022894 EDA Official File Copy
C~Y OF NEW HOPE
EDA AGENDA
EDA Regular Meeting//2 February 28, 1994
President Edward J. Erickson
Commissioner W. Peter Enck
Commissioner Gerald Otten
Commissioner Terri Wehling
Commissioner Marky Williamson
1. Call to Order
2. Roll Call
3. Approval of Minutes of February 14, 1994
4. Resolution Approving Multi-Family Housing Policy Loan for New Hope
Apartments, 7200-7260 43rd Avenue North (Improvement Project No. 510)
5. Adjournment
CITY OF NEW HOPE
4401 XYLON AVENUE NORTH
HENNEPIN COUNTY, MINNESOTA 55428
Approved EDA Minutes February 14, 1994
Meeting//1
CALL TO ORDER President Erickson called the meeting of the Economic Development
Authority to order at 8:45 p.m.
ROLL CALL Present: Erickson, Enck, Otten, Williamson, Wehling
APPROVE MINUTES Motion was made by Commissioner Williamson, seconded by
Commissioner Enck, to approve the EDA minutes of November 22, 1993.
All present voted in favor. Motion carried.
IMP. PROJECT 513 President Erickson introduced for discussion Item 4, Resolution Directing
Item 4 and Authorizing President and Executive Director to Execute Loan/Grant
Documents for Community Center Expansion Project at Broadway Village
Apartments (Improvement Project No. 513).
Councilmember Enck asked if the project was initiated due to the corner
lot at 62nd and West Broadway. City Manager Donahue stated there were
two separate issues: 1 ) the City wanted something done with that corner
and asked Lang Nelson if they would consider including that property as
part of the Anthony James project; and 2) Lang Nelson was interested in
expanding their Broadway Village apartments and asked if the City would
participate by developing a community center for the complex which
would be accessible to the senior community at large for use.
Mr. Donahue stated that the City has not been able to tie the two projects
together and that was not the City's intent. Mr. Donahue stated that the
City will not make one project dependent upon the other. He said Super
America Group, the owners of the corner property, have indicated that
they wish to proceed with development at 6144 West Broadway. In
regard to the Broadway Village Apartment complex expansion, it
significantly upgrades that property and creates a market value that will be
stabilized, it adds value to the City, and it benefits the complex and the
residents of that property.
Mayor Erickson indicated his support for upgrading the area.
Mr. McDonald said the total cost of the project is $200,000 for the
community center and $85,000 for street lighting for a total of $285,000.
Mr. McDonald stated that the loan/grant proposal requires the EDA and the
land developer to each fund 50% of the development costs for the
community center. The EDA cost contribution would not exceed
$142,500 and would be funded out of excess tax increment revenues for
that TIF district. The developer has agreed to provide the EDA with a non-
exclusive license agreement to utilize the community center for 24 times
a year over a 20-year period for appropriate public functions.
New Hope EDA February 14, 1994
Page 1
Councilmember Enck commented that this is only possible due t(
available TIF funds.
Councilmember Wehling inquired as to the capacity of the corem
room. Mr. Paul Brewer stated that it will hold 68 people. Mr. Br
indicated he would like the City to handle the requests for use o
community center as a control factor. Mayor Erickson stated this col
handled through the Park and Recreation Department. Mr. Brewer s
that his only concern is that it does not interfere with their residents
the building and that is the reason for the 24 meeting/year stipulatior
exceeding two per month) in the agreement. He said that he anticil
that evening meetings would not be a problem as the residents us
community room mostly in the daytime hours.
EDA RESOLUTION Commissioner Wehling introduced the following resolution and mov.
94-01 adoption: "RESOLUTION DIRECTING AND AUTHORIZING PRESll
Item 4 AND EXECUTIVE DIRECTOR TO EXECUTE LOAN/GRANT DOCUM
FOR COMMUNITY CENTER EXPANSION PROJECT AT BROAD
VILLAGE APARTMENTS (IMPROVEMENT PROJECT NO. 513)".
motion for the adoption of the foregoing resolution was secondE
Commissioner Williamson and upon vote being taken thereon, the foll¢
voted in favor: Erickson, Enck, Otten, Wehling, and Williamson; a~
following voted against: None; Absent: None; whereupon the reso
was duly passed and adopted, signed by the president which was att
to by the executive director.
ADJOURNMENT Motion was made by Commissioner Wehling, seconded by Commis.,
Otten, to adjourn the meeting. All present voted in favor. The New
EDA adjourned at 9:10 p.m.
Respectfully submitted,
Valerie Leone
City Clerk
New Hope EDA February 14,
Page 2
~ EDA
RE UES FOR ACTION
Originating Department Approved for Agenda Agenda Section
City Manager EDA
.~ 2-28-94
Kirk McDonald '~ Item No.
By: Management Assistant By. !!/ 4
/
RESOLUTION APPROVING MULTI-FAMILY HOUSING POLICY LOAN FOR NEW
HOPE APARTMENTS, 7200-726043RD AVENUE NORTH (Improvemen~ Project #510)
Last fall the EDA adopted a Resolution Approving Multi-Family Housing Policies which
established a policy and general guidelines for rehabilitation loans under certain
circumstances to owners of multi-family housing complexes in the City. The policy was
developed with the assistance of an experienced consultant, Gary Stout, of Public-Private
Ventures, Inc. Over the past six months staff has been working in conjunction with the
consultant, the City Attorney, and the owner of New Hope Apartments to develop a pilot
project for this multi-family housing rehabilitation loan policy. The City staff, City Attorney
and consultant have developed a pilot project proposal and request to present the proposal
to the EDA. The attached Resolution and related loan documents approve a multi-family
housing policy rehabilitation loan for the complex located at 7200-7260 43rd Avenue North
and the loan is consistent with the policies set forth in the EDA Resolution approving the
program.
The four-building apartment complex is showing signs of aging and a Project for
rehabilitating the complex has been presented to the City. The project involves
rehabilitation of basic needs, including roofs, carpet, windows, blacktop, etc., as outlined in
the attached bid packet. An independent objective f'mancial analysis of the project has been
performed and private funds are not reasonably available to fund the entire project.
Review: Administration: Finance:
RFA-O01
Request for Action
February 28, 1994
Page 2
The property owners will provide 50 percent of the total project costs under the prol
with the balance of the funds in the form of an EDA loan. The City would appro~
construction contracts for the various parts of the project and would advance the loan
only after the items of work have been completed and the property owner has already
to the contractor the owner's portion of the contract amount. Documentatio~
substantiate that the property is current on its mortgage and real estate taxes wou
required at the closing of the loan and prior to the disbursement of funds.
Loan repayment provisions call for payment of one percent of the initial principal ba
per month, leading to a loan term of eight and one-third years. Interest would not 1
charged as long as none of the various events of default occur, and also as long ~
property owner raises rents only within the terms of the CPI Index for the first two ye
the loan. If interest is required, it would accrue at eight percent per annum, an
partners would individually guarantee the loan for the first two years. The EDA
amount being proposed is $97,350.00and total project cost is $194,700.00.
Staff recommends favorable consideration of the proposal by the EDA and approval
Resolution Approving Multi-Family Housing Policy Loan for 7200-7260 43rd Avenue ~
Attachments: Resolution Approving Loan
City Attorney Correspondence
Loan Agreement and Construction Loan Disbursement Agreem
(including list of Improvements and Budget)
Second Mortgage
Second Mortgage Loan Note
Consultants Analysis
Correspondence to Owner
Resolution Establishing Policy
Location Map
EDA RESOLUTION NO, 94-
RESOLUTION APPROVING MULTI-FAMILY
HOUSING POLICY LOAN FOR
NEW HOPE APARTMENTS~
7200 - 7260 43RD AVENUE NORTH
IMPROVEMENT PROJECT NO. 510
WHEREAS, the Economic Development Authority in and for the
City of New Hope (EDA) adopted a Resolution approving multifamily
housing policies on September 13, 1993, EDA Resolution 93-13, and
WHEREAS, said policy called for rehabilitation loans under
certain circumstances to owners of multi-family housing in the City
of New Hope (City), and
WHEREAS, a four-building multi-family complex owned by New
Hope Apartments, a Minnesota General Partnership, is located at
7200-7260 43rd Avenue North in the City of New Hope, and
WHEREAS, said apartment complex is showing signs of aging and
obsolescence, and
WHEREAS, a project for rehabilitating the apartment units has
been presented to the EDA, and
WHEREAS, the project involves rehabilitation of basic needs,
including roofs, carpet, windows and blacktop, and
WHEREAS, an independent objective financial analysis of the
project has been performed, and
WHEREAS, private funds are not reasonably available to fund
the project, and
WHEREAS, at ]east two bona fide bids from non-related parties,
will be required for each item that is part of the overall project,
and
WHEREAS, no project costs include fees by the owner or related
parties, including construction management fees, or developer fees,
and
WHEREAS, no funds will be used to bring taxes current or brin9
the mortgage current, and
WHEREAS, the property owners will provide 50% of the total
project costs, with the balance of the funds in the form of an EDA
loan, and '
WHEREAS, said loan will be repaid immediately if the property
FEB-25-@4 FRI 09:55 /03
· :~..~ WHEREAS, for the first two years of the project, the . r
will be required to raise rents only within the limits ol e
Consumer Price Index, or else will be required to pay intere n
the loan balance, and
WHEREAS, no relocation statutes and payments wil e
triggered, and
WHEREAS, the project wilt not result in lower propertl x
payments, and
WHEREAS, without the use of public funds, the project d
not be possible, and
WHEREAS, the independent consultant is recommending s
project, and
WHEREAS, the projected cost savings to the property o 's
from the project will generate sufficient income to repay the
and
WHEREAS, the attached Loan Agreement and Constru )n
Disbursement Agreement, Second Mortgage Note and Second Mot le
(collectively Loan Documents) set forth acceptable term~ ~d
conditions for this project.
