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HomeMy WebLinkAboutHRA 4El ' le Date April 7, 2014 Item No. RESOLUTION APPROVING RELEASE OF INTEREST REDUCTION LOAN AGREEMENT Proposed Action Staff recommends adoption of the following motion: Move to approve Resolution Approving Release of Interest Reduction Loan Agreement Approval of the Resolution will result in the Lakeville Housing and Redevelopment Authority receipt of $2.23 million as repayment of the Interest Reduction Loan Agreement with Southfork Apartments Limited Partnership. Overview The Lakeville HRA established the Southfork Tax Increment Financing District in 1988 for the purpose of providing financial incentives for affordable rental housing opportunities. The developer ( Southfork Apartments Limited Partnership) received 65% of the tax increment in each of the first three years and 50% of the tax increment in each of the next seven years. The Developer is in the process of refinancing the property and as such will be repaying the Interest Reduction Loan to the Lakeville HRA. The total amount of the Interest Rate Reduction Loan repayment, including principal, interest and net appreciation, is $2,230,000. Approval of the Resolution approves the Release of Loan Agreement, subject to receipt of funds and authorizes the Lakeville HRA Chair and Executive Director to sign all requisite documents related to the Release. Primary Issues to Consider (see attached) ➢ Background ➢ Interest Reduction Loan Agreement repayment ➢ Process Financial Impact: $2.23 million. budgeted: No Source: Related Documents (CIP, ERP, etc.): Notes: ➢ Permitted uses of Loan payments Primary Issues to Consider Background Southfork Apartments (phase 1) is located on Jubilee Way - across from Rainbow Foods. i/ I The Lakeville HRA established the Southfork Tax Increment Financing District in 1988 for the purpose of providing financial incentives for affordable rental housing opportunities. The developer (Southfork Apartments Limited Partnership) received 65% of the tax increment in each of the first three years and 50% of the tax increment in each of the next seven years. The tax increment was secured by an Interest Rate Reduction Loan Agreement whereby the developer agreed to repay the Loan in 2018. In December 2000, the Lakeville HRA approved the First Amendment to the Interest Rate Reduction Agreement whereby Southfork Apartments agreed to a $500,000 prepayment of the Interest Reduction Loan Agreement; the $500,000 prepayment was appropriated to the Arts Center construction project. The Loan balance as of December 20, 2000 was $986,278. The term of the Loan was extended to a 2032 maturity date. The Loan repayment is to include 8% simple interest on the Loan balance. Interest Rate Reduction Loan repayment The Developer is in the process of refinancing the property and as such will be repaying the Interest Rate Reduction Loan to the Lakeville HRA. As of April 30, the date of the refinancing, the Loan repayment to the HRA will be $2,040,686 which includes principal ($986,278) and interest ($1,054,408). The Interest Rate Reduction Loan Agreement also provided for a sharing of the net appreciation, if any, of the subject property. The firm of Patchin Messner Appraisals was retained by the Lakeville HRA (and City) to provide consultation services regarding the valuation. Based on Southfork Apartments financial information, comparable sales of similar properties and other relevant information, the property has an estimated fair market value of $23.5 million. (Note: The market value as determined by the Dakota County Assessor is $18.1 million). Based on the formulas contained within the Interest Rate Reduction Loan Agreement, the HRA will receive additional $189,314 from the "Net Appreciation ". The total amount of the Interest Rate Reduction Loan repayment, including principal, interest and net appreciation, is $2.23 million. The law firm of Dorsey and Whitney LLP has represented the Lakeville HRA (and City of Lakeville) in this transaction and in preparation of the closing documents. Process Lakeville HRA is being requested to approve a Release of Interest Reduction Loan Agreement. The Release will be subject to receipt of Loan proceeds and will not be executed until after the Loan proceeds are received. On or after April 30, 2014, the Lakeville HRA will receive $2,230,000 from Southfork Apartments Limited Partnership as full and final payment on the Interest Rate Reduction Loan Agreement. Permitted uses of Loan payments According