 9 Operating Budget Submittals ................................................................................. 10 Payment of Operating Subsidy ............................................................................... 11 Development Operating Subsidy Cap .................................................................... 11 Segregated Account ............................................................................................... 12 Monthly Operating Reports ................................................................................... 13 Audited Financials and Supplemental Data ........................................................... 13 Post-Year Adjustments .......................................................................................... 13 Vacancy Adjustment .............................................................................................. 14 Incidental Development Income ............................................................................ 14 Future Legislation .................................................................................................. 14 ARTICLE V Development Operating Subsidy Reserve Establishment of Reserve and Accounts ................................................................ 15 Investments,~,i". ....................................................................................................... 15 Floor Level djustments ........................................................................................ 15 C:\WINDOWSXTEMP\i 1 RJ~GOPRAG.DOC i REGULATORY AND OPERATING AGREEMENT Section 5.4. Section 5.5. Section 5.6 Voluntary Replenishment of Reserve .................................................................... 15 Owner Surplus Cash Contribution ......................................................................... 16 Utilization of Reserve ............................................................................................ 16 ARTICLE VI Owner Remedies Section 6.1. Section 6.2. Section 6.3. Section 6.4. Section 6.5. Limited Owner Obligation ..................................................................................... 18 Relationship to Separate Agreements .................................................................... 18 Remedies When Vacancy ...................................................................................... 18 Remedies When No Vacancy ................................................................................. 19 MPHA Failure to Elect .......................................................................................... 21 Section 7.1. ARTICLE VII Non-Discrimination and Other Federal Requirements Non-Discrimination and Other Federal Requirements .......................................... 22 ARTICLE VIII Owner Default Section 8.1. Section 8.2. Section 8.3. Defined ................................................................................................................... 23 Notification .................................................................................................. 23 MPHA Remedies ...................................................................................... 111...111111123 Section 9.1. Section 9.2. ARTICLE IX Disclaimer of Relationships No Assignment of ACC ......................................................................................... 24 No Third Party Beneficiary .................................................................................... 24 ARTICLE X Miscellaneous Section 10.1. Binding Obligation ................................................................................................. 25 Section 10.2. Assignment ............................................................................................................ 25 Section 10.3. No Waiver ........................................................... 25 Section 10.4. Amendment ....................... ' .................................................. 25 Section 10.5. ' .................................................................................... Notice ................................................................................................................ 25 Section 10.6. Law Governing ............................................................................................. i...11.1126 Section 10.7. Severability ............................................................................................................ 26 Section 10.8. Headings and Titles ................................................................................................ 26 TESTIMONIUM SIGNATURES EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D Development Site Dispute Resolution Procedures Development Operating Subsidy Cap Worksheet Management Agreement C :\WINDOWS~TEMP\i 1 REGOPRAG.DOC ii REGULATORY AND OPERATING AGREEMENT REGULATORY AND OPERATING AGREEMENT THIS AGREEMENT made this ~ day of ,2003 by, bena, een and among the MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS, a public body corporate and politic, organized and existing under the laws of the State of Minnesota (the "MPHA"), the ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE, a public body corporate and politic, organized and existing under the laws of Minnesota (the "EDA") (together with the MPHA sometimes called the "Authorities") and the BASS LAKE APARTMENTS LLC, a Minnesota limited liability company (the "Owner"). The MPHA and the United States Department of Housing and Urban Development ("HUD") are parties to an Annual Contributions Contract ("ACC") pursuant to which the MPHA has been granted funding for the demolition and replacement of 770 units of low rent public housing pursuant to Section 5 of the United States Housing Act of 1937, as amended (the "Act"), and pursuant to the terms of that certain Consent Decree entered in settlement of Hollman et al. vs. Cisneros et al, U.S.D.C. (Minn. Dist., 4th Div.) Civil Case No. 4-92-712. As a part of its effort to locate replacement units in areas of nonconcentration as to race and poverty throughout the Minneapolis-St. Paul Metropolitan area it has entered into a joint powers agreement with the EDA for the purpose of seeking inclusion of replacement units in the Owner's multifamily housing project to be constructed within the City of New Hope, Minnesota (the "Development"). The Development is to be a mixed-income community consisting of eleven (11) units. Four (4) units shall be set aside and maintained as "public housing," as defined in Section 3(b) of the Act, and eligible to receive the benefit of operating subsidies by HUD pursuant to Section 9 of the Act for the term of the ACC. Owner intends that nine (9) of the units will be available to households with income restrictions at or below 50 percent of the area median and two (2) of the units will be at market rates. NOW, THEREFORE, the parties hereto agree as follows: C:\WINDOWS~TEMP\i 1 REGOPRAG.DOC I REGULATORY AND OPERATING AGREEMENT ARTICLE I Definitions Section 1.1. Definition~. As used herein, the following terms shall have the following meanings: "ACC" shall mean the Consolidated Annual Contributions Contract between HUD and the MPHA dated April 10, 1971, as amended from time to time including, specifically, as amended by a Mixed-Finance Amendment dated ,2003. "Act" shall mean the United States Housing Act of 1937, as amended from time to time, and any successor legislation. "Authority Units" shall mean the dwelling units in the Development operated and maintained from time to time as "public housing" units in accordance with the Act, the ACC, and this Agreement. "Consent Decree" shall mean the Order of the United States District Court, District of Minnesota in the action entitled Hollman et al vs. Cisneros et al, Civil Action No. 4-92-712, which provides, among other things, for the development of 770 public housing units in the Minneapolis-St. Paul metropolitan area and for priority occupancy by certain families relocated or displaced from demolished public housing in Minneapolis. "Development" shall mean the 11-unit rental housing development to be rehabilitated, constructed and operated by Owner, during the term of the ACC, on the Development Site. "Development Fiscal Year" shall mean the fiscal year of the Owner, irrespective of whether such fiscal year coincides with the MPHA Fiscal Year. "Development Site" shall mean the real property upon which the Development will be constructed, as more particularly described in Exhibit A hereto. "Development Operating Subsidy" shall mean that part of the Operating Subsidy received by the MPHA from HUD which the MPHA shall pay to the Owner pursuant to this Agreement. "Development Operating Subsidy Reserve" shall mean the trust account established by the Owner pursuant to Article V hereof and consisting of an Owner Account and a Public Account to which contributions made by the Owner, MPHA and EDA to their respective accounts, shall fund shortfalls in Development Operating Subsidy. "Fair Market Rent" shall mean the maximum allowable rent permitted to be charged under Section 8 of the Act. "Housing Agreement" shall mean the Housing Development Agreement dated ,2003 by and between the EDA, the MPHA and the Owner. "Incentive Authority Unit" shall mean one (1) Authority Unit which .is not subject to the waiting list requirements of the Consent Decree. "Initial Operating Period" or "IOP" means the period between DOFA and EIOP and is the period during which operating costs of the Public Housing Units are charged to the development or capital budget, after which such costs are paid from Operating Subsidy. C:\WrNDOWS\TEMP\i I REGOPRAG.DOC 2 REGULATORY AND OPERATING AGREEMENT "Lender" shall mean the lender under a first mortgage loan secured by the Owner's interest in the Development Site obtained by Owner to assist in financing the construction of the Development. Upon the date hereof, Lender shall mean Franklin National Bank, a national banking association. "MPHA Fiscal Year" shall mean the MPHA's October 1 through September 30 fiscal year, used for purposes of calculating the Operating Subsidy received by the MPHA pursuant to Section 9 of the Act. "Managing Agent" shall mean the managing agent named in the Management Agreement, or any successor managing agent of the Development named from time to time and approved by the Authorities as provided herein. "Management Agreement" shall mean the agreement governing management of the Development to be entered into between the Owner and the Managing Agent (with the approval of the Authorities) pursuant to Section 3.3 hereof. "Metropolitan Council" means the Metropolitan Council which is a political subdivision of the State of Minnesota. "Operating Subsidy" shall mean financial payments provided to the MPHA by HUD pursuant to Section 9 of the Act or pursuant to any successor legislation providing for project- based or tenant-based operating or rental assistance in respect of units in public housing developments or eligible occupants thereof. "Proposal" shall mean the MPHA and EDA proposal for the Development approved by HUD. "Replacement Authority Units" shall mean those three (3) Authority Units which are subject to the waiting list requirements of the Consent Decree. "Restrictive Covenant" shall mean the covenants and restrictions contained in that certain Declaration of Restrictive Covenants granted by the Owner which shall run with the land obligating the party and any successors in title, including any successor who acquires title to the Owner's estate by foreclosure of a mortgage, to maintain and operate the Authority Units in compliance with all applicable requirements of the Act, the ACC and this Agreement during the period required by law. C:\WINDOWS~TEMP\i 1 REGOPRAG.DOC 3 REGULATORY AND OPERATING AGREEMENT ARTICLE II Authori .ty Units Section 2.1. Owner Commitmenl. During the term of this Aereement, but subject to Article VI hereof, Owner will continuously set aside four (4) units of th~ Development, having a total of 8 bedrooms and having initially the unit size distribution set forth below, for occupancv by public housing-eligible households at rents and subject to all other conditions of the Act, thb ACC and the Consent Decree. Provided that the Owner continues operating the public housing units in accordance with the Act, the ACC and the Consent Decree, and in accordance with the terms of this Agreement, such units shall be eligible to receive the benefits of Operating Subsidy. Consistent with the requirements currently applicable to public housing, a unit shall not lose its status as an Authority Unit solely because the income of the tenant residing therein rises above the applicable public housing income limit; any such unit shall be governed by rules generally applicable to units occupied by over-income tenants in the public housing program (subject to such modifications in lease and occupancy terms as are permitted hereunder). Section 2.2. Author/tv 1 lnit~ De.qc. rihed. The Authority Units shall initially comprise the following mixture of unit sizds and descriptions: 2 BR 4 Owner may change the specific units designated as Authority Units at any time provided that (a) the number of bedrooms contained in the Authority Units remains 8, (b) if such change is to be made with respect to an occupied Authority Unit, the tenant of such unit shall have the same rights with respect to occupancy and rent as applied prior to removal of the unit's designation as an Authority Unit, and (c) the Authority Units shall at all times, to the extent feasible, be scattered evenly or "float" throughout the Development, and shall not be concentrated in any particular area or areas within the Development. Section 2.3. Caqnaltv and Condemnation. In the event of a casualty loss or taking by eminent domain, Owner shall apply the proceeds of such casualty loss or condemnation to the rebuilding of the units, and units representing the same bedroom mix described above to the extent possible, shall be set aside as Authority Units. Section 2.4. ln.qnranc, e Proceeds. In the event of (a) a casualty, (b) a decision by the Lender to apply insurance proceeds to the first mortgage loan rather than reconstruction of units, insurance proceeds shall be prorated among the entities holding encumbrances permitted by Section 9.1 of the Housing Agreement in accordance with the outstanding balances thereof and, in the case of the MPHA, to the extent of the low income public housing development funds initially paid to the Owner. The MPHA's prorated share of the insurance proceeds shall be returned to the MPHA. All amounts remaining in the Development Operating Subsidy Reserve shall be returned to the Owner, the MPHA and the EDA in accordance with their respective contributions thereto. C:\WINDOW~TEMP\I I REGOPRAG.DOC 4 REGULATORY AND OPERATING AGREEMENT ARTICLE III Operation of Authority l]nits Section 3.1. l Jegal Cc~rnplianc~e. Owner shall maintain and operate the Authority Units in compliance with all applicable requirements of the Act, HUD regulations thereunde{, and the applicable regulations and policies of the MPHA (including the imposition of minimum rent), and in accordance with the ACC (including any waivers granted pursuant thereto), the Consent Decree, and this Agreement. In the event of any conflict among the foregoing authorities, the ACC (including any waivers granted pursuant thereto) shall control (to the extent permitted by law). Notwithstanding the Owner's agreement to perform substantial obligations and responsibilities with regard to the Authority Units pursuant hereto, and the agreement of the EDA to assist in carrying out certain functions and responsibilities, the MPHA remains accountable to HUD for performance of such functions under and pursuant to the ACC and must monitor the performance of the Owner and the EDA to assure compliance therewith; provided, however, that the MPHA shall be entitled to rely upon the truth and accuracy of information provided to it by the Owner or the EDA. Section 3.2. Adrnini.qtrative glexihilitx,. Authorities and Owner acknowledge that the goal of achieving long-term sustainability of ihe Development as a mixed-income community will be enhanced by administrative procedures and terms and conditions of occupancy which reduce discernible distinctions in maintenance and operation, and conditions of continued occupancy, between the Authority Units and other units in the Development to the greatest extent feasible while assuring that the Authority Units are available to house families who meet the occupancy objectives of the Authorities. Sections 3.3 to 3.7 of this Article 1/I enumerate certain respects In which operating procedures and other requirements as to the Authority Units will differ fi.om those in effect with respect to public housing units owned by the MPHA. The Authorities and Owner agree that, if experience demonstrates a need for or the desirability of further departures from standard procedures applicable to PHA-owned public housing, they will consult with each other regarding such further modifications and will take such further imp. l.ementing .steps as they agree to be advisable, including, as appropriate, requests to HUD for rewslon or wmver of regulations necessary to permit the Authorities to undertake measures that enhance the long-term viability of the Development, or requests to implement statutory revisions made by Congress from time to time affecting either public housing in general or public housing located within privately-owned mixed-income communities in particular. Section 3.3. Mana~,emenl'. Owner will retain a Managing Agent for the Development, including the Authority Un~s (the "Managing Agent"), pursuant to a management agreement (the "Management Agreement") which will be subject to written approval by the Authorities. The initial Managing Agent shall be Project for Pride in Living, Inc. The Managing Agent will be responsible to Owner for management of the Authority Units in accordance with the terms of this Agreement and all applicable requirements referenced in Section 3.1 hereof. The Management Agreement will contain appropriate provisions providing access by the Authorities, upon request therefor, to books and records maintained by the Managing Agent with respect to the Development, and pursuant to which the Owner may be required to terminate the Management Agreement and the appointment of the Managing Agent thereunder, subject to appropriate judicial review in any court of competent jurisdiction, if the Authorities determine that the Managing Agent has violated, breached, or failed to comply with any provision of, or obligation under, this Agreement (including, without limitation, by reason of its violation, breach or failure to comply with any governing law, regulation, or agreement referenced in Section 3.1 or Article VI/I hereof). · .. S,.ec. tion,.3..4.,. Waiting T,i.qt.q., The Authorities shall create, maintain and manage the wamng nst or nsts Ior occupancy to the Authority Units in accordance with the Consent Decree C:\WINDOWSX. TEMP\I 1REGOPRAG.DOC 5 REGULATORY AND OPERATING AGREEMENT and all applicable laws and regulation. Upon request of the Managing Agent, the EDA shall supply the names of potentially eligible tenants to the Managing Agent as more fully described in the Management Agreement. The waiting list or lists policy created by the Authorities is subject to HUD approval. Section 3.5. Mana~in~ Aeent Re?nn.qihilitie~. The Authorities deleeate to Owner, subject to re-delegation to~th'~ M~anaging Agent, the following administratixTe functions in connection with admission of applicants to occupancy of the Authority Units: applicant screening, income and data verification, income recertification, record maintenance, unit assignment, execution of leases and terminations, all in accordance with criteria and procedures approved by the Authorities. Screening criteria and procedures proposed by the Managing Agent with respect to the Authority Units will not necessarily be identical to those utilized by the MPHA with respect to MPHA-owned public housing but will, to the maximum extent permissible under applicable HUD requirements and the ACC, be consistent with those utilized by the Managing Agent with respect to other units of the Development; provided, however, that such procedures shall at all times be fair and evenhanded and shall not be more stringent as they relate to Replacement Authority Unit applicants than the Incentive Authority Unit applicants or other applicants. The MPHA shall have the right to monitor the procedures and results of the Managing Agent's activities in this regard. The Authorities shall establish procedures for informal and formal review of eligibility or suitability determinations for applicants for admission to the Authority Units consistent with HUD regulations. Section 3.6. l,ea~e l:orm.q. Tenant leases executed with respect to Authority Units will be in a form attached to the Management Agreement, subject to HUD approval, if required, of variations from the requirements of 24 CFR Part 966, Subpart A, as amended or replaced from time to time. Such leases shall accommodate the remedies available to the Owner pursuant to Section 6.3 and 6.4 hereof. Section 3.7. Grievance Proee. dnre,q. The Authorities will establish a tenant grievance procedure for residents of the Authority Units in compliance with the requirements of Section 6(k) of the Act and 24 CFR Pan 966 and consistent, to the maximum extent feasible, with the intent stated in Section 3.2 above with the Metropolitan Council. Such procedures will provide for such informal and formal hearings as set forth in the HUD regulations. The Authorities will seek HUD approval, to the extent required, of variations from the requirements of 24 CFR Pan 966, Subpart B, as amended or replaced from time to time. C:\WINDOW~TEMP,,I 1REGOPRAG,DOC 6 REGULATORY AND OPERA, TING AGREEMENT ARTICLE IV Development Operating Subsidy Section 4.1. Fnrther Definition.q, As used herein: (a) "Allowed Development Expenses" shall mean all necessary and reasonable operating expenses of the Development for any period, including: (i) all ordinary and necessary expenses of operations of the Development shown as line items on Form HUD-92547-A (Budget Worksheet), exclusive of (A) the amount by which real estate taxes attributable to the Authority Units exceed the amount of the payment in lieu of taxes, for so long as under Minnesota law the Authority Units are entitled to payment in lieu of tax treatment, (B) debt service requirements of any lender (including the Authorities) and (C) utility expenses which are the direct responsibility of the tenant. If the MPHA and HUD approve the borrowing of funds for repairs, replacements or improvements not funded from the Development reserve for replacements (which approval shall not be unreasonably withheld), then the debt service requirements for such borrowing shall be included in Allowed Development Expenses. Authority Unit Expenses (as hereinafter defined) shall be reduced by any amounts contributed by the Authorities, on a grant basis, for repairs, replacements or improvements of the Authority Units, up to the amount of the Authorities' share (based on the Authority Percentage, as hereinafter defined) of debt service requirements for any such borrowing for similar repairs, replacements or improvements to units other than the Authority Units; (ii) management fees payable pursuant to the Management Agreement; (iii) legal expenses associated with the operation of Development and accounting and audit expenses, including tax return preparation expenses, permitted to be charged as project expenses pursuant to the HUD Handbook 4370.2 REV-l, Financial Operations and Accounting Procedures for Insured Multifamily Projects, or any successor thereto; and (iv) reserves for replacements and for any other purposes, as required by the Lender and approved by the MPHA. (b) "Authority Percentage" shall mean the higher of: (i) the number of Authority Units, divided by the total number of units in the Development; or (ii) the net rentable square feet of the Authority Units, divided by the net rentable square feet of all units of the Development. Any change in the "Authority Percentage" resulting from a change in the composition of the units comprising the Authority Units permitted by Article II hereof shall become effective for the MPHA Fiscal Year following the year in which such changes occur. (c) "Authority Unit Expenses" shall mean (i) Allowed Development Expenses, multiplied by the Authority Percentage, plus (ii) the portion of any payment in lieu of real estate taxes to be paid in respect of the Authority Units, if any, made by the Owner and not directly by the Authorities, plus (iii) amounts payable to Authority Unit occupants as utility reimbursement (i.e., "negative rent"); provided, however, that if any line item expense shall be included in Estimated Authority Unit Expenses on the basis of a percentage other than the Authority Percentage pursuant to the second sentence of C:\WINDOWS\TEMP\i 1REGOPRAG.DOC 7 REGULATORY AND OPERATING AGREEMENT Section 4.2(a) hereof, such expense shall be included in Authority Unit Expenses on the basis of the same percentage; (d) "Authority Unit Income" shall mean all income received in respect of Authority Units, including tenant rents ("Tenant Rent" as defined in 24 CFR 913.102) and any other sources of income anticipated in respect of Authority Units, including all types of revenue shown as line items on Form HUD 92547-A, but exclusive of operating subsidy. (e) "Estimated Allowed Development Expenses," "Estimated Authoritv Unit Expenses," and "Estimated Authority Unit Income" shall mean the estimated amofints of such items for any period determined in accordance with Section 4.2 hereof. Section 4.2. Oneratin~, l:l,d~,et ,qnhmittak Not later than 90 days prior to the anticipated date of first availability, for ocCupanCy of any unit of the Development, and not later than the first day of June preceding any subsequent MPHA Fiscal Year, the Owner shall submit to the MPHA its proposed Operating Budget for the following MPHA Fiscal Year (or, in the case of the year in which first availability for occupancy occurs, the remainder thereof). The Operating Budget shall project Estimated Allowed Development Expenses, Estimated Authority Unit Expenses, and Estimated Authority Unit Income for the subject period, subject to the following conditions: (a) Estimated Allowed Development Expenses shall be reasonably within industry standards for similar housing type, materials and location. The MPHA may comment upon and propose changes to the Estimated Allowed Development Expenses set forth in the Operating Budget submitted by the Owner, but the Owner shall not be required to reduce any estimated expense below industry standards for such expenditure reasonably anticipated by the Owner for the period provided, however: (i) the portion of any line item within the Estimated Allowed Development Expenses including in Estimated Authority Unit Expenses shall be altered from the Authority Percentage if either the MPHA or the Owner demonstrates satisfactorily that allocation of such item to the Authority Units on the basis of the Authority Percentage is inappropriate (e.g., marketing and advertising costs, if such relate solely or preponderantly to the non-Authority Units); and (ii) if the MPHA and Owner disagree about whether the Estimated Allowed Development Expenses, or any line-item therein, are consistent with industry standards, the Owner's estimate shall be utilized for budget purposes, but the MPHA may institute the dispute resolution procedures described in Exhibit B hereto. (b) For the period in which first occupancy of the Development is anticipated to occur, Estimated Authority Unit Income shall be determined on the basis of assumed tenant rent collections for each unit size equal to the average tenant rent collections for all units of comparable size owned and administered by the MPHA in the most recent annual or semiannual period for which such statistics are available at the time of Owner's submission of the Operating Budget for such period to the MPHA. For each subsequent MPHA Fiscal Year, Estimated Authority Unit Income shall be determined on the basis of the aggregate tenant rents actually collected for all Authority Units during the first nine months of the preceding MPHA Fiscal Year. Notwithstanding the foregoing, with respect to any MPHA Fiscal Year, Owner and the MPHA may agree to project Estimated Authority Unit Income at a level different from that which would otherwise be established pursuant to the preceding sentence, taking into account (i) the reasonably C:\WINDOWS~TEMP~I ! REGOPRAG.DOC 8 REGULATORY AND OPERATING AGRI/EMENT anticipated level of incomes of tenants anticipated to be admitted to the Authority Units during such period, based on anticipated turnover and the admissions policies referenced in Section 3.5 hereof, and (ii) reasonably anticipated increases in income levels of existing tenants based on tenant participation in employment training and other supportive services programs. Section 4.3. Payment nff)perating ~qnhsidy. (a) During the Initial Operating Period, the MPHA shall pay operating costs of the Authority Units from the Initial Operating Deficit line item of the Development budget. During such period, all rental income received by the Owner from the Authority Units shall be delivered to the MPHA. for deposit in said Initial Operating Deficit account. (b) Subject to Section 4.12 hereof, during each MPHA Fiscal Year after the end of the Initial Operating Period, the MPHA shall pay .to the Owner a Development Operating Subsidy equal to the lesser of (1) (i) Estimated Authority Unit Expenses for such period less (ii) Estimated Authority Unit Income for the period or (2) the Development Operating Subsidy Cap (such amount with respect to any period being referred to herein as the "Development Operating Subsidy Requirement"). The MPHA shall pay to Owner, on the first day of each month of an MPHA Fiscal Year, one-twelfth (1/12) of the Development Operating Subsidy Requirement for such MPHA Fiscal Year; provided, however, that Owner and the MPHA may agree, upon determination of the Operating Budget and Development Operating Subsidy Requirement for any MPHA Fiscal Year, to provide for lump sum or unequal monthly payments for such year. Cap shall be determined annually as i'ollow~ Section 4.4. Develonment Oneratino ,qnhqidy Cap. The Development Operating Subsidy (a) On or before September 15 of each year the MPHA shall determine, in accordance with its budget submittals to HUD (i) the total number of available public housing units which are then subject to the ACC, (ii) the distribution of such units by number of bedrooms and (iii) the total Operating Subsidy for such units approved by HUD for the following MPHA Fiscal Year, exclusive of that portion of the Operating Subsidy allocable to accounting costs. (b) The MPHA shall multiply the number of units of each bedroom size by the number of rooms per unit using the following Minnesota Housing Finance Agency table of rooms per unit and add the products for each bedroom size in order to calculate (i) the total number of rooms existing in the MPHA inventory and (ii) the total number of rooms in the Authority Units: Unit Size Rooms per Unit 0 3.5 1 3.5 2 4.5 3 6.0 4 7.0 (c) The MPHA shall divide the total Operating Subsidy approved by HUD for the following MPHA Fiscal Year by the total number of rooms determined under Section 4.4(b)(i) hereof to determine an average subsidy per room per year for all MPHA units. C:\WINDOWS~TEMP\i I REGOPRAG.DOC 9 REGULATORY AND OPERATING AGREEMENT (d) The MPHA shall multiply the average subsidy per room determined under Section 4.4(c) times the number of rooms in the Authority Units determined under Section 4.4 (b)(ii) which shall constitute the Development Operating Subsidy Cap for the following MPHA Fiscal Year. (e) On or before December 15 of each year the MPHA shall submit to HUD its post-year audit with respect to the preceding MPHA Fiscal Year. On or before February 1 of each succeeding year the MPHA shall take into account all HUD-approved post-year adjustments in MPHA Operating Subsidy and shall recalculate the Development Operating Subsidy Cap pursuant to Section 4.4 above (the "Recalculated Development Operating Subsidy Cap"). The calculations required by this Section 4.4 shall be made on the form attached hereto as Exhibit C and shall be mailed to the Owner and the EDA on or before October 1, the beginning of the MPHA Fiscal Year. Section 4.5. ,qemm'cEnter Aeennnt, All payments of Development Operating Subsidy received from the MPHA, plus all payments, if any, made to Owner from the Development Operating Subsidy Reserve (as hereinafter defined), shall be deposited by Owner in a Development-wide operating account maintained in a financial institution whose deposits are insured by an agency of the Federal Government; provided, however, that at all times the funds shall be invested in a manner consistent with Minnesota Statutes, Section 469.12, Subdivision 1, paragraph 16. Owner shall also cause all receipts in respect of Development units, including tenant rents and other revenues (but exclusive of tenant security deposits), to be deposited into the Development-wide operating account and shall make all Allowed Development Expenses disbursements therefrom. Section 4.6. Monthly Clneratin~ Renal'tS. Monthly operating budget and expense reports shall be prepared on forms s'upp~lied by'the MPHA and submitted by the Owner to the MPHA on or before the twentieth (20th) of each calendar month showing activity for the previous month. Not later than 60 days after the end of each successive quarterly period commencing with the calendar quarter in which first occupancy of the Development occurs, Owner shall deliver to the Authorities, separately with respect to the Authority Units and with respect to the Development (including the Authority Units), itemized statements of income and expenses, prepared on an accrual basis, in form substantially comparable to Form HUD-92410 (Statement of Profit and Loss), certified by the chief financial officer of the Managing General Partner of Owner, for the quarterly period and from the beginning of the Development fiscal Year to the end of such quarterly period. Section 4.7. Audited ginaneial.q and ,qnnnlemental Darn. Not later than March 1 of each year, Owner shall deliver to the Authorities a c~o'py of the audited financial statements of Owner for such year and the period then ended, prepared in accordance with generally accepted accounting principles and accompanied by the report of independent public accountants thereon, together with a copy of any additional financial statements or reports delivered by Owner to its partners. Such financial statement shall be accompanied by supplemental data, together with the report of independent public accountants thereon, which shall show on a cash basis for such period (a) actual income from the Authority Units, (b) actual expenditures for Authority Unit Expenses, (c) the amount of Development Operating Subsidy received by Owner, showing separately amounts received from the Authorities and amounts withdrawn from the Development Operating Subsidy Reserve, (d) the