:~-- NOW, THEREFORE, BE IT RESOLVED by the Economic Devetc ~t
Authority in and for the City of New Hope as follows:
1. That the foregoing recitals are incorporated here
reference.
2. That this rehabilitation project, known as ImproN ~t
Project No. 510, involving a loan in the amou
$97,350.00 to New Hope Apartments, a Minnesota GE
Partnership, in accordance with the Loan Doc[
attached hereto and incorporated by referenc~ is
approved.
3. That staff is directed to take such steps a: re
necessary to complete the loan and oversee is
rehabilitation project.
Adopted by the Economic Development Authority in and f( he
City of New Hope this day of ... , 1994.
Edw. d. Erickson, Presid,
At t est:
D~niel J. Donahue, Executive Director
CORRICK & SONDRA~.L.P.A.
ATTORNEYS AT LAW
Executive
Office
Plaza
MICHAEL R LAFLEUR samourgn
WILLIAM C. STRAIT 8525 Edinbrook Crossing LAVONNEsHARON DE DER/~yKESKE
Suite #203
Brooklyn Park, Minnesota 55443
rEL[P.ON[ (6~2)
February 23, 1994
Kirk McDonald
Management Asst.
City of New Hope
4401 Xylon Avenue North
New Hope, MN 55428
RE: EDA Rehabilitation Loan
New Hope Apartments, 7200 - 7260 43rd Avenue North
Our File No. 99.11118
Dear Kirk:
Enclosed you will find a proposed Resolution Approving Multi-family
Housing Policy Loan for 7200 to 7260 43rd Avenue North in
connection with a rehabilitation loan to the owners of the New Hope
Apartments. Attached to the Resolution are the proposed Loan
Documents. This loan is consistent with the policies set forth in
EDA Resolution No. 93-13, and the Loan Documents attached to the
Resolution have been drafted toward that end.
You may note the documents call for a loan of up to one-half of the
amount of the project, with the property owners to supply funds for
the balance of the project cost. The City will approve all
construction contracts for the various parts of the project, and
will advance'the loan funds only after the items of work have been
completed and the property owner has already paid to the contractor
the owner's portion of the contract amount. The work to be
included in the project involves replacing two roofs, a number of
windows, carpeting, and doors, blacktopping and painting and other
repair of various units. It is our understanding that the property
is current on its mortgage and real estate taxes. Documentation to
substantiate that, of course, will be required at the closing of
the loan and prior to any disbursement of funds.
Loan repayment provisions call for payment of 1% of the initial
principal balance per month, leading to a loan term of eight and
one-third years. Interest will not be charged as long as none of
the various events of default occur, and also as long as the
property owner raises rents only within the terms of the Consumer ,
Mr. Kirk McDonald
February 23, 1994
Page 2
Price Index for the first two years of the loan. If interes
required, it shall accrue at 8~ per annum. The partners
individually guarantee the loan for the first two years.
With minor adjustments, these documents can also be used for
future loans under this program.
Do not hesitate to call if you have any questions.
Sincerely,
Asst. New Hope City Attorney
s3w2
Enclosures
cc: Daniel J. Donahue, City Manger
Valerie Leone, City Clerk
Steven A. Sondrall, City Attorney
LOAN AGREEMENT
AND
CONSTRUCTION LOAN DISBURSEMENT AGREEMENT
THIS LOAN AGREEMENT and CONSTRUCTION LOAN DISBURSING AGREEMENT
(hereinafter referred to as "Loan Agreement") made this day of
, 1994, by and between New Hope Apartments, a Minnesota
general partnership (hereinafter referred to as "Borrower"), and
the Economic Development Authority in and for the City of New Hope,
a Minnesota municipal corporation (hereinafter referred to as
"Lender").
WITNESSETH:
WHEREAS, Borrower has applied to Lender for a real estate
mortgage loan on the Loan Property, as hereinafter defined, in the
principal amount of $97,350.00 (the "Loan Amount"); and
WHEREAS, Borrower has issued the following security documents:
(a) Second Mortgage Note of even date herewith made by
Borrower and payable to the order of Lender in the
original principal amount of $97,350.00 ("Loan Note" or
"Note").
(b) Second Mortgage securing the Loan Note in the amount of
$97,350.00 ("Loan Mortgage" or "Mortgage") of even date
herewith, executed by Borrower, as Mortgagor, in favor of
Lender, as Mortgagee, covering property therein described
situated in Hennepin County, Minnesota (the "Loan
Property").
(c) A Loan Agreement executed by the Borrower to the Lender.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed as follows:
1. Amount of Loan. Borrower agrees to take and Lender agrees
to make a loan in the principal amount of $97,350.00 (hereinafter
called the "Loan") to be advanced as hereinafter provided, said
Loan to be evidenced by the Loan Note and secured by the Loan
Mortgage and any other security documents required under this Loan
Agreement. The terms and conditions of the Loan Note, the Loan
Mortgage and any other instrument required under this Agreement are
hereby expressly incorporated herein by reference and made a part
hereof.
2. Amount of Borrower Contribution. The Loan amount shall be
not more than one-half of the total project cost of the ,
1
improvements. Borrower shall pay out of Borrower's own funds
total project cost of the improvements, less the Loan amour
Borrower's funds shall be placed in a separate bank account
disbursed, all in accordance with the Construction Loan Disburs'
Agreement attached hereto.
3. Use of Loan Proceeds. The Loan proceeds shall be
solely to improve the Loan Property by rehabilitating the ba~
components of the existing buildings, including the roof
windows, all as approved by Lender, and all in accordance with 1
List of Improvements and Budget attached hereto. If Borrower w'
supply the labor for any part of the improvements, the Project c¢
for said part must be limited to material cost only, and Borro~
shall not be paid or reimbursed for its labor cost. For 1
purposes of this Loan Agreement, Borrower will be deemed to h~
supplied the labor if the labor is performed by Borrower
Borrower's employees, or by sole proprietorships, partnerships
corporations in which more than five (5%) percent of 1
partnership shares, corporate stock or ownership interest is OWl
or controlled by Borrower, Borrower's general partners, or
spouse, parent, brother, sister or child of any of them, or
combination thereof.
4. Documents to be Delivered. Borrower covenants and agr,
to immediately without expense to Lender cause the compliance w'
the following conditions, such conditions being hereby made
condition precedent to Lender's obligation to make any advance
the Loan:
(a) Note. Deliver to Lender the Loan Note.
(b) Mortgage. Deliver to Lender the Loan Mortgage togetl
with evidence that the Mortgage has been duly filed
record.
(c) Title Insurance Policy. Deliver to Lender a Mortgage,
Title Policy, hereinafter called "Title Policy", from
reputable title insurance company, issued to Lender
the amount of $97,350.00 with respect to the L,
Mortgage and insuring that the Mortgage is a lien on
Loan Property to the extent it purports to be free
clear of mechanic's liens, materialmen's liens, tax
special assessments, rights of parties in possession
questions of survey and subject only to excepti
specifically approved in writing by Lender, wh
exceptions shall include the First Mortgage in favor
Town & Country Bank.
(d) Insurance. Deliver to Lender a certificate or policy
all insurance required under the terms hereof or of
Mortgage, to be maintained by Borrower.
2
(e) Rent Roll. Deliver to Lender a certified rent roll
listing each individual apartment unit on the Mortgage
Premises, whether occupied or vacant, the rental rate for
the unit and an identification of all identical rental
units.
(f) First Mortgagee Consent. Deliver to Lender such evidence
of the consent of First Mortgagee to the (Second
Mortgage) as required by Lender.
(g) First Mortgagee Concessions. Deliver to Lender such
written evidence as Lender requires to show interest rate
and other concessions required of First Mortgagee.
(h) Contracts. Deliver to Lender copies if all Contracts with
persons or entities supplying materials or labor and
materials to the project. Lender may require additional
bids for some or all of the labor or materials.
5. Affirmative Covenants. The Borrower covenants and agrees
that it will, until the borrowing hereunder and thereafter, so long
as any indebtedness remains outstanding under this Agreement:
(a) Maintain insurance coverage on its physical assets and
against other business risks in such amounts and of such
types as are customarily carried by entities similar in
size and nature, and in the case of all policies covering
the mortgaged property other than those policies
protecting against casualty liabilities to strangers, all
such insurance policies shall provide that the loss
payable thereunder shall be payable to the Borrower and
Lender as their respective interests may appear, all said
coverage to be shown on an Acord 25 Certificate of
Insurance providing for at least 30 days advance written
notice to Lender in the event of cancellation of or
changes to such coverage, delivered with Lender.
(b) Promptly notify the Lender of any condition or event
which constitutes, or with the running of time and/or the
giving of notice would constitute default under this
Agreement, and promptly inform the Lender of any
materially adverse change in Borrower's financial
condition.
6. Encumbrances and Transfer. Borrower agrees not to sell,
transfer or convey the Loan Property or any part thereof, or
encumber the Loan Property or any part thereof, in any manner,
without written consent of Lender.
7. Time of Essence. Time is of the essence in the
performance of this Agreement.
8. Assignability. Borrower shall not assign this AgreemE
nor assign its obligations as specified herein without the writt
consent of Lender.
9. Representations and Warranties. Borrower represents
warrants to Lender the following:
(a) The Borrower is a Minnesota general partnership d[
formed, validly existing and in good standing under t
laws of the State of Minnesota.
(b) The making and performance of this Loan Agreement and
execution and delivery of the herein described No1
Mortgage and all other instruments required hereunder
within the partnership powers of the Borrower and
been duly authorized by all necessary action. This L(
Agreement and the Note, Mortgage and any otl
instruments required hereunder have been duly execul
and delivered and are the legal, valid and bind'
obligations of the Borrower enforceable in accordar
with their respective terms.