to attorneys at Dorsey Law, the Lakeville HRA can use the funds for any of its authorized purposes. While typically the loan repayment would be "tax increment," and would be required to be returned to the tax increment district, per Minnesota Laws 1997, Chapter 231, any repayments of advances or loans made before June 30, 1997 are not tax increment. Accordingly, the Loan payment can be appropriated to fund any of the HRA's authorized purposes, such as blight reduction, housing projects for low and moderate income housing and related improvements, and other urban renewal projects such as repair and rehabilitation of buildings, reduction of traffic hazards or other land uses detrimental to the public welfare, and acquisition of property to remove unhealthful, unsanitary, or unsafe conditions. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE RESOLUTION RESOLUTION APPROVING RELEASE OF INTEREST REDUCTION LOAN AGREEMENT WHEREAS, as authorized by Minnesota Statutes, Section 469.012, subdivisions 7 through 9, the Housing and Redevelopment Authority in and for the City of Lakeville, Minnesota (the "Authority ") has heretofore approved and entered into an Interest Reduction Loan Agreement, dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement, dated December 20, 2000 (as so amended, the "Loan Agreement "), with Southfork Apartments Limited Partnership (the "Developer ") relating to a rental housing development located generally at 18001 Jubilee Way in the City of Lakeville; and WHEREAS, pursuant to the Loan Agreement, the Authority made advances to the Developer (the "Authority Loan"), in consideration for which the Developer agreed to set aside certain units in the Development for low and moderate income housing for a specified period of time and agreed to repay the Authority Loan, with interest; and WHEREAS, the Developer desires to prepay the Authority Loan, and has agreed to pay the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof, which shall constitute payment in full of the Authority Loan (the "Loan Repayment "); and WHEREAS, a draft of the proposed Release of Loan Agreement (the "Release ") has been submitted to this Board. NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Lakeville, Minnesota, as follows: The Release is hereby approved. Upon receipt by the Authority of the Loan Repayment, the Chair and Executive Director of the Authority are authorized to execute the Release on behalf of the Authority substantially in the form of the draft submitted at this meeting, but with such modifications therein as said officers shall in the exercise of their own independent judgment and discretion, and upon advice of counsel, determine to be necessary, appropriate or desirable. 2. The Chair and Executive Director of the Authority are authorized to execute such other documents, certificates, and releases, upon advice of counsel, as they shall deem necessary, appropriate or desirable to effectuate the purposes of the Release and fully release the Loan Agreement and the security for the Loan Agreement. APPROVED AND ADOPTED this 7' day of April, 2014. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE By: Douglas Anderson, Chair ATTEST: Steve Mielke, Executive Director RELEASE OF LOAN AGREEMENT This RELEASE OF LOAN AGREEMENT (this "Release ") is made as of this day of April, 2014, by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA (the "Authority "), and SOUTHFORK APARTMENTS LIMITED PARTNERSHIP (the "Developer "). RECITALS: A. Pursuant to an Interest Reduction Loan Agreement dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement dated December 20, 2000, between the Authority and the Developer (as so amended, the "Loan Agreement'), the Authority agreed to make a loan to the Developer from tax increments for the purpose of reducing the effective interest rate on the financing for a 200 -unit multifamily residential project primarily for rental to low and medium income persons, which loan is currently outstanding in the principal amount of $986,278, plus accrued interest (the "Authority Loan"). B. The Developer desires to prepay the Authority Loan and has provided the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof (the "Loan Repayment'). NOW THEREFORE, in consideration of the foregoing recitals and other consideration, the receipt and sufficiency of which the Authority and the Developer acknowledge, the Authority and the Developer agree as follows: AGREEMENT: 1. Release As of the date hereof, the Authority has accepted the Loan Repayment as repayment in full of the Authority Loan and Authority and the Developer agree that the term of the Loan Agreement has expired pursuant to Section 8.07 thereof. IN WITNESS WHEREOF, the Authority and the Developer have set their hands as of the date first written above. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA M Its Chair Lo Its Executive Director SOUTHFORK APARTMENTS LIMITED PARTNERSHIP RELEASE OF LOAN AGREEMENT This RELEASE OF LOAN AGREEMENT (this "Release ") is made as of this _ day of April, 2014, by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA (the "Authority "), and SOUTHFORK APARTMENTS LIMITED PARTNERSHIP (the "Developer"), RECITALS: A. Pursuant to an Interest Reduction Loan Agreement dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement dated December 20, 2000, between the Authority and the Developer (as so amended, the "Loan Agreement'), the Authority agreed to make a loan to the Developer from tax increments for the purpose of reducing the effective interest rate on the financing for a 200 -unit multifamily residential project primarily for rental to low and medium income persons, which loan is currently outstanding in the principal amount of $986,278, plus accrued interest (the "Authority Loan"). B. The Developer desires to prepay the Authority Loan and has provided the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof (the "Loan Repayment'). NOW THEREFORE, in consideration of the foregoing recitals and other consideration, the receipt and sufficiency of which the Authority and the Developer acknowledge, the Authority and the Developer agree as follows: AGREEMENT: 1. Release As of the date hereof, the Authority has accepted the Loan Repayment as repayment in full of the Authority Loan and Authority and the Developer agree that the term of the Loan Agreement has expired pursuant to Section 8.07 thereof. IN WITNESS WHEREOF, the Authority and the Developer have set their hands as of the date first written above. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA C Its Chair C Its Executive Director SOUTHFORK APARTMENTS LIMITED PARTNERSHIP M Its RELEASE OF LOAN AGREEMENT This RELEASE OF LOAN AGREEMENT (this "Release ") is made as of this day of April, 2014, by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA (the "Authority"), and SOUTHFORK APARTMENTS LIMITED PARTNERSHIP (the "Developer "). RECITALS: A. Pursuant to an Interest Reduction Loan Agreement dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement dated December 20, 2000, between the Authority and the Developer (as so amended, the "Loan Agreement "), the Authority agreed to make a loan to the Developer from tax increments for the purpose of reducing the effective interest rate on the financing for a 200 -unit multifamily residential project primarily for rental to low and medium income persons, which loan is currently outstanding in the principal amount of $986,278, plus accrued interest (the "Authority Loan"). B. The Developer desires to prepay the Authority Loan and has provided the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof (the "Loan Repayment'). NOW THEREFORE, in consideration of the foregoing recitals and other consideration, the receipt and sufficiency of which the Authority and the Developer acknowledge, the Authority and the Developer agree as follows: AGREEMENT: 1. Release As of the date hereof, the Authority has accepted the Loan Repayment as repayment in full of the Authority Loan and Authority and the Developer agree that the term of the Loan Agreement has expired pursuant to Section 8.07 thereof. IN WITNESS WHEREOF, the Authority and the Developer have set their hands as of the date first written above. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA Its Chair LIN Its Executive Director SOUTHFORK APARTMENTS LIMITED PARTNERSHIP :A Its RELEASE OF LOAN AGREEMENT This RELEASE OF LOAN AGREEMENT (this "Release ") is made as of this _ day of April, 2014, by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA (the "Authority "), and SOUTHFORK APARTMENTS LIMITED PARTNERSHIP (the "Developer "). RECITALS: A. Pursuant to an Interest Reduction Loan Agreement dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement dated December 20, 2000, between the Authority and the Developer (as so amended, the "Loan Agreement "), the Authority agreed to make a loan to the Developer from tax increments for the purpose of reducing the effective interest rate on the financing for a 200 -unit multifamily residential project primarily for