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CC Memo 2-15-06 CITY OF CHANHASSEN 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 Administration Phone 952.227.1100 Fax: 952.227.1110 Building Inspections Phone: 952.227.1180 Fax: 952.227.1190 Engineering Phone: 952.227.1160 Fax: 952.227.1170 Finance Phone: 952.227.1140 Fax: 952.227.1110 Park & Recreation Phone 952.227.1120 Fax: 952.227.1110 Recreation Center 2310 Coulter Boulevard Phone: 952.227.1400 Fax 952.227.1404 Planning & Natural Resources Phone: 952.227.1130 Fax: 952.227.1110 Public Works 1591 Park Road Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone: 952.227.1125 Fax: 952.227.1110 Web Site www.ci.chanhassen.mn.us D~-oS -1g'. MEMORANDUM TO: Todd Gerhardt, City Manager FROM: Justin Miller, Assistant City Manager()1'^ VJ;;L"'r: February 15, 2006 '.,../ DATE: RE: Sand Companies/Gateway Place Loan Documents BACKGROUND Last year, the Sand Companies were awarded $300,000 in tax credits by the Minnesota Housing Finance Agency for their proposed Gateway Place apartment project. This money is actually granted to the city where the project will occur, and then the money is passed along to the developer. Due to their financing requirements, the Sand Companies cannot accept this money from the City as a grant. Instead, they must enter into a loan agreement with the City, which states that at the end of 30 years, they must repay the City the loan amount in full. The Sand Companies have used this arrangement in other cities where they have completed projects, and are comfortable with the attached loan language. Financially, the City has no risk with this loan. We are loaning money that was given to us by the Metropolitan Council, and can expect that it will be fully repaid to us at the end of 30 years. The city is under no obligation to repay the money to the Metropolitan Council at the end of this time, and we could use it for any purposes we wish. However, many times the developer will ask that the loan be forgiven for the purposes of capital maintenance on the building, or to allow the developer to use to money to keep the project qualified as affordable. This decision does not need to be made at this time, but can be made by future city councils at the time the loan is due. While the city is not a signatory to this agreement, the city attorney has reviewed the documents and is recommending that the City Council approve the attached promissory note and mortgage. RECOMMENDA TION Staff recommends that they City Council approve the attached "Inc1usionary Housing Account Mortgage and Promissory Note" between the City of Chanhassen and Gateway Place, LLC. Approval of this item requires a majority vote of the City Council. The City of Chanhassen · A growing community with clean lakes, quality schools, a chamning downtown, thriving businesses, winding trails, and beautiful parks. A great place to live, work, and play. G:\ADMIN\JM\Sand Company\Loan agreement.doc / INCLUSIONARY HOUSING ACCOUNT PROMISSORY NOTE Waite Park, Minnesota ,2006 FOR V ALUE RECEIVED, the undersigned (the "Borrower") promises to pay to the order of the City of Chanhassen, a Minnesota municipal corporation (the "Lender"), or its assigns, the sum of Three Hundred Thousand and 00/100 Dollars ($300,000.00) (the "IRA Loan"), without interest. Said sum is made available to Borrower to enable Borrower to develop certain real property located within the City (the "Project"). The principal of this Note shall be payable in full on the later of (i) December 31,2036 or (ii) the maturity date of the Minnesota Housing Finance Agency (MHFA) first mortgage loan with respect to the Project, except as provided below. The debt evidenced by this Note may be prepaid in whole or in part at any time prior to the final maturity date of this Note. The Borrower covenants that (i) it will use the proceeds of this Note solely to finance a portion of the capital cost of acquiring, constructing and equipping the Project, (ii) the Project shall consist of a forty-eight (48) unit residential, rental apartment development to be constructed primarily for the purpose of providing low-to-moderate income housing, and (iii) the Borrower's use of proceeds of this Note shall comply in all material respects with the requirements set forth in that certain Metropolitan Livable Communities Act Inc1usionary Housing Account Grant Agreement, Grant No. SG-005-111, by and between the Metropolitan Council (the "Council") and the City. This Note is secured by a Mortgage of even date between the Borrower and the Lender (the "iliA Mortgage"), and reference is made to the iliA Mortgage for the rights of the Lender as to the acceleration of the indebtedness evidenced by this Note. Neither the Borrower nor any member, employee or agent of the Borrower shall have any personal liability for the Borrower's obligations hereunder, it being recognized by the Lender that the obligations of the Borrower hereunder are nonrecourse obligations and that the remedies of the Lender are limited to the security provided in connection with this Note and the iliA Mortgage. Notwithstanding anything herein to the contrary, Lender agrees that is shall not (a) sell, assign, conveyor otherwise transfer all or any part of its interest in the Loan to the Federal Home Loan Mortgage Corporation ("Freddie Mac") or (b) include the Loan, or any interest therein, in any pool of loans to be sold, assigned, conveyed or otherwise transferred to Freddie Mac. Demand, protest and notice of demand and protest are hereby waived, and the undersigned hereby waives, to the extent authorized by law, any and all homestead and other exemption rights which otherwise would apply to the debt evidenced by this Note. The Borrower promises to pay all costs of collection, including but not limited to reasonable attorneys' fees, paid or incurred by the Lender on account of such collection, all costs associated with recording the IRA Mortgage and any other filing fees paid in connection with the ilIA M~g~e. - This Note shall be governed and construed in accordance with the laws of the State of Minnesota. IN WITNESS WHEREOF, this Note has been duly executed by the undersigned as of the day and year first above written. BORROWER: CHANHASSEN GA TEW A Y PLACE, LLC By: Augusta Ventures, Inc. Its: Managing Member By: Name: Jamie J. Thelen Its: Chief Manager By: Name: James W. Sand Its: Vice President -2- INCLUSIONARY HOUSING ACCOUNT MORTGAGE