(c) No litigation, tax claims or governmental proceedings ~
pending or threatened against the Borrower, and
judgment or order of any court or administrative age~
is outstanding against the Borrower.
(d) The Borrower has filed and will file and cause to
filed all tax returns (federal and state) required to
filed and pay all taxes shown thereon to be
including interest and penalties, or has provi~
adequate reserves for payment thereof.
(e) No pollutants or other toxic or hazardous substanc,
including any solid, liquid, gaseous, or thermal irrit~
or contaminant, such as smoke, vapor, soot, fumes, aci,
alkalis, chemicals or waste (including materials to
recycled, reconditioned or reclaimed) (collectiv,
"substances") have been or shall be discharg,
dispersed, released, stored, treated, generated, dispo
of, or allowed to escape (collectively referred to as'
"incident") on the Loan Property.
(f) No asbestos or asbestos-containing materials have b
installed, used, incorporated into, or disposed of on
Loan Property.
(g) No polychlorinated biphenyls ("PCBs") are located on
in the Loan Property, in the form of electri
transformers, fluorescent light fixtures with ballas '
cooling oils, or any other device or form.
(h) No underground storage tanks are located on the Loan
Property or were located on the Loan Property and
subsequently removed or filled.
(i) No investigation, administrative order, consent order and
agreement, litigation, or settlement (collectively
referred to as the "action") with respect to substances
is proposed, threatened, anticipated or in existence with
respect to Borrower's property.
(j) The Loan Property and Borrower's activity in connection
with the Loan Property are in compliance with
applicable federal, state and local statutes, laws and
regulations. No notice has been served on Borrower from
any entity, governmental body, or individual claiming any
violation of any law, regulation, ordinance or code, or
requiring compliance with any law, regulation, ordinance
or code, or demanding payment or contribution for
envirOnmental damage or injury to natural resources.
10. Indemnification. Borrower agrees to indemnify Lender and
save it harmless against all loss, liability, expense, or damages
including but not limited to attorneys fees, which may arise by
reason of a breach by Borrower of any warranties or representations
contained in this Loan Agreement or the assertion of any lien
against the Loan Property.
11. Defaults. In the'event:
(a) Borrower abandons the Loan Property; or
(b) Bankruptcy, reorganization, assignment, insolvency or
liquidation proceedings, or other proceedings for relief
under any applicable bankruptcy law or other law for
relief of debtors are instituted by or against Borrower;
or
(c) Any judgment, attachment, garnishment or other similar
process is entered against Borrower or against any
property or assets of Borrower and is not released,
satisfied or discharged or bonded to Lender's
satisfaction; or
(d) Any of the terms, covenants, or conditions of any permit
or agreement issued or made by the City or other
governmental body having jurisdiction over the Loan
Property have not been complied with or are terminated or
modified by the City or such other governmental body; or
(e) Any mechanic's or materialmen's lien is filed, against
the Loan Property and is not released,, satisfied or
discharged or bonded to Lender's satisfaction; or
(f) Borrower defaults in the payment or performance
anything by it to be paid or performed under the Fil
Mortgage Note or First Mortgage; or
(g) Borrower defaults in the payment or performance
anything by it to be paid or performed under this L,
Agreement or under the Loan Note or Loan Mortgage; o~
(h) Any change of the partnership structure of the Borrow,
voluntarily or involuntarily, without the consent
Lender; or
(i) Any representation or warranty by Borrower contail
herein or in the Loan Note, Mortgage or any otl
instrument required hereunder is false or untrue in
material respect; or
(j) Borrower defaults in the payment or performance
anything by it to be paid or performed under any no'
mortgage or other agreement now or hereafter made
Borrower in favor of or with Lender or otherwise now
hereafter held by Lender;
then Lender, at its option, shall, in addition to any ot~
remedies which it might be entitled to by law, have the right
(a) Refrain from making an advance under this Agreement;
(b) Cancel this Agreement;
(c) Bring appropriate action to enforce performance and
correction of such failure or default;
(d) Declare the entire unpaid principal of the Loan Note
all accrued interest thereon immediately due and paya
without notice;
(e)Foreclose the Mortgage and any other security instrum
referred to in this Agreement.
12. Advance of Funds and Construction. Borrower agrees
improve the Loan Property (the term "Loan Property" and "Proper
shall mean the real estate described in the Mortgage and
improvements placed thereon) in a manner acceptable to the Len
in accordance with plans, specifications and contracts provided
Lender and in compliance with all applicable rest rictio
conditions, codes, ordinances, regulations and laws of
governmental bodies having jurisdiction over the property.
connection therewith, the Borrower shall comply with the terms
advances shall be made in accordance with the terms and conditi
of the Construction Loan Disbursing Agreement attached as Exhib
6
"A". The Lender's obligation to advance is specifically subject to
compliance with all terms and conditions as specified on Exhibit
"A" Failure of the Lender to enforce strict or timely compliance
with an obligation shall not be deemed a waiver of the right to
require compliance at a later date.
13. Final Loan Amount. In the event the improvements to the
Loan Property contemplated by this Agreement are completed with
Lender advancing less than the full sum of $9?,350.00, then a new
Second Mortgage Note and a Second Mortgage Addendum shall be signed
by Borrower so that the Note and Mortgage are in the amount of the
actual amount advanced or paid out by Lender under this Agreement.
This new Second Mortgage Note and Second Mortgage Addendum shall
replace or amend the old Second Mortgage Note and Second Mortgage,
as the case may be, provided that Borrower supplies Lender with
such evidence of marketable title and supporting documents for the
new Note and Mortgage Addendum as Lender may reasonably require.
14. Notices. Any notices given hereunder shall be in writing
and shall be deemed to have been given when delivered personally or
when deposited in the United States mail, registered, postage
prepaid, addressed as follows:
If to Borrower at: New Hope Apartments
David P. Stewart
100 South Fifth Street, Suite 1250
Minneapolis, MN 55402
If to Lender at: The Economic Development Authority
in and for City of New Hope, MN
4401Xylon Avenue North
New Hope, MN 55428
If to Guarantor at: As designated
or addressed to any such party at such other address as such party
shall hereafter furnish by notice to the other party.
15. Headings. The headings used in this Agreement are for
convenience only and do not define, limit or construe the contents
of this Agreement.
16. Bindings on Successors and Assigns. Subject to the
limitations contained in this Agreement, this Agreement shall be
binding upon and inure to the benefit of the successors and assigns
of the parties hereto.
IN TESTIMONY WHEREOF, each of the parties hereto have cau
these presents to be duly executed as of the day and year fi
above written.
NEW HOPE APARTMENTS,
a Minnesota general partnership
By:
Its General Partner
By:
Its General Partner
THE ECONOMIC DEVELOPMENT AUTHORI
IN AND FOR THE CITY OF NEW HOPE
By:
Its President
By:
Its Executive Director
c:\wp51\cnh~d~&
8
LIST OF IMPROVEMENTS
AND BUDGET
7200 - 7260 43RD AVENUE NORTH
Replace roof- 7220 and 7240
buildings - Rayco Construction $ 25,500 Firm
Windows - Dorglass 55,000 Firm
Windows - replace 32 patio
doors - Dorglass 20,000 Firm
Carpet - replace carpet in 4
buildings - 7200,7220,7240,7260 8,000 Will rebid again
Carpet - 4 two bedroom - units to be
identified ~ 850 3,400 Will rebid again
Carpet - 4 one bedroom - units to be
identified ~ 700 2,800 Will rebid again
Security system - all four buildings
@ 1865/building - Safeway Alarm 7,460 Finn
Master key all units 700 Will rebid again
Asphalt - patch, seal, stripe and install
additional 20 car stops - Metro Paving 6,900 Will rebid again in spring
Pool area/landscape - remove surface
concrete and fill area with dirt and
landscape. Add storage area. 3,500 Will rebid again in spring
Painting - all interior halls and ceiling
includes paint and laundry rooms -
Aiels Building Maintenance 1,700 Firm
Paint 15 apartment units - units '
to be identified, $105 each- Aiels
Building Maintenance 1,5~5 Finn
Repair bathroom ceilings - includes
all labor and material - estimate of : ...
20 @ 60 - Aiels Building Maintenance 1,2.00 'Finn
Paint, scrape and repair all decks ..:"
and railings - Aiels Building . .' ..
Maintenance 1,760 Estimate - rebid in spring
Repair rotted and missing work ":
on decks - time and material
~ $15.00~hour 1,6.00 Estimate - rebid in spring
Paint all exterior trim and all
four buildings ~500 per
building - Aiels Building Maintenance 2,000 Firm
Lighting - replace all interior fixtures
Zinter Maintenance 1,036 Firm
Lighting - replace all exterior fixtures plus
add HID security lights - Zinter Maintenance 814 Firm
Furnace - replace 32 zone valves with
Honeywell zones -Zinter Maintenance 2,100 Firm
Furnace - clean and adjust burners
on all four boilers - Bumamatic 600 Estimate - to be rebid
in fall of 1994
Hand rails - install at all 8
entrances ~ 105/railing Mark's Welding 840 Finn
Plumbing repairs - inspect each unit for
plumbing leaks - repair leaks, replace faucets
as needed - 48 unit at 25 each - labor only -
Zinter Maintenance 1,180 Finn
Ceramic tile repair - repair and replace
tiles in 10 bathrooms - average cost
per job, plus caulk mbs ~ 120 11200
Doors - replace 8 solid core
apartment doors - fully installed ·.