rental to low and medium income persons, which loan is currently outstanding in the principal amount of $986,278, plus accrued interest (the "Authority Loan"). B. The Developer desires to prepay the Authority Loan and has provided the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof (the "Loan Repayment "). NOW THEREFORE, in consideration of the foregoing recitals and other consideration, the receipt and sufficiency of which the Authority and the Developer acknowledge, the Authority and the Developer agree as follows: AGREEMENT: 1. Release As of the date hereof, the Authority has accepted the Loan Repayment as repayment in full of the Authority Loan and Authority and the Developer agree that the term of the Loan Agreement has expired pursuant to Section 8.07 thereof. IN WITNESS WHEREOF, the Authority and the Developer have set their hands as of the date first written above. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA LM Its By Its Executive Director SOUTHFORK APARTMENTS LIMITED PARTNERSHIP RELEASE OF LOAN AGREEMENT This RELEASE OF LOAN AGREEMENT (this "Release ") is made as of this _ day of April, 2014, by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA (the "Authority "), and SOUTHFORK APARTMENTS LIMITED PARTNERSHIP (the "Developer "). RECITALS: A. Pursuant to an Interest Reduction Loan Agreement dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement dated December 20, 2000, between the Authority and the Developer (as so amended, the "Loan Agreement'), the Authority agreed to make a loan to the Developer from tax increments for the purpose of reducing the effective interest rate on the financing for a 200 -unit multifamily residential project primarily for rental to low and medium income persons, which loan is currently outstanding in the principal amount of $986,278, plus accrued interest (the "Authority Loan"). B. The Developer desires to prepay the Authority Loan and has provided the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof (the "Loan Repayment'). NOW THEREFORE, in consideration of the foregoing recitals and other consideration, the receipt and sufficiency of which the Authority and the Developer acknowledge, the Authority and the Developer agree as follows: AGREEMENT: 1. Release As of the date hereof, the Authority has accepted the Loan Repayment as repayment in full of the Authority Loan and Authority and the Developer agree that the term of the Loan Agreement has expired pursuant to Section 8.07 thereof. IN WITNESS WHEREOF, the Authority and the Developer have set their hands as of the date first written above. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA Its Chair VA Its Executive Director SOUTHFORK APARTMENTS LIMITED PARTNERSHIP M Its RELEASE OF LOAN AGREEMENT This RELEASE OF LOAN AGREEMENT (this "Release ") is made as of this _ day of April, 2014, by THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA (the "Authority "), and SOUTHFORK APARTMENTS LIMITED PARTNERSHIP (the "Developer "). RECITALS: A. Pursuant to an Interest Reduction Loan Agreement dated as of January 1, 1988, as amended by a First Amendment to Interest Reduction Loan Agreement dated December 20, 2000, between the Authority and the Developer (as so amended, the "Loan Agreement'), the Authority agreed to make a loan to the Developer from tax increments for the purpose of reducing the effective interest rate on the financing for a 200 -unit multifamily residential project primarily for rental to low and medium income persons, which loan is currently outstanding in the principal amount of $986,278, plus accrued interest (the "Authority Loan "). B. The Developer desires to prepay the Authority Loan and has provided the Authority a mutually agreed upon payment of $2,230,000 in consideration thereof (the "Loan Repayment'). NOW THEREFORE, in consideration of the foregoing recitals and other consideration, the receipt and sufficiency of which the Authority and the Developer acknowledge, the Authority and the Developer agree as follows: AGREEMENT: 1. Release As of the date hereof, the Authority has accepted the Loan Repayment as repayment in full of the Authority Loan and Authority and the Developer agree that the term of the Loan Agreement has expired pursuant to Section 8.07 thereof. IN WITNESS WHEREOF, the Authority and the Developer have set their hands as of the date first written above. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF LAKEVILLE, MINNESOTA IM Its By Its Executive Director SOUTHFORK APARTMENTS LIMITED PARTNERSHIP UZ