balance of the Development operating Subsidy Reserve at the end of the period, and (e) aggregate stated lease rents and the amounts thereof uncollected from Authority Units for which no eviction actions have been commenced ("Supplemental Data"). If Owner shall fail to deliver such financial statements and Supplemental Data to the Authorities, the Authorities shall have the right to retain an independent auditor to conduct an C:\WINDOWS~TEMP~I ! REGOPRAG.DOC 10 REGULATORY AND OPERATING AGREEMENT audit of the financial statements of the Owner and to charge the reasonable cost thereof to the Owner. Section 4.8. po.qt-Year Adju.qtments. (a) Upon receipt of the Section 4.6 monthly operating report for the month of September, the MPHA shall each year determine, based upon the monthly operating repons and MPHA records, (i) actual income from the Authority Units, (ii) actual expenditures for Authority Unit Expenses and (iii) the amount of Development Operating Subsidy received by the Owner during the preceding MPHA Fiscal Year. If the amount described in clause (i)(or the amounts described in clauses (i) and (iii) combined) shall exceed the amount described in clause (ii), the Owner shall immediately forward the amount of such excess to the Public Account of the Development Operating Subsidy Reserve. If the amounts described in clauses (i) and (iii) shall be less than the amount described in clause (ii), the MPHA shall immediately reimburse the Owner for the amount of such deficit, provided that total Development Operating Subsidy payable by the MPHA for such preceding year shall not exceed the Recalculated Development Operating Subsidy Cap. (b) Within sixty (60) days of receipt of the audited financial statements and Supplemental Data pursuant to Section 4.7, the MPHA shall (i) reconcile the same with its determination made pursuant to Section 4.8(a) and (ii) notify the Owner, in writing, of any discrepancy. In accordance with such reconciliation and notice, the parties shall immediately correct any post-year adjustments previously made in accordance with Section 4.8(a) and Floor Level adjustments made pursuant to Section 5.3. Section 4.9. Vae. anc. v Adin.qtment. Separately and independently from the reconciliations provided for under Section 3,.8 a~bove, the Owner shall contribute to the Development Operating Subsidy Reserve, not later than March 1 of each year, the amount, if any, of Development Operating Subsidy received by Owner during such period attributable to any Authority Unit for a period in which such Authority Unit was vacant for more than 90 days, provided that such period of vacancy shall not be attributable to any action or omission by the Authorities. For purposes of this provision: (a) an Authority Unit shall be deemed vacant (i) commencing on the first day for which rent is not charged for the unit following termination or expiration of its occupancy as an Authority Unit, and (ii) ending on the day preceding the first day for which rent is charged for such unit based on re-occupancy as an Authority Unit, or the first day for which rent is charged for occupancy as an Authority Unit of a different unit which was not previously occupied as an Authority Unit, whichever shall first occur; and (b) the amount of Development Operating Subsidy attributable to a unit for a period in which such unit was vacant more than ninety (90) days shall be determined by multiplying the amount of Development Operating Subsidy received by Owner during such year, as reported pursuant to Section 4.3 above, by the product of (x) the net rentable square feet of such unit, divided by the net rentable square feet of all Authority Units (including such vacant unit), multiplied by (y) the number of days in excess of ninety (90) during which such unit is vacant, divided by 365. Section 4.10. Incidental Dev~.lnnrnent Ina. nme.. Separately and independently from the reconciliations provided for under SectiOn 4.8 above, the Owner shall contribute to the Public Account of the Development Operating Subsidy Reserve, not later than March 1 of each year, 4/11 of all incidental income derived from the operation of the Development to the extent it is derived from charges applied to both Authority Units and non-Authority Units. Incidental income shall include, but not be limited to (1) vending and laundry machine income and (2) income received from rental of parking spaces, garage spaces and commercial space. C:\WINDOWS~TEMP\I I ILEGOPRAG.DOC 1 ] REGULATORY AND OPERATING AGREEMENT Section 4.11. Future I.e~.qlalinn, Subject to remedies provided in Article VI hereof, nothing contained herein shall prevent or diminish the full application to the Authoritv Units of any legislation enacted after the date hereof which provides for the termination of'operating subsidies under Section 9 of the Act or of other Federal project-based assistance to public housing developments, including, without limitation, any provision thereof releasing or otherwise modifying occupancy or tenant rent restrictions previously applicable to units in such developments. Section 4.12. Right~ llnon A~.qi~tmrnent. It is understood by the parties hereto that upon (a) completion of Authority Units and (b) execution of an annual contributions contract bv HUD and the Metropolitan Council providing for Operating Subsidy fi.om HUD to the Metropolitan Council for the Authority Units (the "Metro ACC"), the MPHA may, without further action by the Owner, assign this Agreement and all related documents to the Metropolitan Council for ongoing administration of said Operating Subsidy and grievance procedures as well as management of the waiting lists. In such event, the Authority Units shall be removed from the MPHA ACC and added to the Metro ACC. Subsequent to such assignment: (i) All of the duties of the MPHA described herein that are yet to be performed (except for the obligation of the MPHA to provide names of eligible Minneapolis applicants pursuant to the Consent Decree) shall be performed by the Metropolitan Council and the MPHA shall be forever released therefrom; (ii) All of the rights of the MPHA described herein shall be rights of the Metropolitan Council; and (iii) The Operating Subsidy described in this Article IV shall be determined or re-determined solely in accordance with the Metro ACC, payments thereunder shall be limited by such amount as are received by the Metropolitan Council pursuant to the Metro ACC and all matters relating to Operating Subsidy shall be governed by the Metropolitan Council's fiscal year. C :\WINDOWS~TEMPXl 1 REGOPRAG.DOC ARTICLE V Develnnment Operstin~ Rnh~idy l~e~erve Section 5.1. F~tahlishment of Re.~erve and Accnunts. Prior to initial occupancy of each Authority Unit, the Owner will establish a separate trust account known as the "Development. Operating Subsidy Reserve"), consisting of two separate accounts in a financial institution chosen by the Owner and acceptable to the Authorities whose deposits are insured by an agencv of the Federal Government (the "Escrow Agent"), provided, however, that at all times the fund~ shall be invested in a manner consistent with Minnesota Statutes, Section 469.12, Subdivision 1. paragraph 16. One account shall be designated the "Owner Account" and the Owner shall deposit therein an amount not less than $7,704.00 for each Authority Unit (the "Initial Owner Deposit"), which represents an amount equal to three times the estimated annualized amount of the Development Operating Subsidy Requirement determined pursuant to Article IV hereof with respect to the MPHA Fiscal Year in which first occupancy of the Development occurs. Additional deposits to the Development Operating Subsidy Reserve by the Owner shall be deposited and maintained as provided herein. All funds in the Owner's Account shall remain funds of the Owner, but shall be held in trust by the Escrow Agent, and shall be held and applied in accordance with the terms and conditions hereof. Ail deposits to the Development Operating Subsidy Reserve made by any public entity, except as otherwise provided herein, shall be deposited in an account known as the "Public Account," shall remain the funds of the entity making such contributions and shall be held and applied in accordance with the terms and conditions hereof. Interest earnings in the Development Operating Subsidy Reserve shall be allocated to the Owner's Account and Public Account in accordance with their respective balances. When a withdrawal is authorized or required by the terms of this Agreement, such withdrawal shall be made first from the Public Account and then, if the Public Account has been exhausted, from the Owner Account. Section 5.2. lnve~qtment~. The Escrow Agent shall be directed by the Owner to invest and re-invest funds held in the Development Operating Subsidy Reserve in investments permitted for the general funds of the MPHA provided, however, that at all times the funds shall be invested in a manner consistent with Minnesota Statutes, Section 469.12, Subdivision 1, paragraph 16. Income from investments shall be retained in the Development Operating Subsidy Reserve and shall be deemed part thereof. Section 5.3. Flnnr I.evel Adin~tment.c. As used hereinafter, the term "Floor Level" shall mean, initially, the amount required by Section 5.1 to be held in the Development Operating Subsidy Reserve as of the date of first occupancy of each public housing unit. The "Floor Level" amount shall be adjusted annually, following delivery of each September monthly operating statement furnished pursuant to Section 4.6 hereof, to an amount equal to three times the difference between actual annual Authority Unit Income and actual annual Authority Unit Expenses as shown in such financial statements. The MPHA and the Owner shall jointly give notice to the Escrow Agent of adjustments in the Floor Level as promptly and practicable following the calculation of such adjustments. Section 5.4. Voluntary Remleni,qhment of Reserve. If at any time the amount in the Development Operating Subsi~ly Reserve shall be below the Floor Level as a consequence of either (a) adjustment to the Floor Level pursuant to Section 5.3 or (b) payments authorized to be made therefrom pursuant to this Agreement, the Escrow Agent shall notify the MPHA, the EDA and the Owner in writing of such fact and of the amount of such deficit (the "Upper Floor Level Shortfall"). Within ninety (90) days following receipt of such notice, the MPHA and/or the EDA may, but shall not be obligated to pay to the Escrow Agent, for deposit into the Development Operating Subsidy Reserve, fi-om any funds legally available therefor (which may include Operating Subsidy or other public housing or nonpublic housing funds) the amount of the C:\WINDOWS\TEMP\i 1 REGOPRAG.DOC 13 REGULATORY AND OPERATING AGREEMENT Upper Floor Level Shortfall. To the extent such deposit (a) replaces funds previouslv withdraxvn from the Owner's Account of the Development Operating Subsidy Reserve and not previously replaced and (b) do not cause the Floor Level of the Development Operating Subsidy Reserve to be exceeded, such deposit shall be credited to the Owner's Account. To the extent such deposit (a) is in excess of funds previously withdrawn fi'om the Owner's Account of the Development Operating Subsidy Reserve and not previously replaced or (b) causes the Floor Level of the Development Operating Reserve to be exceeded, such deposit shall be credited to the Public Account of the Development Operating Subsidy Reserve. Section 5.5. Owner ~qnrp. hm Ca.qh Contribution. (a) If at any time the amount in the Development Operating Subsidy Reserve shall fall below seventy-five percent (75%) of the Floor Level, the Escrow Agent shall (a) notify the MPHA, the EDA and the Owner in writing of such fact, and (b) five (5) days before the end of the next following Development Fiscal Year notify the MPHA, the EDA and the Owner in writing of the amount by which the then balance of the Development Operating Subsidy Reserve is less than seventy-five percent (75%) of its Floor Level (the "Mid Floor Level Shortfall"). At the end of such next following Development Fiscal Year the Owner shall deposit into the Owner's Account of the Development Operating Subsidy Reserve the lesser of (i) the amount of the Mid Floor Level Shortfall or (ii) fifty percent (50%) of the surplus cash from the Development. (b) There shall be deducted fi'om any amount payable by the Owner pursuant to Section 5.5(a), with respect to the applicable Development Fiscal Year, an amount equal to the difference between (i) the rental income received by the Owner from a Development unit occupied by a tenant with a Section 8 housing choice voucher by operation of Section 6.4(c), and (ii) the rental income which would have been received by the Owner from such Development unit without the operation of Section 6.4(c). Section 5.6. lltiliTatinn nf Re.qerve. If (a) by the tenth day of any month (i) the MPHA shall not have paid to Owner the full amount of the scheduled installment of the Development Operating Subsidy Requirement due for such month or (ii) the amount of Development Operating Subsidy paid by the MPHA is less than the amount by which the Estimated Authority Unit Expenses for such period exceed the Estimated Authority Unit Income for such period or (b) the MPHA shall not have fully reimbursed the Owner for the amount of the actual deficit described in the second sentence of Section 4.8(a) hereof, the Owner shall be authorized to request a disbursement in the amount of the deficiency from the Development Operating Subsidy Reserve. The Escrow Agent shall make such disbursement upon receipt of a certification from the Owner as to the failure of the MPHA to fulfill the conditions described in subclauses (a) and (b) of this Section 5.6 and shall immediately notify the MPHA of the amount of the withdrawal from and balance in the Development Operating Subsidy Reserve. C:\WINDOWS~TEMP'~! IREGOPRAG.DOC 14 REGULATORY AND OPERATING AGREEMENT ARTICLE VI Owner Remedies Section 6.1. T.imited Owner Obligation. It is of the essence of this Agreement that for the term of the ACC, Owner will maintain and operate the number and type of dwelling units in the Development stated in Article II hereof as public housing units in accordance with all applicable requirements of the Act, the Consent Decree, and the ACC; provided, however, that if Authority Unit Income, plus any form of governmental operating or rental assistance received in respect of the Authority Units (including, without limitation, withdrawals from the Development Operating Subsidy Reserve or other contributions by the Authorities) shall be less than Authority Unit Expenses, the Owner shall at no time be required to contribute from its own funds (except as set forth in Section 5.5) toward Authority Unit Expenses in order to preserve the character of the number of units stated in Article II as public housing units. Section 6.2. Relatinnqhip in .qenarate Am'eernent.q. The obligations of the Owner with respect to the Authority Units are sep~ate fror~ other obligations which may arise under the Development Agreement or as a result of some or all of the other units in the Development. Accordingly, Owner remedies provided herein are not intended to diminish or otherwise effect such other obligations. Section 6.3. Remedie.q When Vacancy. If at the time of a vacancy in an Authority Unit the balance of the Development Operating Subsidy Reserve is determined to be less than its Floor Level, the Owner shall notify the MPHA and HUD of such fact and, if the last Supplemental Data delivered.to the MPHA pursuant to Section 4.7 is more than one-hundred eighty (180) days old, shall deliver to the MPHA and HUD with such notice Supplemental Data updated through the last month end. Within ten (10) days of receipt of such notice, the Owner, the EDA, the MPHA and HUD shall confer regarding the course of action to pursue with respect to the Authority Units. The MPHA shall, within thirty (30) days of receipt of such notice (the "Section 6.3 Option Date"), exercise one or more of the following options: (a) Replenish the Development Operating Subsidy Reserve to its Floor Level. To the extent such a deposit (a) replaces funds previously withdrawn from the Owner's Account of the Development Operating Subsidy Reserve and not previously replaced and (b) does not cause the Floor Level of the Development Operating Subsidy Reserve to be exceeded, such deposit shall be credited to the Owner's Account. To the extent such deposit (a) is in excess of funds previously withdrawn from the Owner's Account of the Development Operating Subsidy Reserve and not previously replaced or (b) causes the Floor Level of the Development Operating Reserve to be exceeded, such deposit shall be credited to the Public Account of the Development Operating Subsidy Reserve; (b) Agree to and provide such Operating Subsidy in excess of the Development Operating Subsidy Cap necessary to assure the Owner that no further withdrawals from the Operating Reserve will be required; (c) Authorize the Owner to select a qualified public housing applicant for such vacant Authority Unit with income sufficient to afford rent in an amount which will prevent the Authority Unit Expense from exceeding the Authority Unit Income (including Development Operating Subsidy). Such selection shall first be attempted within the priorities established by the Consent Decree and other waiting list criteria; provided that if such a tenant cannot be so identified or selected, the Owner shall be authorized to select such a tenant notwithstanding Consent Decree priorities, other waiting list criteria or percentage of family income required to