~170/door 1,360
Replace and add heat/smoke detectors
est/mate only - 2i000
Title commitment/insurance '2,0.00
Total cost rehab bids 156,225
Total - parts, appliances, supplies
.(Exhibit A) 20,743
Total needed for rehab 176,968
or
177,000
Plus 10% contingency 17~700
Total Project Cost 194,700
Loan Amount 97,350
EXHIBIT A
PARTS, SUPPLIES, APPLIANCES
NUMBER IDENTIFICATION PRICE TOTAL
3 , GAS RANGES 335.00 705.00
10 RANGE HOODS 45.00 450.00
10 REFRIGERATORS 398.00 3980.00
18 AIR CONDITIONERS 395.00 7172.00
12 2 BEDROOM VERTICAL
BLINDS 37.00 444.00
12 1 BEDROOM VERTICAL
BLINDS 46.00 552.00
20 BATH SINK FAUCETS 39.00 780.00
10 KITCHEN FAUCETS 37.00 370.00
10 TUB FAUCETS 58.00 580.00
20 CEILING FANS 42" 48.00 960.00
20 BATH VANITY
WITH LIGHTS 30.00 600.00
10 TILE FOR KITCHEN
FLOOR REPLACEMENT 1000.00
75 GALS. OF PAINT 750.00
MISC. PARTS 2400.00
TOTAL PARTS/SUPPLIES/APPLIANCES $20,743.00
CONSTRUCT[ON LOAN DISBURSING AGREEMENT
This Construction Loan Disbursing Agreement (hereinafter
"Agreement"), entered into as of , 1994, by
and among the Economic Development Authority in and for the City of
New Hope, Minnesota, a Minnesota municipal corporation (hereinafter
"Lender") and New Hope Apartments, a Minnesota general partnership
(hereinafter "Owner").
WHEREAS, Lender has agreed to make a certain Ninety Seven
Thousand Three Hundred Fifty and No/lOOths Dollars ($97,350.00)
construction loan (hereinafter "Loan") to Owner to be evidenced by
a promissory note of even date herewith in the principal amount of
Ninety Seven Thousand Three Hundred Fifty and No/lOOths Dollars
($97,350.00) (hereinafter "Note"), which Note is secured by a
certain Second Mortgage from Owner to Lender of even date herewith
(hereinafter "Second Mortgage"); and
WHEREAS, in connection with such Loan, Owner and Lender have
entered into a certain Construction Loan Agreement of even date
herewith (hereinafter "Construction Loan Agreement"); and
WHEREAS, the parties hereto wish to provide for the
disbursement of funds and for the insuring of Lender against any
lien imposed by law for labor, services, and material furnished to
improve the Real Estate (as hereinafter defined) over the lien of
the Second Mortgage.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the sufficiency of which are
expressly acknowledged, the parties hereto consent and agree as
follows:
1. Definition of Terms. The following terms shall have the
following meanings:
1.1 "Contractor" means a person or business entity with whom
the Owner has contracted to supply material or labor and
material for any part of the Improvements to the Real
Estate.
1.2 "Construction Contract" means any contract entered into
between Owner and a Contractor which has been approved by
Lender.
1.3 "Improvements" means the improvements to the Real Estate
contemplated by and set forth in the Construction Loan
Agreement. ,
1.4 "Owner Fund" means the money placed by Owner into a b
account in the amount of one-half of the contract pri.
for all of the Improvements, which shall be one-half
the Budget amount without including the 10~ contingen
1.5 "Advance Request" means a request by Owner for payment
Lender to a Contractor for the balance of the contr
price, after completion of the contracted work, to
paid out of the Loan money provided by Lender.
1.6 "Real Estate" means real estate and improvements ther
secured by the Second Mortgage, incorporated herein
reference.
Any terms not defined hereby shall have the meaning set fo
in the Construction Loan Agreement.
2. Deposits into Owner Fund by Owner.
2.1 Within 30 days of the date of this Agreement or bef
construction begins, whichever comes first, Owner sh
deposit into a bank account at a banking institution
Owner's choice money in the amount equal to one-half
the cost of the improvements. Owner shall provide Len
with copies of all Construction Contracts. Owner sh
make withdrawals out of this account, the Owner Fu
only for payment to Contractors for work or materi
supplied under a Construction Contract. Owner sh
provide Lender with bank statements and ot
documentation of the Owner Fund as requested by Lend
Owner shall provide Lender with regular reports, at le
monthly, regarding the progress of the construction.
3. Payment of Loan Proceeds.
3.1 Upon completion of the work required of the Contract
Owner shall submit to Lender an Advance Request. S
Request shall include a lien waiver signed by Contrac
for the amount of the Contract. Lender's obligation
pay said Request is subject to a satisfactory report
the Inspecting Official. If the Inspecting Officia
report is unsatisfactory to Lender in any respect, Len
shall notify Owner, and provide Owner with a copy of
unsatisfactory report within five (5) business days
Lender's receipt thereof.
3.2 If the report is satisfactory, Lender shall make payment
directly to the Contractor, contingent upon receiving a
lien waiver signed by the Contractor and all
subcontractors or materia]men.
3.3 Lender shall have no obligation to pay any amounts in
excess of one-half of the Construction Contract amount
approved at the time of the initial deposit into Owner's
Fund. Any cost overruns are the sole responsibility of
Owner.
4. Breach by Contractor. In the event a Contractor breaches any
provision of a Construction Contract, or in the event Owner
gives notice of termination of the Construction Contract as
provided therein, then Contractor shall have no claim to any
of the Loan amount not yet disbursed, and shall have no
mechanic's lien rights for any work or labor done or services
performed after such breach or notice of termination.
5. Indemnification with Respect to Mechanic's Liens. Owner
covenants and agrees that it will indemnify and hold Lender
harm]ess from any expense, cost or loss resulting from
priority of any lien imposed by ]aw for labor, services and
material furnished to improve the Real Estate over the lien of
the Second Mortgage.
6. Excess Costs. If at any time during the term of this
Agreement, the Lender should determine in accordance with the
Construction Loan Agreement that the Owner Fund set forth in
Schedule I hereof is insufficient to pay a]] costs incidental
to the performance of the Construction Contract other than the
costs to be paid by the Loan amount, then Owner shall pay on
demand additional amounts needed for construction, and Owner
shal] deposit the same in the Owner Fund for disbursement
hereunder.
7. Excess Funds. Should there be any Owner Fund remaining after
payment of the costs of construction of Improvements and any
other costs to be paid hereunder or under the Construction
Contract(s), or Construction Loan Agreement, such sums shall
be returned to the Owner.
8. Inspections. Lender shall have the right but not the
obligation, and solely for its own protection, to make such
inspections of the improvements as it deems advisable. Owner
acknowledges that it does not and shall not rely upon any
inspections which Lender may make pursuant hereto. Lender and
its agents, inspectors, and employees may enter upon the Rea]
Estate at any reasonable time to inspect the progress
construction. Lender is not responsible for seeing that
improvements are constructed in accordance with any plans
specifications, that the improvements contemplated under
Construction Loan Agreement will be completed, that suffici
funds will be available for completion, or that the desi
engineering details, or architectural features are adequate
appropriate. Lender shall also not be required to prov
architectural supervision of construction or any servi
related to construction quality control or judgment.
9. Notice of Liens. Owner agrees to notify Lender in writing
any mechanics' or materialmen's lien or notice thereof wh
is served on it within three (3) business days after rece
of each such lien or notice.
10. Assignment; Enforcement. This Agreement shall not
assignable by any party hereto without the written consent
the other party, but shall be enforceable against the hei
executors, and administrators of any individual party her
and the successors of any corporation or partnership part
11. Terms. As used herein, the singular shall include the plu
and the masculine shall include the feminine and neuter.
12. Governing Documents. In the event of any conflict betw
this Agreement and the Construction Loan Agreement,
provisions of the Construction Loan Agreement shall gover
THE ECONOMIC DEVELOPMENT AUTHORI
IN AND FOR THE CITY OF NEW HOPE
By:
Its President
By:
Its Executive Director
NEW HOPE APARTMENTS,
a Minnesota General Partnership
By:
Its General Partner
By:
Its General Partner
c:\~pSl\cn~\ed~da
4
SECOND MORTGAGE
THIS INDENTURE, (hereinafter referred to as "Mortgage") is
made this day of , 1994, between New Hope
Apartments, a 'Minnesota general partnership, whose address is
, the
("Mortgagor"), and the Economic Development Authority in and for
the City of New Hope, having its office at 4401Xylon Avenue North,
New Hope, MN 55428, (hereinafter called "Mortgagee").
WHEREAS, the Mortgagor has requested and the Mortgagee has
agreed to make a loan to the Mortgagor, evidenced by Mortgagor's
Note (hereinafter the "Note") of even date herewith, payable to the
order of Mortgagee in the principal amount of Ninety Seven Thousand
Three Hundred Fifty and No/lO0 Dollars ($97,350.00) and bearing no
interest except as set' forth therein.
NOW, THEREFORE, in consideration of the premises and for the
purposes of securing the repayment of the loan made pursuant to the
Note and this Mortgage, and of all other sums which may be advanced
by the Mortgagee in accordance with this Mortgage, and all interest
(hereinafter the "Indebtedness"), and to secure the performance of
all covenants, conditions and agreements herein and in the Note,
the Mortgagor conveys forever all of the Mortgagor's right, title
and interest in the tract or parcel of land, legally described in
Exhibit I hereto, (hereinafter the "Land") together with all of the
buildings, structures and other improvements now standing or at any
time hereafter constructed or placed upon the Land, all easements,
appurtenances and other rights and interests now or hereafter
located thereon (all of the foregoing, together with the land,
hereinafter being referred to as the "Property" or "Mortgaged
Property"),
TO HAVE AND TO HOLD, the Mortgaged Property unto the Mortgagee
forever;
PROVIDED, NEVERTHELESS, that this Mortgage is upon the express
condition that if the Mortgagor shall pay to the Mortgagee as and
when due and payable the principal and the interest (if any) on the
Note, and shall also keep and perform all and singular the
covenants herein contained, then, the Mortgage and the estate
hereby granted shall cease and be and become void and shall be
released of record at the expense of the Mortgagor; otherwise this
Mortgage shall be and remain in full force and effect.