This Mortgage is made as of this _ day of , 2006, between CHANHASSEN GATEWAY PLACE, LLC, a Minnesota limited liability company, as Mortgagor, and the CITY OF CHANHASSEN, a Minnesota municipal corporation, as Mortgagee. WITNESSETH: That Mortgagor, in consideration of the sum of One Dollar ($1.00) and other good, valuable, and sufficient consideration, the receipt of which is hereby acknowledged, does hereby grant, bargain, sell and convey unto Mortgagee, its successors and assigns, forever, all the tract or parcel of land lying and being in the County of Carver and State of Minnesota described in the attached EXHIBIT A (the "Property"). To have and to hold the same, together with the hereditaments and appurtenances thereto belonging to Mortgagor, its successors and assigns. And Mortgagor, for itself, and its successors and assigns, does covenant with Mortgagee, its successors and assigns, as follows: That it is lawfully seized of the Property and has good right to sell and convey the same; that the same are free from all encumbrances, save and except reservations, restrictions, and easements set forth on attached EXHIBIT B; that Mortgagee, its successors and assigns, shall quietly enjoy and possess the same; and that Mortgagor will warrant and defend the title to the same against all lawful claims not hereinbefore specifically excepted. Provided, nevertheless, that if Mortgagor, its successors and assigns, shall keep and perform each and every one of its obligations under and pursuant to that certain Inclusionary Housing Account Promissory Note dated the _ day of , 2006 (the "Note") given by Mortgagor to Mortgagee between Mortgagor and Mortgagee and shall keep and perform all the covenants and agreements herein contained, then this deed will be null and void and will be released at Mortgagor's expense. This Mortgage secures a principal debt in the amount of Three Hundred Thousand and No/lOOths Dollars ($300,000.00) payable by Mortgagor to Mortgagee under the terms of the Note. Notwithstanding anything to the contrary herein, the Note and this Mortgage shall be nonrecourse as to Mortgagor and its partners, and Mortgagee's sole recourse with respect to the Note and the Mortgage shall be as set forth herein. Neither Mortgagor nor any member, employee or agent of Mortgagor shall have any personal liability for Mortgagor's obligations under the Note or this Mortgage. Notwithstanding anything herein to the contrary, Lender agrees that is shall not (a) sell, assign, conveyor otherwise transfer all or any part of its interest in the Loan to the Federal Home Loan Mortgage Corporation ("Freddie Mac") or (b) include the Loan, or any interest therein, in any pool of loans to be sold, assigned, conveyed or otherwise transferred to Freddie Mac. Mortgagor, for itself, and its successors and assigns, does hereby covenant and agree with Mortgagee, its successors and assigns, to perform its obligations as above specified, to pay all taxes and assessments now due or that may hereafter become liens against the Property at least ten (10) business days before penalty attaches thereto; to pay, when due, both principal and interest of all prior liens or encumbrances, if any, above mentioned and to keep the Property free and clear of all other prior liens or encumbrances; to commit or permit no waste on the Property and to keep them in good repair; to complete forthwith any improvements which may hereafter be under course of constructions thereon, and to pay any other reasonable expenses and attorneys' fees incurred by Mortgagee, its successors or assigns, by reason of litigation with any third party for the protection of the lien of this Mortgage. Mortgagor does further covenant and agree that if any lien for labor, skill or material shall be filed for record during the life of this Mortgage, upon or against the Property, Mortgagor, within ninety (90) days after the date of its filing for record, either will payoff the said lien and secure its satisfaction of record or will protect Mortgagee against any loss or damage growing out of its enforcement by furnishing a bond for the same amount in the form and with the sureties to be approved by Mortgagee. In case of failure to pay said taxes and assessments, prior liens or encumbrances, expenses and attorneys' fees as above specified, or to insure said buildings and deliver the policies as aforesaid, Mortgagee, its successors or assigns, may pay such taxes, assessments, prior liens, expenses and attorneys' fees and interest thereon, or effect such insurance, and the sums so paid shall bear interest at the rate then in effect on the Note, shall be impressed as an additional lien upon the Property, and shall be due and payable from Mortgagor, its successors or assigns, to Mortgagee, its successors or assigns, within ninety (90) days after Mortgagee, or its successors or assigns, has demanded payment of such advance, and this Mortgage shall from the date thereof secure the repayment of such advance with interest. In case of default in any of the foregoing covenants, Mortgagor confers upon Mortgagee the option of declaring a default and hereby authorizes and empowers Mortgagee, its successors and assigns, to foreclose this Mortgage by judicial proceedings or to sell the Property at public auction and convey the same to the purchaser in fee simple in accordance with the statute, and out of the money arising from such sale to retain all sums secured hereby and all legal costs and charges of such foreclosure and attorneys' fees, which costs, charges, and fees Mortgagor herein agrees to pay. -2- In testimony whereof, Mortgagor has signed this Mortgage as of the day and year first above written. CHANHASSEN GA TEW A Y PLACE, LLC By: Augusta Ventures, Inc. Its: Managing Member By: Name: Jamie J. Thelen Its: Chief Manager By: Name: James W. Sand Its: Vice President STATE OF MINNESOTA ) ) ss. COUNTY OF STEARNS ) The foregoing instrument was acknowledged before me on this _ day of , 2006 by Jamie J. Thelen, the Chief Manager and James W. Sand, the Vice President, of Augusta Ventures, LLC, a Minnesota limited liability company as the Managing Member of Chanhassen Gateway Place, LLC, a Minnesota limited liability company, on behalf of the company. Notary Public -3- EXHIBIT A Description of Mortgaged Property The land described in the attached Mortgage is located in Carver County, Minnesota and is legally described as follows: Lot 1, Block 2, Gateway North