meet said rental obligation; C:\WINDOWS~TEMP\i i REGOPRAG.DOC 15 REGULATORY AND OPERATING AGREEMENT (d) Notify the Owner of such other option agreed upon by the MPHA and HUD as will reasonably assure the Owner that sufficient funds will be received with respect to the Authority Units so that further withdrawal from the Development Operating Subsidy Reserve Fund will be avoided. Section 6.4. Remedie.q When No Vacancy. If the balance of the Development Operating Subsidy Reserve is determined to be less then fifty percent (50%) of the Floor Level and no vacancy in Authority Units exists, the Owner shall notify the MPHA and HUD of such fact and. if the last Supplemental Data delivered to the MPHA pursuant to Section 4.7 is more than one- hundred eighty (180) days old, shall deliver to the MPHA and HUD with such notice Supplemental Data updated through the last month end. Within ten (10) days of receipt of such not,ce, the Owner, the EDA, the MPHA and HUD shall confer regarding the course of action to pursue with respect to the Authority Units. The MPHA shall, within thirty (30) days of receipt of such notice (the "Section 6.4 Option Date"), exercise one or more of the following options: (a) Replenish the Development Operating Subsidy Reserve so that it remains above the seventy-five percent (75%) of its Floor Level. To the extent such a deposit (a) replaces funds previously withdrawn from the Owner's Account of the Development Operating Subsidy Reserve and not previously replaced and (b) does not cause the Floor Level of the Development Operating Subsidy Reserve to be exceeded, such deposit shall be credited to the Owner's Account. To the extent such deposit (a) is in excess of funds previously withdrawn from the Owner's Account of the Development Operating Subsidy Reserve and not previously replaced or (b) causes the Floor Level of the Development Operating Reserve to be exceeded, such deposit shall be credited to the Public Account of the Development Operating Subsidy Reserve; (b) Agree to and provide such Operating Subsidy in excess of the Development Operating Subsidy Cap necessary to assure the Owner that no further withdrawals from the Development Operating Reserve will be required; (c) Notify the Owner that the MPHA intends to make available to the tenants of a specified number of Authority Units (not to exceed four, in the aggregate, at any time) Section 8 housing choice voucher, whereupon the Owner shall agree not to exercise the remedy provided by Section 6.4(e) but shall continue to operate the Authority Units, drawing upon the Development Operating Subsidy Reserve as necessary, until vacancies occur in reasonably comparable non Authority Units. As such vacancies occur, (i) the Owner shall convert the vacant non Authority Unit to an Authority Unit ("Converted Authority Unit"), which Converted Authority Unit shall replace an existing Authority Unit ("Replaced Authority Unit"), (ii) the Replaced Authority Unit shall be converted to a Section 8 umt, (iii) the MPHA shall provide the existing tenant of the Replaced Authority Unit with a Section 8 housing choice voucher, (iv) the Owner shall lease the Replaced Authority Unit to the existing tenant thereof at the Fair Market Rent and (v) the Owner shall lease the Converted Authority Unit pursuant to Section 6.3(c); (d) Notify the Owner of such other option agreed upon by the MPHA and HUD as will reasonably assure the Owner that sufficient funds will be received with respect to the Authority Units so that further withdrawal from the Development Operating Subsidy Reserve Fund will be avoided; or (e) If in the sole judgment of the MPHA no other remedy contemplated by this Section 6.4 is reasonably available to prevent the Authority Unit Expenses from exceeding the Authority Unit Income (plus available Development Operating Subsidy), notify the Owner that it may elect not to renew existing Authority Unit leases at the end of their then current term, beginning with the Incentive Authority Units, and relet such C:\WINDOWS\TEMP\i I REGOPRAG.DOC 16 REGULATORY AND OPERATING AGREEMENT Authority Units in accordance with the provisions of Section 6.3(c). Authority Unit tenants whose leases are not renewed pursuant to this provision shall be given not less than sixty (60) days' advance written notice to vacate by Owner. In such event, the MPHA shall make all reasonable effort to relocate such tenant to another public housing unit owned by the MPHA. Such effort shall include: (i) making up to two (2) offers of the first available and suitable MPHA units to such tenant, without regard to Consent Decree or other waiting list priorities or criteria. The MPHA shall use its best efforts to provide such tenant with thirty (30) days' written notice of the availability of a suitably sized unit. Such tenant's written response to such notice must be received by the MPHA within five (5) days of receipt. If such tenant rejects the first unit offered, the MPHA shall again offer the next available, suitably sized unit to such tenant and such tenant shall have five (5) days of receipt of such second notice to deliver to the MPHA written acceptance of such offer. Rejection of said second offer or failure to respond to an MPHA notice shall relieve the MPHA of any further best efforts obligation; and (ii) offering such tenant a Section 8 housing choice voucher, if one is available to the MPHA. Section 6.5. MPI4A Failure tn Elect. Failure by the MPHA to notify the Owner of the selection of an option described in Section 6.3 on or before the Section 6.3 Option Date shall constitute MPHA approval of the option described in Section 6.3(c). Failure by the MPHA to notify the Owner of the selection of an option described in Section 6.4 on or before the Section 6.4 Option Date shall constitute MPHA approval of the option described in Section 6.4(e). C:\WINDOWS\TEMP\I 1REGOPRAG.DOC 17 REGULATORY AND OPERATING AGREEMENT ARTICLE VII Non-Discrimination and Other Federal Renuirement~ Section 7.1. Non-Di.~crirnination and Other Federal Reqniremenl~. The Owner will comply with all applicable requirements of the following, as the same may be amended from time to time and shall provide evidence of such compliance as deemed necessary, by the MPHA: (a) The labor and wage requirements set forth in the Davis-Bacon Act. 40 U.S.C. 276a et seq. The Owner shall provide such records and information as reasonably requested by the MPHA in order to confirm Owner's compliance with this clause. (b) All Federal statutory, regulatory, and executive order requirements applicable to public housing and the activities undertaken by the Owner under this Agreement pertaining, to civil rights, equal opportunity, and nondiscrimination, as those requirements now exist, or as they may be enacted, promulgated, or amended from time to time. Such requirements include, but are not limited to, the following: (i) The Fair Housing Act, 42 U.S.C. 3601-19, and regulations issued thereunder, 24 CFR Part 100; Executive Order 11063 (Equal Opportunity in Housing) and regulations issued thereunder, 24 CFR Part 107; the fair housing poster regulations, 24 CFR Part 110, and advertising guidelines, 24 CFR Part 109. (ii) Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d, and regulations issued thereunder relating to nondiscrimination in housing, 24 CFR Part 1. (iii) Age Discrimination Act of 1975, 42 U.S.C. 6101-07, and regulations issued thereunder, 24 CFR Part 146. (iv) Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794, and regulations issued thereunder, 24 Pan 8; the Americans with Disabilities Act, 42 U.S.C. 12181-89, and regulations issued thereunder, 28 CFR Part 36; and the elderly and handicapped requirements of Section 209 of the Housing and Community Development Act of 1974. (v) Section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. 1701u, and its implementing regulations at 24 CFR Pan 135. (c) In the event that any other federal, state, or local government assistance is received, or can reasonably be expected to be received, by the Owner with respect to the Authority Units within the Development in addition to the Public Assistance under the Housing Agreement, the Owner shall comply with the requirements of Section 102 of the Housing and Urban Development Reform Act of 1989. (d) The Uniform Relocation and Property Acquisitions Act in the event there are any "displaced persons," as that term is defined therein, as a result of the Development. (e) 24 CFR §§ 941.202, 941.203, 941.205, 941.207, 941.208, 941.209, 941.306, 941.402, 941.404, 941.501. C:\WINDOWS',TI/MP\i 1 REGOPRAG.DOC 18 REGULATORY AND OPERATING AGRF_,EMENT ARTICLE VIII Owner Default Section 8.1. Defined. A default by Owner under this Agreement shall occur if(a) Owner violates, breaches, or fails to comply with any provision of, or obligation under, this Agreement (including, without limitation, by reason of its violation, breach, or failure to comply with any governing law, regulation, or agreement referenced in Section 3.1 hereof); or (b) Owner asserts or demonstrates an intention to violate, breach or fail to comply with any such provision or obligation. A default by Owner which is attributable to an action or omission, or assertion or demonstration of an intended action or omission, of the Managing Agent shall be deemed a default by Owner for purposes of this Article. Section 8.2. Nntifientinn. Upon a determination by the Authorities that a default by Owner has occurred, the Authorities shall notify Owner of (a) the nature of the default, (b) the actions required to be taken by Owner to cure the default, and (c) the time within which Owner shall respond with a showing that all required actions have been taken, which period of time shall be not less than that reasonably necessary to affect a cure. If the default or alleged default is attributable to the Managing Agent, the Authorities shall give a copy of such notice to the Managing Agent. Section 8.3. MPlqA Remedies. If Owner (or, as applicable, the Managing Agent) fails to respond or take corrective action to the reasonable satisfaction of the Authorities, the Authorities shall have the right to (a) Withhold further Development Operating Subsidy payments until such time as such corrective action is taken. All Development Operating Subsidy payments so withheld shall be forfeited by the Owner and retained by the MPHA and such withholding and forfeiture shall not constitute an event of default with respect to any agreement between the Owner and the MPHA which would excuse the continued operation of the Authority Units as public housing units in accordance with the ACC and Declaration of Restrictive Covenants. (b) Exercise any remedy available to it by reason of the nature of such default under and in accordance with the terms of this Agreement, the Housing Agreement or the ACC, to insti.tute the dispute resolution procedure set forth in Exhibit B hereto, or to seek appropriate relief in any court having jurisdiction, including but not limited to specific performance or injunctive relief. C:\WINDOWS\TEMP\i 1 REGOPRAG.DOC 19 REGULATORY AND OPERATING AGREEMENT ARTICLE IX Dinclaimer of Relationships Section 9.1. No As.~i~nment of ACC. The Authorities and Owner acknowledee that any transfer of public housing development grant funds by the MPHA to Owner shall nt~t be or b$ deemed to be an assignment of grant funds, and Owner shall not succeed to any riehts or benefits of the MPHA under the ACC, or attain any privileges, authority, interests, or'rights in or under the ACC. Section 9.2. No Third Party glenefieiary. Nothing contained in the ACC or in any agreement between the Authorities a~d Owner, nor any act of HUD or the Authorities, shall be deemed or construed to create any relationship of third-party beneficiary, principal and agent, limited or general parmership, joint venture, or any association or relationship involvine HUD, except between HUD and the MPHA as provided under the terms of the ACC. ~ C:\WINDOWS\TEMPkl 1 ILEGOPRAG.DOC 20 REGULATORY AND OPERATING AGREEMENT ARTICLE X Section 10.1. Binding Ohligaficm, This Agreement shall continue in full force and effect during the entire term of the ACC, or for such shorter period during which the Authority Units shall be required by law or by the ACC to be set aside, and maintained and operated, as public hous. in.g. Through the recording of a Declaration of Restrictive Covenants, the obligations and restncuons contained herein shall run with the land and bind all future owners and encumbrancers thereof. Section 10.2. A.q.qiLmmenI, This Agreement shall be binding upon and inure to the benefit of the successors and assigns of each of the parties; provided, however, that Owner may not assign its interest in the Agreement without the prior written consent of the Authorities and I-ILrD, which shall not unreasonably be with.held. The Authorities shall have the right to assign their interests in this Agreement, including the right of the MPHA to assign its interest as described in Section 4.12, without further consent of the Owner. Section 10.3. N,~ Waiver. No delay or omission by either party in exemising any right or remedy available hereunder shall impair any such right or remedy or constitute a waiver thereof in the event of any subsequent occasion giving rise to such right or availability of remedy, whether of a similar or dissimilar nature. Section 10.4. Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties and approved by HUD. Section 10.5. Nntiee Any notice or other communication given or made pursuant to this Agreement shall be in writing and shall be deemed given if(a) delivered personally or by courier, (b) telecopied, (c) sent by overnight express delivery, or (d). mailed by registered or certified mail (return receipt requested), postage prepaid, to a party at its respective address set forth below (or at such other address as shall be specified by the party by like notice given to the other party): To the MPHA: Minneapolis Public Housing Authority in and for the City of Minneapolis 1001 North Washington Avenue Minneapolis, Minnesota 55401 Attention: Executive Director To the EDA: Economic Development Authority in and for the City of New Hope 4401 Xylon Avenue North New Hope, Minnesota 55428-4898 Attention: Executive Director To the Owner: Bass Lake Apartments LLC 1925 Chicago Avenue South Minneapolis, Minnesota 55404 Attention: Project for Pride in Living, Inc. Barbara McCormick, Vice President All such notices and other communications shall be deemed given on the date of personal or local courier delivery, telecopy transmission, delivery to overnight courier or express delivery service, or deposit in the United States Mail, and shall be deemed to have been received (a) in the C:\WINDOWS\TEMP\I 1 REGOPRAG.DOC 21 REGULATORY AND OPERATING AGREEMENT case of personal or local courier delivery, on the date of such delivery, (b) in the case of telecopy, upon receipt of electronic confirmation thereof, (c) in the case of delivery by overnight courier or express delivery service, on the date following dispatch, and (d) in the case of mailing, on the date specified in the return receipt therefor. Section 10.6. Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed therein. Section 10.7. Severability. If any provision of this Agreement is declared void or otherwise unenforceable, that provision shall be deemed to have been severed from this Agreement and the remainder of this Agreement shall otherwise remain in full force and effect. Section 10.8. Headings and Titles. Any titles or headings of the several parts, Articles and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. C:\WINDOWSXTEMP~I I REGOPRAG.DOC 22 REGULATORY AND OPERATING AGREEMENT IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS By: Comell L. Moore Its Chairman And by: Cora McCorvey Its Executive Director STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) ) SS. On this ~ day of April, 2003, before me, a notary public, personally appeared Comell L. Moore and Cora McCorvey, the Chairman and Executive Director, respectively, of the Minneapolis Public Housing Authority in and for the City of Minneapolis, a public body corporate and politic under the laws of the State of Minnesota (the "MPHA"), named in the foregoing instrument and acknowledged said instrument on behalf of the MPHA. Notary Public C:\WINDOWS\TEMP\I ! KEGOPRAG.DOC REGULATORY AND OPERATING AGREEMENT ECONOMIC DEVELOPMENT AUTHORITY AND FOR THE CITY OF NEW HOPE By: Its: And by Its STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) ) SS. On this ~ day of ., 2003, before me, a notary public, personally appeared and the and respectively, of the Economic Development Authority in and for the City of New Hope, a public body corporate and politic under the laws of the State of Minnesota (the "EDA"), named in the foregoing instrument and acknowledged said instrument on behalf of the EDA. Notary Public C:\WINDOWS\TEMP\i 1 REGOPRAG.DOC REGULATORY AND OPERATING AGREEMENT BASS LAKE APARTMENTS LLC BY: PROJECT FOR PRIDE IN LIVING, INC. ITS SOLE MEMBER By: Barbara McCormick Its Vice President STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) SS. On this day of ,2003, before me, a notary public, personally appeared Barbara McCormick, the Vice President, of Project for Pride in Living, Inc., the sole member of Bass Lake Apartments LLC, a Minnesota limited liability company, named in the foregoing instrument and acknowledged said instrument on behalf of the company. Notary Public C:\WINDOWS\TEMP\I I REGOPRAG.DOC REGULATORY AND OPERATING AGREEMENT EXHIBIT A Develonment ~ite The East 1/3 of Lot 35, lying South of the North 1138.67 feet thereof, excepting the West 30 feet and the South 33 feet thereof, Auditor's Subdivision 226, Hennepin County, Minnesota. C:\WINDOW~TEMP\I 1 REGOPRAG.DOC A-1 REGUI..ATORY AND OPERATING AGREEMENT EXHIBIT B Di~nnte Re~nlntinn Prneedure~ (1) The MPHA shall give written notice thereof to the Owner, describing briefly the nature of its disagreement with the Owner. The date of receipt of such notice shall constitute the Submission Date. (2) The parties shall have five (5) days fi.om the Submission Date to agree upon a mutually acceptable neutral person not affiliated with either of the parties (the "Neutral"). If no Neutral has been selected within such time, the parties agree jointly to request the American Arbitration Association to supply within five (5) days a list of potential Neutrals with qualifications as specified by the parties in the joint request. Within five (5) days of receipt of the list, the parties shall simultaneously exchange rankings, and shall select as the Neutral the individual receiving the highest combined ranking who is available to serve. (3) In consultation with the Neutral, the parties shall promptly designate a mutually convenient time and place for the Mediation and unless circumstances require otherwise, such time to be not later than ten (10) days after selection of the Neutral. (4) In the event either of the parties has substantial need for information in the possession of the other party in order to prepare for the Mediation, the parties shall attempt in good faith to agree on procedures for the expeditious exchange of such information, with the help of the Neutral if required. (5) One week prior to the first scheduled session of the Mediation, each party shall deliver to the Neutral and to the other party a concise written summary of its view as to the facts in connection with the matter in dispute. (6) In the Mediation, each party shall be represented by such persons, including counsel, as needed to respond to questions, contribute information and participate in the negotiations, the number of such additional persons to be agreed upon by the parties in advance, with the assistance of the Neutral, if necessary (the "Participating Persons"). (7) The parties, in consultation with the Neutral, will agree upon a format for the meetings, designed to assure that both the Neutral and Participating Persons have an opportunity to hear an oral presentation of each party's view on the matter in dispute, and that the Participating Persons attempt to negotiate a resolution of the matter in dispute, with or without the assistance of counsel or others, but with the assistance of the Neutral. To this end, the Neutral is authorized to conduct both joint meetings and separate private caucuses with the parties. During the Mediation the Neutral will be free to divulge to either party all information learned in private caucus with either party unless specifically requested by a disclosing party to keep such information confidential as to the other party. (8) The Neutral, not later than thirty (30) days after the first scheduled session of the Mediation, (i) shall provide his or her opinion to both parties on matter being mediated and the probable outcome of litigation, and (ii) shall make one or more recommendations as to the terms of a possible settlement, upon any conditions imposed by the parties. The Neutral shall base his or her opinions and recommendations on information then requested by the parties to be kept confidential. The opinions and recommendations of the Neutral shall not be binding on the parties. C:\WINDOWS\TEMP\i I REGOPRAG.DOC B- 1 REGULATORY AND OPERATING AGREEMENT (9) The parties agree to participate in the Mediation to its conclusion (as designated by the Neutral) and not to terminate negotiations concerning resolution of the matters in dispute until at least ten (10) days thereafter. Each party agrees not to commence litigation or seek other remedies prior to the conclusion of the ten (10) day post-Mediation negotiation period; provided, however, that either party may commence litigation within thirty (30) days prior to the date after which the commencement of litigation could be barred by an applicable statute of limitations or at any time in order to request an injunction to prevent irreparable harm or other equitable relief, in which event, the parties agree (except as prohibited by court order) to nevertheless continue to participate in the Mediation to its conclusion. (1 O) The fees of the Neutral shall be shared equally by the parties. The Neutral shall be disqualified as a witness, consultant, expert or counsel for either party with respect to the matters in dispute and any related matters. (11) The Mediation is a compromise negotiation for purposes of applicable State and Federal Rules of Evidence. The entire procedure is confidential, and no stenographic, visual or audio record shall be made. All conduct, statements, promises, offers, view and opinions, whether oral or written, made in the course of the Mediation by either of the parties, their agents, employees, representatives or other invitees and by the Neutral (who will be the parties' joint agent for purposes of these compromise negotiations) are confidential and shall, in addition and where appropriate, be deemed to be work product and privileged. Such conduct, statements, promises, offers, views and opinions shall not be discoverable or admissible for any purposes, including impeachment, in any litigation or other proceeding involving the parties, and shall not be disclosed to anyone not an agent, employee, expert, witness, or representative of any of the parties; provided, however, that evidence otherwise discoverable or admissible is not excluded from discovery or admission as a result of its use in the Mediation. C:\WINDOWS\TEMP\i 1 REGOPRAG.DOC B-2 REGULATORY AND OPERATING AGREEMENT Line 1 Line 2 EXHIBIT C Development O.neratin~ ~qnh.qidy Cap Workaheet Development Name: Bass Lake Apartments Annual MPHA Operating Subsidy Approved by HUD for the next fiscal year Rooms in all MPHA units by size of unit Line 3 Line 4 Line 5 #units (a) 0 BR x 3.5 = (b) 1 BR x 3.5 = (c) 2 BR x 4.5 = (d) 3 BR x 6.0 = (e) 4+ BR x 7.0 = Line 6 Line 7 Sum of all rooms in all MPHA units (sum of Lines 2(a) through 2(e)) Average annual MPHA Subsidy Per Room (Line 1 divided by Line 3) Rooms in Authority Units by size of unit #units (a) 0 BR x 3.5 = (b) 1 BR x 3.5 = (c) 2 BR x 4.5 = (d) 3 BR x 6.0 = (e) 4+ BR x 7.0 = Sum of all rooms in all Authority Units (sum of Lines 5(a) through 5(e)) Development Operating Subsidy Cap (Line 6 times Line 4) C:\WINDOWS\TEMP\I IREGOPRAG.DOC D- I REGULATORY AND OPERATING AGREEMENT Line 1 Line 2 (a) (b) (c) (d) (e) Line 3 Line 4 Line 5 (a) (b) (c) (d) (e) Line 6 Line 7 EXHIBIT C Development Operating Subsidy Cap Worksheet (EXAMPLE) Development Name: Bass Lake Apartments Annual MPHA Operating Subsidy Approved by HUD for the next fiscal year 15,730,765.00 Rooms in all MPHA units by size of unit #units 0 BR 955 x 3.5 = 1 BR 3,895 x 3.5 = 2 BR 280 x 4.5 = 3 BR 447 x 6.0 = 4+ BR 278 x 7.0 = 3,342.50 13,632.50 1,260.00 2,682.00 1,946.00 22,863.00 688.04 Sum of all rooms in all MPHA units (sum of Lines 2(a) through 2(e)) Average annual MPHA Subsidy Per Room (Line 1 divided by Line 3) Rooms in Authority Units by size of unit #units 0 BR 0 x 3.5 = 1 BR 0 x 3.5 = 2 BR 4 x 4.5 = 3 BR 0 x 6.0 = 4+ BR 0 x 7.0 = 18.00 18.00 Sum of all rooms in all Authority Units (sum of Lines 5(a) through 5(e)) Development Operating Subsidy Cap (Line 6 times Line 4) 12,384.72 C:\WINDOWS\TEM]~.i IREGOPRAG.DOC D-2 REGULATORY AND OPERATING AGREEMENT EXECUTION COPY 04/23/2003 PROPERTY MANAGEMENT AGREEMENT between BASS LAKE APARTMENTS LLC and PROJECT FOR PRIDE IN LIVING, INC. Dated as of ., 2003 This Document Prepared by: HOLMES & ASSOCIATES, LTD. Two Carlson Parkway, Suite 155 Minneapolis, MN 55447 Telephone: 763-249-0888 Facsimile: 763-249-0777 C:\WINDOWS',TEMP\I 2ABASSLAKEMNGMTAG.DOC PROPERTY MANAGEMENT AGREEMENT TABLE OF CONTENTS OF PROPERTY MANAGEMENT AGREEMENT PREAMBLE Section 1.01. Section 1.02. Section 1.03. ARTICLE I Scope; Representations and Covenants Appointment and Acceptance .................................................................................. 2 Representations and Covenants of the Managing Agent ......................................... 3 Definitions ........... 3 Section 2.01. Section 2.02. Section 2.03. Section 2.04. ARTICLE II General Functions of ManaRin£ Agent Basic Information ..................................................................................................... 5 Insurance ........ .. ......................................................................................................... 5 Non-discrimination .................................................................................................. 5 Meetings and Conferences with Owner ................................................................... 5 Section 3.01. Section 3.02. Section 3.03. Section 3.04. Section 3.05. Section 3.06. ARTICLE III Rental Marketing ..................................................................................... i ........................... 6 Authority Units ........................................................................................................ 6 Tenant Selection ....................................................................................................... 7 Income Certifications ............................................................................................... 8 Enforcement of Leases ............................................................................................. 9 Inspections ............................................................................................................... 9 ARTICLE IV Collection and Deposit of Rents, Security Deposits and Public Housing Fund:: Section 4.01. Section 4.02. Section 4.03. Collection of Rents ................................................................................................ 11 Security Deposit Account ...................................................................................... 11 Public Housing Funds ............................................................................................ 11 C:\WINDOWS\TEMP\I 2ABASSLAKEMNGMTAG.DOC i PROPERTY MANAGEMENT AGREEMENT Section 5.01. Section 5.02. Section 5.03. Section 5.04. Section 5.05. Section 5.06. ARTICLE V Maintenance and Repairs Maintenance and Repair ......................................................................................... 12 Taxes ...................................................................................................................... 12 Compliance with Government Orders ................................................................... 13 Utilities and Services ............................................................................................. 13 Bids and Discounts ................................................................................................ 13 Safety and Health Regulations ............................................................................... 13 Section 6.01. Section 6.02. Section 6.03. ARTICLE VI Employees Employees .............................................................................................................. 14 Fidelity Bond .......................................................................................................... 14 Training .................................................................................................................. 15 Section 7.01. Section 7.02. Section 7.03. Section 7.04. ARTICLE VII The Development Revenue and Expense Account Disbursements, from Development Revenue and Expense Account ......................16 Managing Agent's Compensation .......................................................................... 16 Deficiencies ............................................................................................................ 17 Development Budget .............................................................................................. 17 Section 8.01. Section 8.02. Section 8.03. ARTICLE VIII Record and Reports Records and Reports .............................................................................................. 18 Owner's Right to Re-Allocate Functions ............................................................... 19 Owner's Responsibility .......................................................................................... 19 Section 9.01. ARTICLE IX Term of Agreement Term of Agreement ................................................................................................ 20 C:\WINDOWS\TEMI~,I 2ABASSLAKEMNGMTAG.DOC ii PROPERTY MANAGEMENT AGREEMENT ARTICLE X Indemnities Section 10.01. Owner's Indemnities ............................................................................................... 22 Section 10.02. Managing Agent's Indemnities .............................................................................. 22 Section 10.03. Exceptions ............................................................................................................. 22 ARTICLE XI Additional Provisions Section Section Section Section Section Section Section Section Section Section Section 11.06. 11.07. 11.08. 11.09 11.10. 11.11. 11.01. Successors .............................................................................................................. 23 11.02. Addresses and Notices ........................................................................................... 23 11.03. Title and Captions .................................................................................................. 23 11.04. Further Action ........................................................................................................ 23 11.05. Applicable Law ...................................................................................................... 23 Amendment ............................................................................................................ 23 Assignment ............................................................................................................ 24 Waiver .................................................................................................................... 24 Interpretative Provisions ........................................................................................ 24 Availability of_Funds ............................................................................................. 24 Counterparts ........................................................................................................... 24 TESTIMONIUM SIGNATURES EXHIBIT A EXHIBIT B EXHIBIT C Legal Description Management Plan Authority Unit Lease Form C:\WINDOWS\TEMP\I 2 ABASSLAKEMNGMTAG.DOC 111 PROPERTY MANAGEMENT AGREEMENT PROPERTY MANAGEMENT AGREEMENT This Agreement is made this __ day of ,2003 between the BASS LAKE APARTMENTS LLC, a Minnesota limited liability company (the "Owner"), and PROJECT FOR PRIDE IN LIVING, INC., a Minnesota nonprofit corporation (the "Managing Agent"). WHEREAS, the Owner is renovating an eleven (11) unit multifamily housing project in the City of New Hope (the "City"), Minnesota known as Bass Lake Apartments (the "Development"); and WHEREAS, pursuant to a consent decree entered in the case of Hollman et al. v. Cisneros et al., U.S.D.C. (Minn. Dist., 4th Div.) Civil No. 4-92-712 ("Consent Decree") certain low income public housing units located within the City of Minneapolis are to be demolished and replaced with new units throughout the Minneapolis-St. Paul metropolitan area; and WHEREAS, pursuant to Section 5 of the United States Housing Act of 1937 (the "Act"), the Minneapolis Public Housing Authority in and for the City of Minneapolis ("MPHA") and the United States Department of Housing and Urban Development ("HUD") are parties to an Annual Contributions Contract Amendment ("ACC"), in accordance with which the MPHA has been granted funding in cooperation with the City and the Economic Development Authority in and for the City of New Hope (the "EDA") for four (4) low income public housing units (the "Authority Units") within the Development; and WHEREAS, the construction and operation of the Authority Units is subject to the terms and conditions of an existing Housing Development Agreement (the "Housing Agreement") and a Regulatory and Operating Agreement (the "Regulatory Agreement") between the MPHA, the EDA and the Owner; and WHEREAS, the Owner wishes to appoint the Managing Agent as its agent for purposes of managing the Development, which include the Authority Units. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: C :\WINDOWS~TEMP~ 12ABASSLAKEMNGMTAG.DOC 1 PROPERTY MANAGEMENT AGREEMENT ARTICLE I Scope; Representations and Covenants Section 1.01. Appointment and Acceptance. (a) The Owner appoints the Managing Agent as exclusive agent for the management of the Development, and the Managing Agent accepts the appointment, subject to the terms and conditions set forth in this Agreement. The Managing Agent agrees that it will operate the Development in a first class manner; provided, however, that this Agreement shall not shift to the Managing Agent nor relieve the Owner of any of the Owner's responsibilities or obligations under the Act, the ACC, the Consent Decree, the Housing Agreement and the Regulatory Agreement (sometimes collectively called the "Housing Covenants") or under any agreement to which the Owner is a party. (b) Attached to this Agreement as "Exhibit B" and incorporated herein by reference is a copy of a Management Plan (the "Management Plan") for the Development, which contains a detailed description of the policies and procedures to be followed in the management of the Development. In many of its provisions, this Agreement briefly defines the nature of the Managing Agent's obligations, with the intention that reference is made to the Management Plan for more detailed policies and procedures. Accordingly, the Managing Agent and the Owner will comply with applicable provisions of the Management Plan, regardless of whether specific reference is made thereto in any particular provision of this Agreement. To the extent the Management Plan and this Agreement are inconsistent, this Agreement shall control. (c) The Managing Agent hereby agrees to perform for and on behalf of the Owner all rights, powers, authorities and obligations of the Owner under and pursuant to the Management Plan and any relevant portions of the Housing Covenants pertaining to the day-to-day operation and maintenance of the Development and the use of the land constituting the site of the Development as described in Exhibit A hereto; it being acknowledged and agreed that the agency relationship hereby created is for the benefit and security of HUD and the MPHA under the Housing Covenants and that this Agreement cannot be modified or terminated or the obligations of the Managing Agent hereunder modified in any material way or terminated without the express prior written consent of the MPHA. (d) All third parties in dealing with the Managing Agent as agent under this Agreement shall have the right to rely upon the authority of the Managing Agent without any investigation or inquiry and such third parties shall not be responsible to see to the application of any funds paid or delivered to said Managing Agent. C:\WINDOWS\TEM P\ 12ABASSLAKEMNG/ViTAG.DOC 2 PROPERTY MANAGEMENT AGREEMENT Section 1.02. Representations and Covenants of the Managing Agent. (a) The Managing Agent hereby represents and wan'ants that some of its officers and owners have at least five (5) years of demonstrated experience in the management and leasing of low income housing developments; and (b) the Managing Agent hereby covenants and wan'ants that it will not: (1) commit or suffer waste, or fail to use its best efforts to prevent any other person from committing or suffering waste at the Development, (2) cause or permit the Development (subject to the availability of sufficient funds from Development revenues or other funds provided by the Owner or the MPHA) to be repaired, replaced, operated, managed or maintained in a negligent manner, (3) cause or permit development revenues in its possession or under its control to be paid or disbursed to any person other than for deposit in the Development Revenue and Expense Account (as hereinafter defined), except in accordance with this Agreement, or (4) take any actions or permit any actions within its control to be taken which are intended to cause any reduction in value or loss or damage to the Development, or (5) take any action or permit any actions within its control to be taken which would, to the knowledge of the Managing Agent, violate the Housing Covenants. All of the obligations, representations and undertakings of the Managing Agent in this Agreement shall be subject to the following conditions: (i) Funding must be provided from the Development Revenue and Expense Account or by the Owner in an amount sufficient to pay for and compensate those items required by this Agreement to be paid by the Owner or from the Development Revenue and Expense Account. (ii) The Managing Agent shall only be responsible for performing those specific obligations of which the Managing Agent has actual knowledge or of which the Managing Agent should have had actual knowledge. (iii) The Managing Agent shall not be responsible for any omissions or commissions to the extent limited or directed by express instructions of the Owner. (b) The Managing Agent shall carry out the obligations of the Owner as set forth in the Housing Covenants and as they relate to the management and operation of the Development; provided, however, that assumption of such obligations by the Managing Agent shall not relieve the Owner of the responsibility therefor. (c) The Managing Agent understand that the Owner may be receiving federal subsidy derived from the MPHA ACC with HUD and that the Managing Agent, on behalf of the Owner, must comply with the requirements of the Housing Covenants. The Managing Agent further understands that, pursuant to the Regulatory Agreement, failure of the Managing Agent to comply with the Housing Covenants or MPHA administrative policies may result in the withholding of such federal subsidy. C:\WINDOWS~TEMP\I 2 ABASSLAKEMNGMTAG.DOC 3 PROPERTY MANAGEMENT AGREEMENT Section 1.03. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Housing Covenants. Unless the context otherwise specifies or requires a different meaning or intent, the words and terms herein shall have the meanings specified in the Housing Covenants, except that the words "hereof," "herein," "hereunder" or other words of similar import refer to this Agreement as a whole and the following words have the following definitions unless used otherwise in this Agreement: (a) "Development Fiscal Year" means the twelve-month period commencing January 1 and ending December 31. (b) "Development Budgets" means the Development Budgets to be prepared periodically pursuant to Section 7.04 hereof. (c) "Development Revenue and Expense Account" means an account established by the Managing Agent in the name of the Owner into which the Managing Agent shall deposit all revenues derived from the Development and from which the Managing Agent, on behalf of the Owner, shall pay all expenses related to the Development. (d) "Development Security Deposit Account" means an account established by the Managing Agent in the name of the Owner into which all tenant security deposits shall be deposited, invested and returned in accordance with Section 4.02 of this Agreement. (e) "LIPH" means the low income public housing units. (f) "MPHA Fiscal Year" means the twelve-month period commencing October 1 and ending September 30. '(g) "State" means the State of Minnesota. C:\WINDOWS\TEMP\I 2ABASSLAKEMNGMTAG.DOC 4 PROPERTY MANAGEMENT AGREEMENT ARTICLE II General Functions of Managing Agent Section 2.01. Basic Information. The Owner will furnish the Managing Agent with a complete set of the construction plans and specifications and copies of all guaranties and warranties pertinent to construction, fixtures, and equipment incorporated into the Development. With the aid of this information and inspection by competent personnel, the Managing Agent will thoroughly familiarize itself with the character, location, construction, layout, Management Plan and operation of the Development, and especially of the electrical, heating, plumbing, air- conditioning and ventilating systems, the elevators and other mechanical equipment. Section 2.02. Insurance. (a) The Owner will inform the Managing Agent of insurance to be carried with respect to the Development and its operations and, subject to the provisions of Subsection (b) hereof, the Managing Agent will cause such insurance to be placed and kept in effect at all times with such companies on such conditions, in such amounts and with such beneficial interest appearing thereon as shall be acceptable to the Owner. Owner will maintain liability policies in an amount required by the MPHA naming the Managing Agent as an additional insured. (b) Premiums and any other amounts payable with respect to insurance required in Subsection (a) above shall be paid from the Development Revenue and Expense Account for the Development established hereunder or from other moneys of the Owner. (c) The Managing Agent shall investigate all accidents, claims, and potential claims for damages relating to the Development and shall notify the Owner and shall cooperate with the Owner and the insurance company in connection therewith. Section 2.03. ..Non-discrimination. In the performance of its obligations under this Agreement, the Managing Agent will comply with the applicable provisions of any federal, State, or local law prohibiting discrimination in housing on the grounds of race, color, creed, religion, sex, marital status, status with regard to public assistance, disability, familial status, sexual orientation or national origin, including Title VI of the Civil Rights Act of 1964 (Public Law 88- 352, 78 Stat. 241), all requirements imposed by or pursuant to the Regulations of HUD (24 CFR, Subtitle A, Part 1) issued pursuant to that Title; regulations issued pursuant to Executive Order 11063, and Title Vlll of the 1968 Civil Rights Act. Section 2.04. Meetings and Conferences with Owner. The Managing Agent shall cause a representative of the Managing Agent to attend meetings and to confer with the Owner with respect to the Development and the Managing Agent's duties under this Agreement on a periodical basis as requested by the Owner. C:\WINDOWS\TEMP,,i 2ABASSLAK.EMNGMTAG.DOC 5 PROPERTY MANAGEMENT AGREEMENT ARTICLE III Rental Section 3.01. Marketing. During the initial rent-up period, the Managing Agent, with the cooperation of the Owner, shall conduct a marketing and promotional campaign to lease up the Development. The Managing Agent will offer for rent and will rent the dwelling units, parking spaces, and other rental facilities and concessions in the Development. Incident thereto, the Managing Agent will make all necessary preparations for rent-up in a timely manner and in harmony with the marketing requirements of the Development including but not limited to those prescribed in the Management Plan. Section 3.02. Authority Units. (a) All parties hereto acknowledge that the goal of achieving long-term sustainability of the Development as a mixed-income community will be enhanced by administrative procedures and terms and conditions of occupancy which reduce discernible distinctions in maintenance and operation, and conditions of continued occupancy, between the Authority Units and other units in the Development to the greatest extent feasible while assuring that the Authority Units are available to house families ~vho meet the occupancy objectives of the MPHA and EDA. This Agreement enumerates certain respects in which operating procedures and other requirements as to the Authority Units will differ from those in effect with respect to public housing units owned by the MPHA. The parties agree that, if experience demonstrates a need for or the desirability of further departures from standard procedures applicable to MPHA-owned public housing, they will consult with each other regarding such further modifications and will take such further implementing steps as they agree to be advisable, including, as appropriate, requests to HUD for revision or waiver of regulations necessary to permit the MPHA to undertake measures that enhance the long-term viability of the Development, or requests to implement statutory revisions made by Congress from time to time affecting either public housing in general or public housing located within privately-owned mixed-income communities in particular. (b) The Managing Agent, property managers/supervisors and on-site office staff appointed or assigned to the Development and all site personnel shall carefully review and become familiar with all regulatory requirements applicable to LIPH. Key members of the aforementioned personnel (the "Staff") shall attend LI?H compliance training as soon as is practicable. At least once every 2 years thereafter, the Staff must attend seminars, conference and/or workshops on the LIPH to ensure continued knowledge of and compliance with LIPH regulations and policies, as may be periodically amended by HUD. The Managing Agent shall ensure that the Authority Units are operated and managed in compliance with all of the foregoing, cooperate with MPHA, HUD and other governmental authorities in connection therewith; and inform the Owner of any such information which may subsequently become available, which may be material to C:\WINDOWS\TEMP\i 2ABASSLAKEMNOMTAG.DOC 6 PROPERTY MANAGEMENT AGREEMENT the operation and management of the Authority Units and/or Owner's investment therein. (c) Owner shall provide the Managing Agent with copies of the following MPHA policies and documents in a timely manner: (i) Leasing; (ii) Admissions; (iii) Rent Calculation; (iv) Occupancy Standards; (v) Security Deposits; (vi) Grievance Procedures; (vii) Regulatory and Operating Agreement; and (viii) Housing Development Agreement. (d) The Owner further agrees to provide the Managing Agent with amendments, changes, rulings and announcements to the aforementioned documents, as they may occur. The Managing Agent agrees to provide copies of documents for the Staff. Current copies are to be maintained at the Development for the duration of the compliance period required by the Authority Units. (e) The Managing Agent will provide MPHA with a copy of all tenant file documentation for any and all tenants who occupied an Authority Unit in the Development from the date the Development was placed in service through December 31 of the following year. Such documentation will be submitted to MPHA within thirty (30) days of said December 31 date. Section 3.03. Tenant Selection. (a) The Managing Agent will follow the resident selection policy described in the Management Plan. (b) The Managing Agent will show the premises to prospective residents. (c) With respect to all units within the Development, the Managing Agent will take and process applications for rentals and shall perform all applicant screening, income and data verification, income recertification, background investigations and unit assignments. If an application for an Authority Unit is rejected, the applicant will be told the reasons for rejection, and the rejected application, with reason for rejection noted thereon, will be kept on file for three (3) years. A C:\WINDOWS\TEMP\i 2 ABASSLAKEMlqOMTAG.DOC PROPERTY MANAGEMENT AGREEMENT current list of prospective residents will be maintained. In the event this Agreement is terminated or not renewed for any reason, Managing Agent shall forthwith deliver to Owner Managing Agent's list of prospective or rejected tenants. (e) (0 (d) With respect to the Authority Units, the MPHA and EDA shall create, maintain and manage one or more waiting lists in accordance with the Housing Covenants. When a vacancy will occur in an Authority Unit, the Managing Agent shall request and the MPHA shall supply to the Managing Agent the names of potentially eligible tenants for the Authority Units. Screening criteria and procedures employed by the Managing Agent with respect to applicants for Authority Units shall, to the extent permissible under the Housing Covenants, be no more restrictive than those utilized by the Managing Agent with respect to other units in the Development; provided that at all times such procedures shall be fair and evenhanded and shall not be more stringent as they relate to waiting list applicants than other applicants. The MPHA shall have the right to monitor the procedures and results of the Managing Agent's activities in this regard. The MPHA shall establish procedures for formal and informal review of eligibility or suitability determinations for applicants for admission to the Authority Units, consistent with HUD regulations. Application fees shall not be charged applicants for the Authority Units. Any applicant initially denied admission to an Authority Unit shall be advised of the reason or reasons for the denial and shall be offered an opportunity for a hearing under established grievance procedures. The Managing Agent will prepare all rent calculations and dwelling leases and parking permits in the name of the Owner and will execute the same as agent for the Owner. The terms of all leases will comply with the pertinent provisions of state and local law. Dwelling leases will be in a form approved by the Owner, but individual dwelling leases and parking permits need not be submitted for approval by the Owner. Leases for the Authority Units will be on the form attached hereto as Exhibit C, subject to such changes as shall be approved in writing by the MPHA and HUD. The Owner will furnish the Managing Agent with rent schedules from time to time. (g) The Managing Agent will negotiate concession agreements, and will execute the same in the name of the Owner, identified thereon as agent for the Owner, subject to the Owner's prior approval of all terms and conditions. (h) The Managing Agent will comply with all policies of the Owner regarding rentals. Section 3.04. Income Certifications. Prior to move-in on an interim basis as necessary and at least annually thereafter, the Managing Agent shall certify/recertify incomes of tenants as required by the Housing Covenants for LIPH. An annual report regarding the Authority Units shall be forwarded to the MPHA. Tenant incomes must be in compliance with the Act, any C:\WINDOWS\TEMP\I 2ABASSLAKEMNGMTAG.DOC 8 PROPERTY MANAGEMENT AGREEMENT subsidy contract for the Development and/or as required by any federal or state law relating to the use of proceeds for the funding of the Development's grant. Section 3.05. Enforcement of Leases. (a) The Managing Agent will use its best efforts to secure full compliance by each resident with the terms of his/her lease. Subject to the pertinent procedures prescribed in the Management Plan, the Managing Agent may lawfully terminate any tenancy when, in the Managing Agent's judgment, sufficient cause (including but not limited to nonpayment of rent) for such termination occurs under the terms of the resident's lease. For this purpose, the Managing Agent is authorized to consult with legal counsel to be designated by the Managing Agent, subject to reasonable approval of the Owner, to bring actions for evictions and to execute notices to vacate and judicial pleadings incident to such actions; provided, however, that the Managing Agent will keep the Owner informed of such actions and will follow such instructions as the Owner may prescribe for the conduct of any such action. Subject to the Owner's approval, attorney's fees and other necessary costs incurred in connection with such actions will be paid out of the appropriate Rental Project Account as Development expenses. (b) The MPHA will establish a tenant grievance procedure for residents of the Authority Units in compliance with the requirements of Section 6(k) of the Act and CFR Part 966 and consistent, to the maximum extent feasible, with the intent stated in Section 3.02 above. Such procedures will provide for informal discussion and settlement of grievances by the Managing Agent and hearing before a formal hearing panel appointed in accordance with such grievance procedures. The MPHA will seek HUD approval, to the extent required, of variations from the requirements of 24 CFR Part 966, Subpart B, as amended or replaced from time to time. (c) It is agreed that payments of Development Operating Subsidy from the MPHA shall be made directly to the Managing Agent. In the event that the MPHA does not provide the Managing Agent with the Development Operating Subsidy or the Development Operating Subsidy is inadequate to pay the difference between Authority Unit Income and Authority Unit Expenses, all as defined in Article IV of the Regulatory Agreement, the Managing Agent shall utilize funds in the Development Operating Subsidy Reserve as described in Section 5.6 of the Regulatory Agreement. In the event the Development Operating Subsidy Reserve reaches the levels described in Sections 6.3 and 6.4 of the Regulatory Agreement, the Owner and MPHA shall exercise the remedies provided therein. Section 3.06. Inspections. (a) The Managing Agent shall participate in the final inspection(s) to certify the readiness of the units for occupancy and shall (1) inform the Owner of any defects in material and workmanship discovered within the construction warranty period, C:\WINDOW~TEMPXl 2ABASSLAKEMNGMTAG.