THE MORTGAGOR REPRESENTS, WARRANTS AND COVENANTS to and with
the Mortgagee that it is lawfully seized of the Mortgaged Property
in fee simple and has good right and full power and authority to
execute this Mortgage and to mortgage the Mortgaged Property; that ,
neither this Mortgage nor the Note contravene any covenant in any
indenture or agreement affecting the Mortgagor; that the Mortga
Property is free from all liens and encumbrances except th
identified in Exhibit II; that the Mortgagee shall quietly en
and possess the Mortgaged Property; that the Mortgagor will warr
and defend the title to the Mortgaged Property against all clai
whether now existing or hereafter arising; and that all buildi
and improvements now or hereafter located on the Land are loca
entirely within the boundaries of the Land. The covenants
warranties of this paragraph shall survive foreclosure of t
Mortgage and shall run with the land.
AND IT FURTHER COVENANTED AND AGREED AS FOLLOWS:
ARTICLE ONE
GENERAL COVENANTS, AGREEMENTS, WARRANTIES
1.1 Payment of Indebtedness, Observance of Covenan
Mortgagor will duly pay each installment of principal and inter
on the Note and all other indebtedness and will perform all ct
agreements and covenants by Mortgagor to be performed hereunder
under the Note, the Loan Agreement, or any other security docume
referred to herein. Mortgagor will also duly pay each installm
of principal and interest on the First Mortgage and First Mortg
Note and will perform all other agreements and covenants to
performed under the First Mortgage or First Mortgage Note.
1.2 Payment of Impositions. The Mortgagor agrees to p
before a penalty might attach for non-payment thereof, all tax
assessments, water and sewer charges, and other fees, taxes
charges of whatsoever nature levied upon or assessed or pla
against the Mortgaged Property.
1.3 Maintenance and Repairs. Mortgagor agrees that it w
keep and maintain the Property in good condition and repair, f
from any waste or misuse, and will comply with all requirements
law, municipal ordinances and regulations, restrictions
covenants affecting the Property and its use, and will promp
repair or restore any buildings, improvements'or structures now
hereafter on the Property which may become damaged or destroyed
1.4 Insurance.
(a) So long as the Indebtedness remains unpaid, the
Mortgagor shall, at its own cost, maintain with insurers
of recognized responsibility acceptable to the Mortgag
hazard and fire insurance on such completed improveme
insuring against loss by fire, hazards included in the t
"extended coverage", loss by vandalism or malicious mischi
and such other hazards, casualties and contingencies as may
required by the Mortgagee, on the basis of replacement co ,
without a co-insurance clause, in an amount sufficient to
prevent the Mortgagor from becoming a co-insurer of any loss
thereunder and at least equal to the sum of the unpaid balance
of the Indebtedness and all amounts secured by any senior
mortgage or other lien which exists from time to time against
the Mortgaged Property (to which the Mortgagee does not
necessarily consent). The Mortgagor shall pay all premiums on
insurance required hereunder by making payment directly to the
insurer, and upon request of Mortgagee, the Mortgagor shall
promptly furnish to the Mortgagee evidence of all such
policies, renewals thereof, renewal notices and all
paid-premium receipts received by it.
(b) The policies of all such insurance shall have
loss payable provisions in favor of and in form
acceptable to the Mortgagee, shall provide for at least
thirty (30) days prior to written notices of
cancellation, termination or modification thereof to the
Mortgagee.
1.5 Inspection. The Mortgagee, or its agents, shall have the
right to enter upon the Mortgaged Property during ordinary business
hours for the purposes of inspecting the Mortgaged Property or any
part thereof. The Mortgagee shall have no duty, however, to make
such inspection.
1.6 Mortgagor's Covenant to Provide Information. Mortgagor
covenants to provide documentation and such other information as is
required by the terms and conditions of this Mortgage, the Loan
Agreement and all other documents or instruments of security
referred to in this Mortgage.
1.7 Low Income Tax Credits. Mortgagor agrees to repay the
Note in full immediately upon the receipt of initial funds or
economic benefit following the award of low income tax credits for
the Mortgaged Property.
ARTICLE TWO
EVENTS OF DEFAULT
Each of the following occurrences shall constitute an Event of
Default hereunder:
2.1 Failure to Pay. The Mortgagor's failure to pay, when
due, any payment of interest or principal on the Note or any other
amount required to be paid by Mortgagor hereunder.
2.2 Other Performance Failure. The Mortgagor's failure duly
to observe or perform any of the other terms, conditions, covenants
or agreements required to be observed or performed by the Mortgagor
hereunder or pursuant to any other agreement between Mortgagor and
Mortgagee.
3
2.3 Breach of Warranty of Title. The breach of any warra
of title made by the Mortgagor hereunder.
2.4 Misrepresentation. The making of any misrepresentat
in any financial statement or report submitted to the Mortgagee
or on behalf of the Mortgagor.
2.5 Voluntary Bankruptcy. The filing of a petition
bankruptcy by the Mortgagor, or its request or consent to
appointment of a receiver or trustee for the Mortgagor or for
or any part of its property, or the making of a general assignm
for the benefit of creditors.
2.6 Involuntary Bankruptcy or Receivership. The entry of
order, judgment or decree appointing, without the consent
Mortgagor, a receiver or trustee for it or for all or any part
its property or approving a petition filed against it seek
relief under the bankruptcy laws of the United States or simi
laws of any state or other competent jurisdiction, which ord
judgment or decree shall have remained in force undischarged
unstayed for a period of thirty (30) days.
2.7 Foreclosure. The institution of foreclosure or ot
enforcement proceedings by the holder of any other lien on
Mortgaged Property (without hereby implying Mortgagee's consent
any mortgage or other lien).
2.8 Sale of Proeerty. A sale, assignment, conveyan
encumbrance or transfer of the Mortgaged Property, or any p
thereof, or any interest therein (except leases for a term of 1
than three (3) years).
ARTICLE THREE
ACCELERATZON AND FORECLOSURE; OTHER REMEDIES
Upon any Event of Default, the Mortgagee may, at its opti
exercise one or more of the following rights and remedies (and
other rights and remedies available to it):
3.1 Acceleration. The Mortgagee may declare immediately
and payable all unmatured Indebtedness secured by this Mortga
and the same shall thereupon be immediately due and payab
without notice or demand.
3.2 Foreclosure; Action or Advertisement. The Mortgagee
(and is hereby authorized and empowered to) foreclose this Mortg
by action or advertisement, pursuant to the statutes of the St
of Minnesota in such case made and provided, power being expres~
granted to sell the Mortgaged Property at public auction.and convey
the same to the purchaser in fee simple and, out of the proceeds
arising from such sale, to pay all Indebtedness secured hereby with
interest, and all legal costs and charges of such foreclosure and
the maximum attorneys' fees permitted by law, which costs, charges
and fees the Mortgagor agrees to pay. Any real estate or interest
or estate sold hereunder may be sold in one parcel, as an entirety,
or in such parcels and in such manner or order as the Mortgagee, in
its sole discretion, may elect. In case of any sale of the
Mortgaged Property pursuant to any judgment or decree of any court
or at public auction or otherwise in connection with the
enforcement of any of the terms of this Mortgage, the Mortgagee,
its successors and assigns, may become the purchaser, and for the
purpose of making settlement for or payment of the purchase price,
shall be entitled to deliver over and use the Note and any claims
for interest accrued and unpaid thereon, together with all other
sums, with interest, advanced and unpaid hereunder, and all
statutory charges for such foreclosure including maximum attorneys'
fees allowed by law in order that there may be credited as paid on
the purchase price the sum then due under the Note including
principal and interest thereon and all other sums, with interest,
advanced and unpaid hereunder, and all charges and expenses of such
foreclosure including maximum attorneys' fees allowed by law.
Mortgagor acknowledges that if the Mortgagee elects to foreclose by
advertisement and cause the Property or any part thereof to be sold
at public auction, notice of such sale must be published at least
once a week for six (6) successive weeks in a newspaper of general
circulation and that personal notice is not required to be served
upon Mortgagor. Mortgagor further understands that under the
Constitution of the United States and the Constitution of the State
of Minnesota it may have the right to notice and hearing befoFe the
Property may be sold and that the procedure for foreclosure by
advertisement described above does not insure that notice will be
given and said procedure for foreclosure by advertisement does not
require any hearing or other judicial proceeding. MORTGAGOR HEREBY
RELINQUISHES, WAIVES AND GIVES UP ANY AND ALL OF THE CONSTITUTIONAL
RIGHTS TO NOTICE AND HEARING BEFORE SALE OF THE PROPERTY AND
EXPRESSLY CONSENTS AND AGREES THAT THE PREMISES MAY BE FORECLOSED
BY ADVERTISEMENT AS DESCRIBED ABOVE. MORTGAGOR ACKNOWLEDGES THAT
IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING THIS
DOCUMENT THIS PARAGRAPH AND MORTGAGOR'S CONSTITUTIONAL RIGHTS WERE
FULLY EXPLAINED BY SUCH COUNSEL AND THAT MORTGAGOR UNDERSTANDS THE
NATURE AND EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF
SUCH WAIVER.
3.3 Forbearance and Other Rights of Mortgagee. Any delay by
the Mortgagee in exercising any right or remedy hereunder, or
otherwise afforded by law or equity, shall not be a waiver of or
preclude the exercise of such right or remedy or any other right or
remedy hereunder or at law or in equity. The failure of the
Mortgagee to exercise any option to accelerate maturity of the
5
Indebtedness secured by the Mortgage, the forbearance by
Mortgagee before or after the exercise of such option, or the
withdrawal or abandonment of proceedings provided for by this
Mortgage shall not be a waiver of the right to exercise such opt
or to accelerate the maturity of such Indebtedness by reason of ~
past, present or future event which would permit acceleration.
procurement of insurance or the payment of taxes or other liens
charges by the Mortgagee shall not be a waiver of the Mortgage~
right to accelerate the maturity of the Indebtedness.
Mortgagee's receipt of any awards, proceeds or damages shall
operate to cure or waive default by the Mortgagor. The Mortga~
may at any time, without notice, re]ease any person liable
payment of any Indebtedness, extend the time or agree to alter
terms of payment of any of the Indebtedness, accept additio~
security of any kind,, re]ease any plat or map of the Mortga~
Property or the creation of any easement thereon or any covenal
restricting use or occupancy thereof, or alter or amend the te
of this Mortgage in any way. No such release, modificati,
addition or change shall affect the liability of any person ot
than the person so re]eased, for payment of any Indebtedness, ~
the priority and first lien status of this Mortgage upon
property not so re]eased.
ARTICLE FOUR
MISCELLANEOUS
4.1 Mortgagee's Remedies Cumulative. All remedies of
Mortgagee are distinct and cumulative to any other right or rem
under this Mortgage or afforded by law or equity, and may
exercised concurrently or independently, as often as the occas
therefore arises.
4.2 Successors and AssiRns Bound; Captions. The covena
and agreements herein contained shall bind, and the rig
hereunder shall inure to, the respective heirs, legal
representatives, successors and assigns of the Mortgagee and
Mortgagor. The captions and headings of the paragraphs of t
Mortgage are for convenience only and are not to be used
interpret or define the provisions hereof.
4.3 Notice. Any notice from the Mortgagee to the Mortga
under this Mortgage shall be deemed to have been given by
Mortgagee and received by the Mortgagor when mai]ed by certif
mai] by the Mortgagee to the Mortgagor at the following addres
New Hope Apartments,
a Minnesota genera] partnership
David P. Stewart
100 South Fifth St., Suite 1250
Minneapolis, MN 55402
6
or at such other address as the Mortgagor may designate in writing
to the Mortgagee.
4.4 Governing Law; Severability. This Mortgage shall be
9overned by the laws of the State of Minnesota. In the event that
any provision Or clause of this Mortgage conflicts with applicable
law, such conflict shall not affect other provisions of this
Mortgage which can be given effect without conflicting provisions
and to this end the provisions of the Mortgage are declared to be
severable.
4.5 Counterparts. This Mortgage may be executed in any
number of counterparts, each of which shall be an original but all
of which together shall constitute one instrument.
4.6 Hazardous Materials. Mortgagor covenants, represents and
warrants to Mortgagee, its successors and assigns, that during the
Mortgagor's ownership of the Property, the operation of said
Property has not violated and is not currently violating any
federal, state or local law, regulation, ordinance or requirement
governing Hazardous Materials; that the Property is not listed in
the United States Environmental Protection Agency's National
Priorities List of Hazardous Waste Sites nor any other list,
schedule, log, inventory or record of Hazardous Materials or
hazardous waste sites, whether maintained by the United States
Government or any state or local agency, and that the building
improvements do not contain any formaldehyde, urea or asbestos,
except as may have been disclosed in writing to the Mortgagee by
the Mortgagor at the time of execution and delivery of this
Mortgage. The Mortgagor agrees to indemnify and reimburse the
Mortgagee, its successors and assigns, for any breach of these
representations and warranties and from any loss, damage, expense
or cost arising out of or incurred by Mortgagee which is the result
of a breach of, misstatement of or misrepresentation of the above
covenants, representations and warranties, together with all
attorneys' fees incurred in connection with the defense of any
action against the Mortgagee arising out of the above. These
covenants, representations and warranties shall be deemed
continuing covenants, representations and warranties for the
benefit of the Mortgagee, including any purchaser at a mortgage
foreclosure sale, any transferee of the title of the Mortgagee or
any subsequent purchaser at a foreclosure sale, and any subsequent
owner of the Property and shall survive any foreclosure of the
Mortgage and any acquisition of title by Mortgagee or anyone
claiming through or under the Mortgage as the title of the
Mortgagee. The amount of all such indemnified loss, damage,
expense or cost, shall bear interest thereon at the rate of
interest in effect on the Note and shall become so much additional
indebtedness, secured by this Mortgage and shall become immediately
due and payable in full on demand of the Mortgagee, its successors ,
and assigns. Said indemnity shall only apply in connection w
the conditions which were in existence, in whole or in part, pr
to the date on which Mortgagee acquires possession and title to
Property and shall not apply in connection with liability of
Mortgagee due to action taken by it or its assigns while it
Mortgagee.
4.7 Future Advances.
(a) To the extent that this Mortgage secures future
advances, the amount of such advances is not currently
known. The acceptance of this Mortgage by the Mortgagee,
however, constitutes an acknowledgement that the
Mortgagee is aware of the provisions of Minnesota
Statutes §287.05, Subd. 5, and intends to comply with the
requirements contained therein,
(b) The maximum principal amount of indebtedness
secured by this Mortgage at any one time, excluding
advances made by the Mortgagee in protection of the
mortgaged property or the lien of'this Mortgage, shall be
$75,000.00.
(C) The representations contained in this section
are made solely for the benefit of the county recording
authorities in determining the mortgage registry tax
payable as a prerequisite to the recording of this
Mortgage. The Mortgagor acknowledges that such
representations do not constitute or imply any agreement
by the Mortgagee to make any future advances to the
Mortgagor.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage
be duly executed as of the day and year first above written.
NEW HOPE APARTMENTS,
a Minnesota general partners
By.
Its
By
Its
8
STATE OF MINNESOTA )
SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this
day of , 1994, by and
. , both general partners of New Hope
Apartments, a 'Minnesota general partnership, on behalf of the
partnership.
Notary Public
THIS INSTRUMENT DRAFTED BY:
CORRICK & SONDRALL, P.A.
8525 Edinbrook Crossing, Suite 203
Brooklyn Park, MN 55443
(612) 425-5671
c:\ w p5 l\cnh\eda.~,~
9
EXHIBIT I
That part of Lot 34 lying South of a line drawn parallel to and
feet North of the South line of Lot 31, extended East, to the E
line of said Lot 34, and lying North of the South line of Lot
extending East to the East line of said Lot 34, except the East
feet thereof,
all in "Auditor's Subdivision Number 324, Hennepin Coun
Minnesota", according to the recorded plat thereof.
!
SECOND MORTGAGE
LOAN NOTE
$97,350.00 , Minnesota
, 1994
FOR VALUE RECEIVED, the undersigned, New Hope Apartments, a
Minnesota general partnership (hereinafter designated as
"Borrower"), promises to pay to the order of the Economic
Development Authority in and for the City of New Hope (hereinafter
referred to as "Lender"), (Lender and any holder of this Note from
time to time are each hereinafter sometimes referred to as
"Holder"), at 4401Xylon Avenue North, New Hope, MN 55428, or such
other place as may hereinafter be designated from time to time in
writing by the Holder hereof, the principal sum of Ninety Seven
Thousand Three Hundred Fifty and No/lO0 Dollars ($97,350.00) or so
much thereof as shall have been advanced hereunder to or for the
benefit of the undersigned pursuant to the terms of a Construction
Loan Agreement of even date herewith, made by the Borrower and
Lender (hereinafter referred to as the "Loan Agreement"), together
with no interest from the date hereof until fully paid except such
interest as set forth below. The Principal Balance and interest
(if any) shall be due as follows:
A Monthly principal payments commencing on the first day of the
eleventh month after the date hereof, shall be in the amount
of $973.50 per month and a like amount shall be due and
payable on the same day of each month thereafter until the
principal balance is paid in full.
B. In addition to the monthly principal payments, at the same
time Borrower shall pay no monthly interest payments, unless
such interest shall accrue for the previous month in
accordance with the terms hereinafter set forth.
C. All payments made by Borrower pursuant to the terms of this
Note shall be applied first to interest (if any) and then to
reduction of principal.
D. No interest on the Principal Balance shall accrue because of
rental rate increases at the Mortgaged Premises during each
month in which the rental rate for each unit in the Mortgage
Premises remain the same as of the date hereof or increases no
more than the Allowable Rent Adjustment as described
hereafter.
Borrower will have the right to increase rents on individual
apartment units on the Mortgage Premises for new tenants or
renewals of ]eases for current tenants by the allowable rent
adjustment as set forth below. The allowable rent a-djustment ,
("Adjustment") will be calculated annually, based on the
previous year's Consumer Price Index for general goods, or its
reasonable potential future substitute as available from
federal government. For the purposes of this Note, the 1
Consumer Price Index was 2.7%.
Base rents for each apartment unit in the Mortgage Premi
will be established as of the date hereof. The base re
will be limited to the lowest rent charged for that particu
unit during the six months prior to the date hereof.
As of the date hereof, Borrower will certify a rent r
listing each apartment unit on the Mortgage Premises and
lowest rent charged for each unit during the past six mont
and including the identification of all "identical" units.
the anniversary date the year after the date hereof, Borro
will update the maximum rents that may be charged for e
unit, as adjusted by the 1994 Consumer Price Index and s
this new certified rental roll to the Lender. If Borro
charges rents for any individual unit higher than the maxi
allowable rents for that unit on the certified rent r
interest will commence to accrue on the entire outstand
Principal Balance as of the date the higher than certif
rent was first in effect. It is the Borrower's responsibil
to maintain an accurate certified maximum rental roll. Th
is no requirement that Lender evaluate the rental roll
accuracy or any other purpose. In the event of substantial
intentional misstatement by Borrower on the certified r
roll, Lender may, in its sole discretion, declare a defa
and cause the entire outstanding Principal Balance to
immediately due and payable, together with any accr
interest.