~ 9 PROPERTY MANAGEMENT AGREEMENT (b) (c) (d) and (2) participate in any formal inspection held for the purpose of identifying construction defects. Prior to occupancy of any unit by a resident, the Managing Agent and resident shall inspect the unit and both shall certify on forms prescribed by the Managing Agent, that they have inspected the unit and have determined it to be decent, safe, and samtary in accordance with the criteria provided in the prescribed terms. Copies of these repons shall be kept by the Managing Agent for at least three (3) years. The Managing Agent shall annually certify to the MPHA the condition of the Authority Units and cooperate with the MPHA in conducting semi-annual inspections of Authority Units as well as HUD-required REAC inspections. The Managing Agent shall permit the Owner and any of its invitees or representatives, to have reasonable access to the Development and any Development records, including those required to be maintained under the terms of this Agreement. The Managing Agent shall cooperate with respect to any on- site evaluations of the Development and its operation, maintenance and management. The Managing Agent shall apply its best efforts to correct within 30 days any shortfalls in the management, maintenance or evaluation of the Development reported by the Owner, and shall report to the Owner in writing about such shortfalls and the Managing Agent's efforts to correct them. C:\WINDOWS~TEMP\I2ABASSLAKEMNGMTAG.DOC 10 PROPERTY MANAGEMENT AGREEMENT ARTICLE IV Collection and Deposit of Rents~ Security Deposits and Public Housing Funds Section 4.01. Collection of Rents. The Managing Agent will collect when due all rents, late fees, service charges and all other amounts receivable on the Owner's account in connection with the management and operation of the Development. Such receipts from the Development (except for resident's security deposits, which will be deposited into the Development Security Deposit Account as specified in Section 4.02 below) will be deposited in a separate account for the Development, which is also separate from all other accounts and funds. The Managing Agent is hereby authorized to establish the Development Revenue and Expense Account and the Development Security Deposit Account that shall be insured by the Federal Deposit Insurance Corporation. These accounts will be carried in the Owner's name, but the Managing Agent or the Owner shall be entitled to withdraw funds from said account. Section 4.02. Security Deposit Account. Any funds collected as security deposits for the Development must be maintained in the Development Security Deposit Account, a trust account in the name of the Owner separate and apart from all other funds of the Development. The balance in each such account must at all times equal or exceed the Development's liability for tenant security deposits. The Managing Agent shall comply with State or local laws regarding investment of security deposits and distribution of any interest or other income earned thereon. Security deposits for the Authority Units will be handled in accordance with MPHA policies. Section 4.03. Public Housing Funds. All payments of Development Operating Subsidy made to the Development pursuant to the Regulatory Agreement shall be deposited by the Managing Agent into the Development Revenue and Expense Account. The Initial Deposit to the Authority Reserve shall be segregated and invested as set forth in Article V of the Regulatory Agreement. C:\WINDOWS~TF_,MP\I 2ABASSLAKEMNGMTAG.DOC 1 1 PROPERTY MANAGEMENT AGREEMENT ARTICLE V Maintenance and Repairs Section 5.01. Maintenance and Repair. The Managing Agent will cause the Development to be maintained and repaired in accordance with the Management Plan and local codes, and in a first class condition consistent with developments of a similar nature at all times acceptable to the Owner, including but not limited to cleaning, painting, decorating, plumbing. carpentry, grounds care, and such other maintenance and repair work as may be necessary, subject to any limitations imposed by the Owner in addition to those contained herein. Incident thereto, the following provisions will apply: (a) The Managing Agent will prepare, and adhere to, a preventive maintenance schedule approved by the Owner. Special attention will be given to preventive maintenance, and to the greatest extent feasible, the services of regular maintenance employees will be used. (b) Subject to the Owner's prior approval, the Managing Agent will coordinate the Owner's contracting with qualified independent contractors for the maintenance and repair of air conditioning systems and elevators, as appropriate, and for extraordinary repairs beyond the capability of regular maintenance and employees. (c) The Managing Agent will systematically and promptly receive and investigate all service requests from residents, take action thereon as may be justified, and will keep records of the same. Emergency requests will be received and serviced on a twenty-four (24) hour basis. Complaints ora serious nature will be reported to the Owner after investigation. (d) All health and safety deficiencies identified through its own inspections, those of the MPHA or the HUD-required REAC inspections shall be (1) remedied and certified to the MPHA as remedied within 24 hours of discovery. (d) All payments for purchase of all materials, equipment, tools, appliances, supplies and services necessary for proper maintenance and repair shall be made by Managing Agent from the Development Revenue and Expense Account as provided in Article VII hereof. Section 5.02. Taxes. (a) The parties hereto acknowledge that property taxes shall be paid by the Owner according to law. The Managing Agent shall obtain statements for ad valorem property taxes and assessments against the Development and transmit copies thereof to the Owner promptly upon receipt thereof by the Managing Agent. C:\WINDOWS\TEM~i 2ABASSLAICEMNGMTAG.DOC 12 ?~oP~'rv MANAGEMENT AGREEMENT (b) Pursuant to Minnesota Statutes, §469.040, the Authority Units are exempt from property taxation and instead the Owner will be obligated to forward pa.vments in lieu of taxes equal to five percent (5%) of "shelter rents," as defined therein. It shall be the duty of the Managing Agent to annually certify to the appropriate assessing officials the number of Authority Units in the Development and the obligation of the Managing Agent to calculate and provide to the Owner and MPHA the amount of such payments in such a manner as to permit the timely payment thereof. (c) Notwithstanding anything in the preceding paragraphs of this Section 5.02 to the contrary, the Owner or Managing Agent shall have the right at any time during the term of this Agreement to contest the amount of or assessment pertaining to real estate taxes, assessments, or any other imposition levied or imposed by any governmental authority concerning the Development. Section 5.03. Compliance with Government Orders. The Managing Agent shall promptly take such action as may be necessary to comply and cause the Development to comply with any and all governmental orders, or other requirements affecting the Development, of which Managing Agent knows or should have known, whether imposed by federal, State, county, or municipal authority; subject, however, to the expenditure approval stated in Article VII. Nevertheless, the Managing Agent shall take no such action so long as the Owner is contesting, or has affirmed its intention to contest, any such order or requirement. The Managing Agent will notify the Owner in writing of all notices of such orders or other requirements, within seventy- two (72) hours from the time of their receipt and promptly notify the Owner of the action proposed to be taken by the Managing Agent with respect thereto. Section 5.04. Utilities and Services. In accordance with the operating budget, the Managing Agent will make arrangements for water, electricity, gas, fuel, oil, sewage, and trash disposal, vermin extermination, decorating, laundry facilities, and telephone service, provided that contracts for such utilities and services shall be made with vendors proposed by the Managing Agent but in the name of and approved by Owner. Disbursements for such utilities and services shall be made by the Managing Agent as provided in Article VII hereof. Section 5.05. Bids and Discounts. The Managing Agent shall assist the Owner by soliciting bids and making recommendations regarding obtaining contracts, materials, supplies and services all in compliance with Minnesota law. The Managing Agent will secure to the Development all discounts, rebates or commissions obtainable with respect to purchases, service, contracts, and other transactions on behalf of the Development. The Managing Agent shall ensure that all goods and services purchased from individuals or companies having an identity- of-interest with the Managing Agent shall be purchased at costs not in excess of those that would be incurred in making arms-length purchases on the open market. In the event charges levied by a firm with an identity-of-interest with the Managing Agent exceed charges that were or would have been levied by non-identity-of interest firms for similar services or materials, the Managing Agent shall refund such excess to the Owner. Section 5.06. Safety and Health Regulations. The Owner and Managing Agent shall take such action as may be necessary to assure that the Owner and the Managing Agent are at all times C:\WrNDOWS\TEM P\ 12ABASSLAKEMNGMTAG.DOC 13 PROPERTY MANAGEMENT AGREEMENT in compliance with wage, hour, health, safety, and other federal, state, and local laws, ordinances, regulations, notices and orders of courts or other administrative bodies relating to their respective employees who furnish service in connection with the Development. C:\WINDOWSXTEMP\ 12ABASSLAICEMNGMTAG.DOC 14 PROPERTY MANAGEMENT AGREEMENT ARTICLE VI Employees Section 6.01. Employees. The Management Plan prescribes the number, qualifications and duties of the personnel to be regularly employed in the management of the Development, including Resident Managers, maintenance, bookkeeping, clerical, and other managerial employees. All such personnel will be hired, paid, supervised, and discharged subject to the following conditions: (a) As more particularly described in the Management Plan, the Resident Manager will have duties of the type usually associated with this position. He/She will be directly responsible to the Managing Agent. (b) The amount of compensation (including fringe benefits) of all on-site personnel will be as prescribed in the Management Plan. (c) (d) (e) Compensation (including fringe benefits) payable to any off-site bookkeeping, clerical, and other managerial personnel who are employees of the Managing Agent, plus all local, State and Federal taxes and assessments incident to the employment o{ such Personnel will be borne solely by the Managing Agent, and will not be paid out of Owner funds or treated as Development expenses. All such personnel will be employees of the Managing Agent and not the Owner, and will be hired, supervised, and discharged by the Managing Agent. Subject to Article VII hereof, the Owner will reimburse the Managing Agent for compensation (including fringe benefits) payable by the Managing Agent to on- site personnel, as prescribed in the Management Plan, and for all local, State and Federal taxes and assessments (including but not limited to Social Security taxes, unemployment insurance, and Workers Compensation insurance) incident to the employment of such personnel. Such reimbursements will be paid out of the appropriate Development Revenue and Expense Account, as provided in Article VII hereof, and will be treated as Development expenses. The rental value of any dwelling units furnished rent free to the Resident Managers will not be considered a part of his/her compensation, but will instead be treated as a cost to the Development. Provided such amounts are paid to Managing Agent in the first instance, Owner shall have no obligation with respect to employee withholding and taxes to assure that said amounts are timely paid to the proper third parties. All employees of the Managing Agent having access to any unit in the Development or access to keys to any unit in the Development shall undergo a criminal background check by the Managing Agent in accordance with the requirements of Minnesota Statutes, Sections 299C.66 to 299C.71. Section 6.02. Fideli~. The Managing Agent will furnish, at its own expense, an employee theft insurance policy in the principal sum of not less than the fully leased monthly C:\WINDOWS\TEMP\i 2ABASSLAKEMNGMTAG.DOC 1 $ PROPERTY MANAGEMENT AGREEMENT gross rent for all of the Development. Such employee theft insurance policy must contain conditions protecting the Owner against misapplication of Development funds by the Managing Agent and its employees and shall insure the Owner against any loss or damage by reason of any fraudulent or dishonest acts of any person acting on behalf of the Managing Agent. The other terms and conditions of the policy shall be subject to the approval of the Owner. The Managing Agent upon execution of this Agreement will deliver a certificate from its insurance company addressed to the Owner evidencing such insurance to be in effect. Section 6.03. Training. The Managing Agent shall provide training for key management personnel, including attendance at conferences and seminars on housing management. The Managing Agent will cooperate with the MPHA and EDA to facilitate resident awareness of and access to available social services. Such cooperation shall include keeping and displaying, on site, information concerning such services as is from time to time provided to the Managing Agent by the MPHA or such other entity or entities as designated by the MPHA. Training on public housing will be made available as needed by MPHA, however, Managing Agent is required to attend LIPH training as outlined in Section 3.02. C:\WINDOWS~TEMP\I2ABASSI..AKEMNGMTAG.DOC 16 PROPERTY MANAGEMENT AGREEMENT ARTICLE VII The Development Revenue and Expense Account Section 7.01. Disbursements from Development Revenue and Expense Accounl. (a) From the funds collected and deposited by the Managing Agent in the Development Revenue and Expense Account established pursuant to Section 4.01 above, the Owner will make the following disbursements promptly when payable upon written request of Managing Agent: (i) To the Managing Agent for compensation payable to the employees specified in Article VI above, and for the taxes and assessments payable to local, State, and Federal governments in connection with the employment of such personnel. (ii) The payments required to be made by the Owner for fire and other hazards and liability insurance premiums, all as required by the MPHA. (iii) All sums otherwise due and payable by the Owner as expenses of the Development authorized to be incurred by the Managing Agent under the terms of this Agreement, including compensation payable to the Managing Agent, pursuant to Section 7.02 below, for its service hereunder. In all cases, funds disbursed from the Development Revenue and Expense Account shall only be used to pay expenses of the Development. (b) In no event will the Managing Agent be required to use its own funds to pay such disbursements. (c) Ail disbursements out