Any rents that are lower than the rents charged for identi
units can be raised only by the Consumer Price Index amc
until such time as the unit becomes vacant. For example,
unit were rented for $380.00 per month, and the remainder
the identical units on the Mortgage Premises rented for $
per month, and if the Consumer Pr.ice Index were five (
percent, a maximum rental increase allowed during the n
year would be $19.00 for the unit renting at $380.00,
$20.00 for the identical units renting at $400.00. At
time that the $380.00 unit became vacant, it could be
rented at the then certified price for the identical $400
units. Borrower agrees not to evict tenants paying lo'
rents than those charged for identical units, if such evict
is for the purpose of raising rents on these units. Such
eviction would constitute a Event of Default, allowing Len
to declare the entire outstanding Principal Bala
immediately due and payable, together with. any accr ,
int erest.
E. No interest on the Principal Balance shall accrue because of
rental rate increases after the date two years from the date
hereof, regardless of any increase in the rental rate charged
by Borrower for any rental units on the Mortgage Premises
after such two year date.
F. Interest shall also accrue from the date of any default
hereunder.
G. If interest is payable under this Note, the interest rate
shall be eight (8%) percent per annum.
If any installment is paid more than fifteen (15) days after
the due date thereof, the Borrower shall pay a late charge of 4% of
the installment to cover the expenses of collection.
Borrower may prepay this Note in whole or in part at any time.
In the event Borrower sells or otherwise transfers the
Mortgage Premises, or in the event Borrower receives any funds or
economic benefit following the award of low income tax credits in
connection with the Mortgaged Permises, the entire Principal
balance and any interest accrued thereon shall be immediately paid
to Lender.
This Note is secured by a Second Mortgage of even date
herewith upon real property situated in Hennepin County, Minnesota.
All of the terms and conditions contained in said Mortgage and in
the Loan Agreement which are to be kept and performed by Borrower
are hereby made a part of this Note and to the same extent and with
the same force and effect as if they were fully set forth herein;
and Borrower covenants and agrees to keep and perform them, or
cause them to be kept and performed, strictly in accordance with
their terms.
Time is of the essence hereof. In the event of a default in
the payment of any principal or interest due hereunder or in the
payment or performance of anything by Borrower to be paid or
performed under any of the terms and conditions in this Note or in
the Mortgage or Loan Agreement, the Holder at its option and
without further notice, demand or presentment for payment to
Borrower or others, may declare immediately due and payable the
Principal Balance and interest accrued thereon, together with any
reasonable attorneys' fees 'incurred by Holder in collecting or
enforcing payment thereof, whether suit be brought or not, and all
other sums due by Borrower hereunder or under the Mortgage and Loan
Agreement anything herein or in the Mortgage or Loan Agreement to
the contrary notwithstanding, and payment thereof may be enforced
and recovered in whole in or in part at any time by one or more
the remedies provided to Holder in this Note or in the Mortgage
Loan Agreement.
The remedies of Holder as provided herein and in the Mort~
or Loan Agreement shall be cumulative and concurrent and may
pursued singly, successively or together, at the sole discretior
Holder, and may be exercised as often as occasion therefor sh
occur; and the failure to exercise any such right or remedy sh
in no event be construed as a waiver or release thereof.
Borrower waives presentment for payment, demand, notice
demand, notice of nonpayment or dishonor, protest and notice
protest of this Note, and all other notices in connection with
delivery, acceptance, performance, default or enforcement of
payment of this Note.
Holder shall not be deemed by any act of omission
commission to have waived 'any of its rights or remedies hereun
unless such waiver is in writing and signed by the Holder, and t
only to the extent specifically set forth in the writing. A
with reference to one event shall not be construed as continuin~
as a bar to or waiver of any right or remedy as to a subsequ
event.
All agreements herein are expressly limited so that in
contingency or event whatsoever shall the amount paid or agreec
be paid to the Holder for the use, forbearance or detention of
money to be advanced hereunder exceed the highest lawful r
permissible under applicable usury laws. If from any circumstan
whatsoever fulfillment of any provision hereof at the t
performance of such provisions shall be due, shall invc
transcending the limit of validity prescribed by law which a cc
of competent jurisdiction may deem applicable hereto, then
obligation to be fulfilled shall be reduced to the limit of s
validity and if from any circumstance the Holder shall ever rece
as interest an amount which would exceed the highes~ lawful ra
such amount which would be excessive interest sba1.1 be applied
the reduction of the unpaid principal balance due hereunder and
to the payment of interest.
This instrument shall be governed by and construed accor¢
to the laws of the State of Minnesota.
IN WITNESS WHEREOF, Borrower, intending to be legally bc
hereby, has duly executed this Note the day and year first ab
written.
4
NEW HOPE APARTMENTS~
a Minnesota general partnership
By
Its General Partner
By.
Its General Partner
The undersigned
do hereby guaranty performance of all terms and obligations as
specified in the foregoing Second Mortgage Note for a period of two
years from the date hereof,
(Address)
(Address)
(Address)
(Address)
5
(Address)
(Address)
c: \ ~ p51 \Ch h\ecla, loa
6
Gary E. Stout, President
Public-Private Ventures, Inc.
5101 West 70th Street, Suite 220
Edina, Minnesota 55439
Phone 612-941-4999
Fax 612-941-0195
Mr. Daniel J. Donahue February 22, 1994
City Manager
City of New Hope
4401 Xylon Avenue North
New Hope, MN 55428
Dear Mr. Donahue
I have reviewed the request for a City loan from the New Hope Apartments
Partnership. I have met with the managing partner for the owners (and also
the City Attorney and city staff) several times, reviewed the managing
partner's preliminary bid packets, analyzed financial data on the apartments
and owners, reviewed the partnership tax returns for the past several years,
made independent projections for the building, reviewed the request against
the recently adopted EDA policy for such loans, prepared a memorandum of
agreement on how this project might proceed, and worked with the City
Attorney in an attempt to draft a prototype set of documents that might be used
for such loans (with minor modification) in the future.
Based on my analysis, the project appears to comply with the City's policy in
all important ways including, specifically, the following:
-1. The funding requested appears to be the minimum necessary to make
substantial building improvements (such as the roof replacement,
and windows replacement) and also to deal effectively with deferred
maintenance. Only 10% is proposed as a contingency line item.
2. No extraneous amenities are included in the proposed bid.
3. No money is to be used for fees to the owner, or related parties.
4. The owners are matching the city requested loan on a 50/50 basis.
Their funds are in an escrow account, awaiting an EDA decision.
5. The owners are bringing the mortgage and taxes current, with their
own funds, in addition to their contribution to the above rehab
funding pool.
6. The project will be funded with a loan, with no grant funds or equity
investments used.
7. The bank holding the debt is participating in the solution to the
financial problems of this project through interest rate reduction and a
re-write of the loan.
In addition, the owners are participating in additional equity
investments, such as back taxes, back mortgage payments, contribution t{
the loan pool, and a willingness to guarantee repayment of the City's loan
for two years.
8. The rehab investment will be used to help the building achieve a
financial break-even, and not to raise the profitability of the
building. No displacement of existing moderate income tenants will
be required. No relocation of residents will be necessary.
The owners have agreed to hold rent increases to the rate of the
consumer price index for 1994 and 1995 so as to minimize any rental
increases on existing tenants during this time, that might otherwise
result from the rehabilitation effort.
9. The loan requested would not normally be considered a "bankable"
loan, and the proposed loan terms would not be available from any
private source.
10. In the event that the project obtained new financial infusions,
through a sale or the use of Low Income Tax Credits, the City loan would
be immediately repayable.
Proposed Loan Terms
The proposed loan terms are as follows:
Total rehab budget: $177,000, $88,500 contributed by the partnership, $88,500
as a EDA loan.
In the event of unexpected problems, the above budget may be increased up to
a maximum additional contribution of 10% (or $8,850 from both the
partnership and the EDA). Any problems or situations above that will require
a new EDA approval.
Loan repayment: 1% a month ($885/month), for 100 months, commencing
after the end of the construction period (11 months after loan closing).
Loan Interest: No interest would be charged, unless the loan were in default e
the owner raised the rents more than the consumer price index amount
during the first two years.
Partial Loan Guarantee: Regardless of the financial performance of the
building, the partners have agreed to personally guarantee the first two year.,
of loan repayments. This would take us through a period approximately three
years from now, and the success of the building should be well established by
that time.
Projected Financial Status of Building
The building has been losing substantial sums in recent years. Maintenance
has been deferred. The building has lost value (as have most multifamily
buildings). Based on an analysis of the most recent audited figures for the
building (1992) it appears that the over-all effort of the owners should result
in a break-even situation.
This projected financial improvement is due to a number of factors: slightly
higher rents in a rehabed building (2.7% maximum); a slightly lower real
estate tax based on a lower building value; a lower bank interest rate; lessened
utility costs due to lighting replacements, window replacement, better control
valves, and some additional roof insulation; lessened maintenance costs due to
the proposed repair program; and fewer costs due to tenant turn-over in a
building that is rehabilitated and more comfortable.
Recommendation
Based on the above noted analysis and conclusions, it is my recommendation
that the EDA approve a loan on the above terms for the New Hope Apartments
partnership.
This recommendation is made with the realization that such loans inherently
have some risk. I believe that the risk is prudent in this case, however there
will always be some risk.
Please see my attached two page discussion of the potential alternative policies
of the EDA with regard to the issue of risk.
SinceTy yours
Gary E.
GS/m
PUBLIC LENDING RISK-DISCUSSION OF OPTIONS
Real estate rehabilitation public financing always has a component of risk of
repayment. In my experience, there are three major ways that various cities le the
question of non-repayment risk.
Grants
One prime method to avoid the problem of potential non-payment of loan is to ly
give the money away. With this approach there is no risk of non-repayment, )ly
because there is no repayment. This approach has the advantage of:
1. Simplicity
2. A predictable, expected 100% guarantee of receipt of no payments on a grin
often somehow less politically embarrassing than an unexpected 20% or 30~ s
rate on a loan program.