of the Development Revenue and Expense Account shall be made in accordance with the provisions of this subparagraph. All withdrawals shall be made by check issued by the Managing Agent in the name of the Owner Section 7.02. Managing Agent's Compensation. The Managing Agent will be compensated for its services under this Agreement by monthly fees to be paid out of the Development Revenue and Expense Account and treated as Development expenses. Such fees will be payable in 12 monthly installments on the first day of each month, for the preceding month, beginning with the first day of the second month after this Agreement becomes effective for a particular Development and ending on the first day of the month after the last month that this Agreement is effective for a particular Development. The fee shall be equal to $106.20 per unit. The Owner shall be responsible for timely payment of the foregoing amounts notwithstanding any lack of funds in the Development Revenue and Expense Account. C:\WINDOWS~TEMP\ 12ABA$SLAKEMNGMTAG .DOC 17 PROPERTY MANAGEMENT AGREEMENT Section 7.03. Deficiencies. In the event that the balance in the Development Revenue and Expense Account is at any time insufficient to pay disbursements due and payable for the Development from the Development Revenue and Expense Account under Section 7.01 hereof by reason of expenses in excess of the then-current budget, the Managing Agent shall give the Owner at least five (5) days' notice thereof and shall promptly file an amendment to the Development Budget showing the required amount and requesting a deposit from the Owner to cover such deficiency. The Managing Agent will provide the Owner with monthly estimates of Development revenue and expenses for the forthcoming month, and the Owner shall calculate and make available sufficient funds to cover any anticipated deficiency by the 10th of each month. Section 7.04. Development Budget. Annual operating budgets for the Development will be as approved by the Owner. In addition to preparation and submission of a recommended operating budget for the initial Development Fiscal Year, the Managing Agent will prepare a recommended operating budget for the Development for each subsequent Development Fiscal Year beginning during the term of this Agreement, and will submit the same to the Owner at least sixty (60) days before the beginning of the Development Fiscal Year. In addition, the Managing Agent shall prepare and submit the initial estimated and subsequent operating budgets for the Authority Units pursuant to Article IV of the Regulatory Agreement and shall provide such other information and reports as required of the Owner thereby. The Owner will promptly inform the Managing Agent.of changes, if any, incorporated in approved budgets, and the Managing Agent will keep the Owner informed of any anticipated deviation from the receipts or disbursements stated therein. Any amendments to the budgets must be approved by the Owner. C:\WINDOWSXTEMP\I2ABASSLAKEMNOMTAG.DOC 18 PROPERTY MANAGEMENT AGREEMENT ARTICLE VIII Record and Reports Section 8.01. Records and Reports. In addition to any requirements specified in the Management Plan or other provisions of this Agreement, the Managing Agent will have the following responsibilities with respect to records and reports: (a) The Managing Agent will establish and maintain a comprehensive system for the Development of records, books, and accounts in a manner required by the relevant Management Plan. All records, books, and accounts will be subject to examination at reasonable hours by any authorized representative of the Owner, HUD or the MPHA. The Managing Agent shall be responsible for providing the budgets and repons described in Article 4 of the Regulatory Agreement. The Managing Agent must submit monthly occupancy data as required by HUD on HUD forms 50058 and 51234. (b) With respect to each Development Fiscal Year ending during the term of this Agreement, the Managing Agent will cooperate in the preparation of an annual audited financial report to be prepared by a Certified Public Accountant selected by the Owner, based upon the preparer's examination of the books and records of the Owner and the Managing Agent. Compensation for the preparer's services will be paid out of the Development Revenue and Expense Account as an expense of the Development. (c) The Managing Agent will prepare a monthly report for the Development comparing budgeted figures with actual receipts and disbursements, and will submit each such report to the Owner and the MPHA. (d) The Managing Agent will fumish such information (including occupancy reports) as may be requested by the Owner or the MPHA from time to time with respect to the financial, physical, or operational condition of the Development, provided that Owner shall compensate the Managing Agent for its costs in furnishing any information not otherwise required by this Agreement or the relevant Management Plan in the event the Managing Agent is required to retain independent contractors not otherwise employed or retained by the Managing Agent. (e) By the twentieth (20th) day of each month, the Managing Agent will furnish the Owner with an occupancy report and an itemized list of all delinquent accounts, including rental accounts, as of the tenth (10th) day of the same month. (t) By the twentieth (20th) day of each month, the Managing Agent will furnish the Owner with a statement of receipts and disbursements during the previous month, and with a schedule of accounts receivable and payable, and reconciled bank statements for each Development Revenue and Expense Account, each Development Revenue and Expense Account, and each Security Deposit Account C:\WINDOWS\TEMP\ 12 ABASSLAKEMNGMTAG.DOC 19 PROPERTY MANAGEMENT AGREEMENT as of the end of the previous month and income and balance sheet statements for the previous month. (g) Except as otherwise provided in this Agreement and except with respect to provisions of this Agreement requiring independent contractors who are not employees of the Managing Agent, all off-site bookkeeping, clerical, and other managerial overhead expenses (including but not limited to costs of office supplies and equipment, data processing services, postage, transportation of managerial personnel, and telephone services) will be borne by the Managing Agent out of its own funds and will not be treated as Development expenses. Section 8.02. Owner's Right to Re-Allocate Functions. If the Owner determines that the books of account of the Development are not being maintained in accordance with acceptable standards or that reporting timetables have not been met or are not likely to be met, the Owner, at its expense, may cause such functions to be performed by personnel selected by the Owner. Section 8.03. Owner's Responsibility. Notwithstanding the obligations of the managing Agent to the Owner and the MPHA, nothing contained in this Agreement shall be construed to reduce or eliminate the obligations of the Owner to the MPHA, or any other party, arising from the Housing Covenants. C:\WINDOWS\TEMP\I 2 ABASSLAK~MNGMTAG.DOC 20 PROPERTY MANAGEMENT AGREEMENT ARTICLE IX Term of Agreement Section 9.01. Term of A,m'eement. (a) This Agreement shall terminate as follows: (i) This Agreement shall be effective beginning on the date hereof and ending one year later. (ii) This Agreement shall be extended automatically for successive periods of one (1) year unless either the Owner or the Managing Agent provide written notice ninety (90) days prior to expiration of then-current term indicating their intention to have this Agreement terminate. (iii) This Agreement may be terminated by the either of the parties hereto as of the end of any calendar month with a written thirty (30) day notice and with the express prior written consent of the MPHA. (iv) In the event of a default by either party hereunder and upon thirty (30) days written notice by the non-defaulting party to the defaulting party, and failure to cure during said period by the defaulting party, this Agreement shall terminate and, except as set forth in Section 10.02 hereofi such termination shall be the exclusive remedy of the non-defaulting party. (v) In the event that a petition in bankruptcy is filed by or against the Owner or Managing Agent, or in the event that either makes an assignment for the benefit of creditors or takes advantage of any insolvency act, the other party may terminate this Agreement without notice to the other. (vi) In the event of sale of the Development, either party may terminate this Agreement upon ninety (90) days written notice. (vii) In the event the MPHA determines that the Managing Agent has violated, breached, or failed to comply with any provision of, or obligation under, the Housing Covenants, it shall so notify the Owner in writing and the Owner shall immediately so notify the Managing Agent and this Agreement shall terminate within 'thirty (30) days of receipt by the Managing Agent of such notification provided that the Managing Agent has not cured the violation within thirty (30) days. (b) Within ten (10) days of the date that this Agreement is terminated, the Managing Agent shall turn over to the Owner all of the Development's cash, trust accounts, investments and records. After the Owner and Managing Agent have accounted to each other with respect to all matters outstanding for the Development as of the C :\W INDOWS~TEMP~,I 2ABASSLAKEMlqGMTAG.DOC 21 PROPERTY MANAGEMENT AGREEMENT date of termination, the Owner shall furnish Managing Agent security, in the form and principal amount satisfactory to the Managing Agent, against obligations or liabilities which the Managing Agent may properly have incurred with respect to the Development on behalf of the Owner. C:\W INDOWS\TEM P\ 12ABASSLAKEMNGMTAG.DOC 22 PROPERTY MANAGEMENT AGREEMENT ARTICLE X Indemnities Section 10.01. Owner's Indemnities. The Owner shall indemnify and hold the Managing Agent harmless from and against all claims, damages and costs (including reasonable attorneys fees and costs), arising out of or in connection with the management of the Development and the operation thereof, except (i) for acts of the Managing Agent taken outside the scope of its responsibilities, (ii) for acts of fraud, negligence, or willful misconduct, and (iii) for actual violations by the Managing Agent of local, State, Federal, or other laws pertaining to employees, fair housing, equal opportunity or non-discrimination, provided that this indemnity shall not relieve the Managing Agent from any responsibility or liability to the MPHA or HUD. Section 10.02. Managing Agent's Indemnities. The Managing Agent shall indemnify and hold the Owner harmless from and against all claims, damages and costs (including reasonable attorney's fees and costs) arising out of or in connection with acts outside of the scope or acts of the Managing Agent's duties and responsibilities under this Agreement, arising out of or in connection with acts of fraud, negligence, or willful misconduct, or arising out of or in connection with any actual violation by the Managing Agent of local, State, Federal or other laws pertaining to employees, fair housing, equal opportunity or non-discrimination. Section 10.03. Exceptions. The indemnities herein contained shall not apply to any claim with respect to which the indemnified party is fully covered by insurance, provided that the foregoing exclusion does not invalidate the indemnified parties' insurance coverage. Each party shall endeavor to procure from its insurers waiver of subrogation with respect to claims against the other party under policies in which the other party is not a named insured, and shall promptly notify the other party in the event that any such waiver is unobtainable, or is obtainable only upon payment of an additional premium. If such waiver is obtainable only upon payment of an additional premium, the other party shall have the right, at its option, to require such waiver only if such party pays such additional premium. C :\W INDOWS\TEMPX 12ABASSLAKEMNGMTAG.DOC 23 PROPERTY MANAGEMENT AGREEMENT ARTICLE XI Additional Provisions Section 11.01. Successors. Any reference in this Agreement, by name or number, to a governmental agency, statute, program, or form shall include any successor agency, statute. program, or form. Section 11.02. Addresses and Notices. Whenever any approval or notice on behalf of the Owner, Managing Agent and MPHA is required under this Agreement, the address for all purposes shall be as set forth below, or such other address of which the other parties have received written notice. Any notice, demand, or request required or permitted to be given or made hereunder shall be in writing and shall be deemed given or made when hand delivered or three (3) business days after having been sent by certified or registered mail, return receipt requested, to such party at such address: Bass Lake Apartments LLC 1925 Chicago Avenue South Minneapolis, Minnesota 55404 Attention: ~Project for Pride in Living, Inc. Barbara McCormick, Vice President Project for Pride in Living, Inc. 1925 Chicago Avenue South Minneapolis, Minnesota 55404 Attention: Morris Manning, PMD Manager Minneapolis Public Housing Authority in and for the City of Minneapolis 1001 Washington Avenue North Minneapolis, MN 55401 Attention: Executive Director Section 11.03. Title and Captions. All articles, section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend, or describe the scope or intent of any provisions hereof. Section 11.04. Further Action. The parties shall execute and deliver all documents, provide all information, and take or forebear from all such action as may be necessary or appropriate to achieve the purpose of this Agreement. Section 11.05. Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Minnesota. Section 11.06. Amendment. This Agreement may be modified or amended only with the written approval of the parties hereto and with the prior written consent of the MPHA. C:\WINDOWS\TEMP\I2ABASSLAKEMNGMTAG.DOC 24 PROPERTY MANAGEMENT AGREEMENT Section 11.07. Assi~mament. It is understood and agreed by the parties hereto that this Agreement shall not be assigned by the Managing Agent without the written consent of the Owner and the MPHA. Section 11.08. Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement or the Housing Covenants or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, agreement, term, or conditions. Any party, by notice to the other parties, may waive any of its rights or any conditions to its obligations hereunder, or any duty, obligation, or covenant of any other party. Section 11.09. Interpretative Provisions. (a) At all times, this Agreement will inure to the benefit of and constitute a binding obligation upon the parties and their respective successors and assigns. (b) This Agreement constitutes the entire agreement between the Owner and the Managing Agent with respect to the management and operation of the Development, and no change will be valid, unless made by supplemental written agreement in compliance with the provisions of the Housing Covenants and executed by the_ parties. (c) This Agreement has been executed in several counterparts, each of which shall constitute a complete original agreement, which may be introduced in evidence or used for any other purpose without production of any of the other counterparts. (d) The MPHA shall be promptly notified of any disagreement between the Owner and Managing Agent with respect to any matter pertaining to the operation, management or leasing of the Development or otherwise pertaining to the Development or any action taken or proposed or required to be taken by the Managing Agent or the Owner under this Agreement or the Housing Covenants. Section 11.10. Availability of Funds~ Notwithstanding anything to the contrary herein contained, the Managing Agent shall not be required to make payments herein required or to take actions herein required unless funds necessary therefor are made available by the Owner. Section 11.11. Counte__.~_9_~. This Agreement may be executed in any number of counterparts, each of whom shall be regarded as an original and all of which shall constitute but one and the same insmnnent. C:\WINDOWS\TEMP\i 2ABASSLAKEMNGMTAG.DOC 25 PROPERTY MANAGEMENT AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. OWNER: BASS LAKE APARTMENTS LLC BY: PROJECT FOR PRIDE IN LIVING, INC. ITS SOLE MEMBER By:. Barbara McCormick Its Vice President MANAGING AGENT: PROJECT FOR PRIDE IN LIVING, INC. By:, Barbara McCormick Its Vice President C:\WINDOWS\TEMP~I 2ABASSLAKEMlqGMTAG.DOC PROPERTY MANAGEMENT AGREEMENT The MPHA hereby approves and consents to the foregoing Agreement and the Managing Agent appointed therein. MINNEAPOLIS PUBLIC HOUSING AUTHORITY IN AND FOR THE CITY OF MINNEAPOLIS By Comell L. Moore Its Chairman By Cora McCorvey Its Executive Director DATE: C :\WINDOWSXTEM P\ 12 ABASSLAKEMNGMTAG.DOC PROPERTY MANAGEMENT AGREEMENT The EDA hereby approves and consents to the foregoing Agreement and the Managing Agent appointed therein. ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By: Its: And by Its DATE: C:\WINDOWS\TEMP\I 2ABASSLAKEMNGMTAG.DOC PROPERTY MANAGEMENT AGREEMENT EXHIBIT A Legal Description The East 1/3 o£Lot 35, lying South of the North 1138.67 feet thereof, excepting the West 30 feet and the South 33 feet thereo£, Auditor's Subdivision 226, Hennepin County, Minnesota. C :\WINDOW S\TEMP\I 2 ABASSLAKEMNGMTAG.DOC A- 1 PROPERTY MANAGEMENT AGREEMENT EXHIBIT B Management Plan C:\WINDOWS\TEMP~i 2ABASSLAKEMNGMTAG.DOC B- ] PROPERTY MANAGEMENT AGREEMENT EXHIBIT C Authority Unit Lease Form C:\WINDOWS\TEMP\I 2ABA$SLAKEMNGMTAG.DOC C- 1 PROPERTY MANAGEMENT AGREEMENT