This approach has the disadvantages of:
1. Public funds are not available to "re-cycle" to use for other related purpose the
future (i.e. additional rehabilitation funding requires additional tax dollar
resources in each and every case, as no repayment funds are available).
2. When public funds are "free", more applicants tend to ask for them.
3. When public funds are "free", each applicant tends to ask for more money.
All of the above tend to increase the demand for funds, and decrease the avail y
of funds. This means that the EDA will have to raise more tax dollars to undert
significant multifamily rehabilitation program.
Stringent Underwriting Criteria/Personal Guarantees/Extensive Thir~ rty
Studies/etc.
In attempts to create less "risky" and more "bankable" loans, some cities have tpted
to extract many requirements, guarantees, legal documents, outside studies be etc.
etc. in an attempt to ensure that non-repayment risk will be minimized.
This approach has the following advantages:
1. It may slightly increase the repayment rate.
This approach has the following disadvantages:
1. If a project can survive a through "bankable" underwriting criteria, it pro is
a truly "bankable" loan and should be sought from private banking instit s--
rather than using relatively scarce public funds.
2. Most owners have the option of declaring bankruptcy, in the event that a
and their own personal situations are not working out. Therefore, conclus
that an extensively documented loan is 100% safe are often premature and
founded.
3. The costs of obtaining loans under these circumstances are often exorbitant. In
one (admittedly unusual) situation that I am familiar with the owner of a building
has spent approximately $70,000 and over 15 months on required documentation
and preparation for a $250,000 loan. In another example, Fridley recently sent out
a notice that favorable federal lending was available for multifamily buildings in
the City. After review of the requirements, only one apartment owner has spent
several months struggling through the process. The rest refused to participate,
including projects that the City most wanted to see rehabilitated.
4. Due to the cost, complexity, and personal entanglements involved in these type of
loans, most owners of marginal projects do not want to become involved.
Unfortunately, the financially stressed owners of distressed property with
marginal financial results are exactly the type of owners that most elected
officials would want to request public rehabilitation funding, in order to
maintain property values and stability in the area and provide decent, safe,
and sanitary housing for the tenants.
"Middle of the Road"
The recommended and adopted EDA policy followed a middle of the road approach.
1. Requests for funds are minimized by requiring:
· a loan (not grant) format
· that the owners normally match the requested funds with their own
funds
· that other parties participate in the financial solution to the project
(such as the mortgage lender, the partners, etc.)
· not allowing the owner to take out fees
· minimizing the application requirements
· not allowing funds to be used for superfluous project amenities
· personal guarantees on payment during the difficult early years of a project
· that "bankable" deals go to banks
2. Although several legal documents are used, application requirements are
simplified.
Some cities would require that several thousand dollars be spent for Phase I
environmental reports, asbestos testing, lead paint testing, etc. prior to
considering an application. In the event that the EDA might become involved in
a smaller 4 -plex or 8-plex project, it is conceivable that the above costs, plus legal
fees, might even approach the anticipated costs of the minimum required
improvements in the building.
This somewhat simplified approach should prove useful in the event that the EDA
becomes involved in smaller properties in the future.
Conclusion
If the EDA becomes involved with a number of loans over a period of ~ears, it should
be expected that there will inevitably be a loss of some amount at some time. However,
this projected problem must be balanced against the public purpose of housing and
neighborhood stabilization efforts, and the problems with other approaches to
meeting those needs.
CORRICK & SONDR~.L, P.A.
ArTORNZYS AT LAW
STEVEN i. SONORALL ~j~__~ ~
M,C.^;L ~. ~E~; ~a~naur~n Execu~ve Office Pl~ -
M~IN ~ MALECHA
WILLIAM C. ~RAIT 8525 ~inbmok Crossing LA& ESKE
SH
S~J~= ~203
~o~= ~a~, ~o~ 55~3
T~LEPHONE (612) 42~1 F~ (612)
February 23, 1994
David P. Stewart
Paragon Real Estate Investments
100 South Fifth St., Suite 1250
Minneapol t s, MN 55402
Gary E. Stout
Public - Private Ventures, Inc,
5101 West 70th Street
Edina, MN 55439
RE: New Hope EDA Rahab Loan
Our File No: 99.11118
Dear David and Gary:
Enclosed is a f~na] draft of the loan documents,
Changes were'r~ade on the following pages (tn addition to than(.
the loan dollar amount):
1. Loan Agreement. Paragraph 13 contains agreeme~ :o
adjust the documents if contingency not used,
2. Disbursing Agreement. Paragraph 1.4 - rather th'a se
"90%", ! added language excluding the contingency
the t/2 calculation. This will have the same ef :.
Paragraph 2.1 - ! added a new ~ast sentence reqL ~g
regular construct ion progress reports.
3. Note. Paragraph 3 - one third down from the top I
a clause making sale/transfer a cause for making
immedi ate] y payable,
4. Mortgage. Paragraph 2.8 - I deleted the last two
to make more definite as to transfer of the prc ;y
being a de,fault, '
February 23, 1994
Page 2
Let me know if you have any comments or questions.
Sincerely,
ORIGINAL SIGNED - ·
BY MARTIN P. MALECHA
Martin P. Malecha
Assr. New Hope City Attorney
s3t
Enclosures
cc: Kirk McDonald, Management Assr, (w/enc)~THIscOPYFOR .~
Daniel J. Donahue, City Manager ..........
Steven A. Sondra11, City Attorney
bps: Kirk, these are the same documents included with the
Resolut ion. MPM
EDA RESOLUTION NO. g3-],3
RESOLUTIOI~ APPROVING MULTI-FAMILY
HOUSING POLICIES
(PROJECT #510)
WHEREAS, the City of New Hope contains over 3,839 units of rental multiple unit housing;
WHEREAS, many of those units have been constructed during the period from 1960 to 1979
.WHEREAS, many of those units h~ve begun to show signs of aging and obsolescence; and
WHEREAS, many private owners are I~aving difficulty obtaining private capital necessary to r, itate and
properly maintain their units; and
WHEREAS, many of these rental housing projects have been subjected to the real estate rece that has
involved most of the United States as well as the met¢opolitan area; and
WHEREAS, this housing stock, if maintained, can provide a decent, safe, and desirable sourci =fordable
housing for the current and future residents of New Hope; and
WHEREAS, the City of New Hope Economic Development Authority (FDA) has a desire to prov sistance
where that assistance is clearly needed and warranted; and
WHEREAS, the purpose of that assistance would be to: stem physical property deterioration, i fe public
safety, improve values, enhance neighborhood cohesiveness, and assist in the provi.. ; modern
rental amenities; and
WHEREAS, the City of New Hope must target its limited resources, reflecting the reality that provide
· only limited funding, compared to the funding that might potentially be required 3ovate a
significant percentage of the 3,839 multi-family rental units in the City; and
WHEREAS, the goal of the EDA's involvement would be to meet public policy needs in the housi ~ human
services area, rather than to resolve project financial problems and issues that priva ~ers and
lenders may have, and
WHEREAS, the FDA recognizes that financial assistance to real estate projects involve some
NOW THEREFORE BE IT RESOLVED that the following policy shall be used by the EDA to eval ~otential
future requests for assistance by rental unit owners:
1. The minimum amount of public funding required shall be provided in each
2. Funding priority will be given to basic needs (such as roof replacement, w heating,
etc.) as opposed to provision of amenities (such as washers and dryers in E nit, new
office and lobby furniture, etc.)
3. No funding will be provided which, directly or indirectly, is used for fees b~ Iwner or
related parties (including construction management fees, developer use of
· .. "contingency funds", fee sharing, etc.)
I 4. At leaSt two bona fide bids, from non-related parties, will be required for eM, ~ that is
· a part of an overall program of rehabilitation funded partially or completely w y funds.
Normally, "in house" contracting and/or related party contracting will be pr ~d.
5. No funds will be provided to bring defaulted mortgages current.
~ ' ~ 6.. No funds will be provided to bring taxes current.
7. Public funds will be used to leverage private funding wherever possible. Normally a 50/50
matching of funds for eligible activities would be required.
· 8. Wherever possible, loans shall be used as the preferred financing vehicle, r;~ther than grants
or equity investments. ..
9. In the case in which a project has substantial, private financial stress, appropriate
participation by the lender and the equity owner will be a requirement for City investment.
The private investment may take the form of additional equity, debt forgiveness, interest
rate reduction, loan,term extension, payment deferrals, management fee reduction, reduced
cash flow distribution, etc.
In no case will tax funds be used to solve financial problems that would otherv~ise be
solved privately in the absence of public participation.
10. Public funds will only be provided in those instances in which the public funds are essential
to the rehabilitation of the project. Public funds will not be provided when the primary
result of that provision would be to merely raise the profitability of a building.
1 1. Public funds will not be substituted for private funds that could reasonably be raised in the
private market. For example, if a private loan could be obtained, and/or if Iow income tax
credits would be available, EDA funds will not be used to displace these other potential
resources.
12. Each financial assistance agreement will contain an accelerated repayment provision in the
event of property sale, or other significant changes in circumstances.
13. Funds will not be provided that will allow the owner to displace moderate income residents
"and attract higher income tenants. Nothing in this statement shall be construed to
preclude the attraction of desirable tenants to a project, and the displacement of
undesirable tenants.
14. Fun~ls would not be provided for projects that would result in lower property tax payments,
unless such projects meet other City objectives.
15. EDA Rehabilitation funds shall not be provided for use'in such a way that Relocation
statues and payments are triggered.
16. No funding will be considered for approval without a prior objective financial analysis of the
project, and an independent recommendation as to the amount and type of proposed
fundin_g..
.7
Adopted.by the Economic Development Authority in and for the City of New Hope this 13th day of September,
1993.
" .... ,,/~dward J./Eri~kson, President
/Daniel J. Don~h-ue, Executive Director
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