Title
Resolution Approving Issuance of Satisfaction of Mortgage on Forgivable Loan with Hazel Park Heights, LLC, Greater East Side District 2
Body
WHEREAS, the White Bear Avenue Small Area Plan was adopted by the City Council on July 5, 2001 and made part of the City's Comprehensive plan stating that the transit corridors should encourage development that increases density, minimizes surface parking, makes a statement in building quality, provides other life-style housing opportunities that are not available in the neighborhood and provides for mixed income units; and
WHEREAS, the City of Saint Paul approved STAR funding for the acquisition and redevelopment of property at the SW corner of Maryland and White Bear for housing development, HRA approved a loan of $175,000 to continue the assembly of said site and this property was identified in the Housing 5000 Plan as one of the transit corridor sites to be developed in an attempt to increase housing density on transit corridor and offer neighborhoods other housing options without destroying the single family characteristics of a neighborhood; and
WHEREAS, NENDC proceeded to develop architectural drawings, enter into marketing contract to secure pre-sales, of which nine have been secured, to move the development forward and worked with Anchor Bank to secure interim construction financing; and
WHEREAS, in order to move forward with this development NENDC requested financing assistance both in the form of subsidy assistance for the extra costs associated with smaller transit corridor development and a guaranty covering the pre-sales of the remaining four units to make the 50% pre-sale requirement so that construction could move forward; and
WHEREAS, NENDC formed a limited liability company with Zeman Construction Company to move forward and develop the Hazel Park Heights Condominiums; and
WHERAS, on September 28, 2005, by Resolution 05-09/28-05 HRA authorized the execution of a Development Agreement by and between the HRA and NENDC to form Hazel Park Heights, LLC for owning and building Hazel Park Heights Condominium Project which included the construction of a three story building, with underground parking, providing for 27 condominium units all to be sold for ownership meeting the objectives of the White Bear Avenue Small Area Plan; and
WHEREAS, the approval included (1) an HRA Guaranty in the amount of $600,000 to cover the remaining pre-sale requirement of 4 units, Guaranty would only be drawn upon, if 4 more pre-sales were not secured within 12 months after completion of the project and upon receipt of pre-sale purchase agreements for each of the guarantee units the Guaranty would be reduced by 1/5th of the total and (2)
financing assistance in the amount of $1.19 million to cover redevelopment costs and extraordinary housing costs associated with smaller site development with higher density and underground parking; and
WHEREAS on September 28, 2005, by Resolution 05-09/28-5 HRA approved the Hazel Park Heights Condominium Project and provided financing assistance in the form of a $1,190,000 forgivable loan and an HRA Guaranty of $600,000 on presale requirements (only collected on if another four units were not sold within 12 month from date the final overall Certificate of Occupancy is issued); and
WHEREAS, HRA had to provide the $600,000 guaranty to Anchor Bank, closed on 11/12/08 and owned 5 units that are being marketed for sale; and
WHEREAS, the forgivable loan of $1,190,000 was to be forgiven by $44,074.07 as each unit was sold. and to date this amount has been reduced by $661,111.05 with the sale of 10 units and the purchase of 5 by the HRA with a current balance is $528,888.95 to be forgiven over the next 12 sales: and
WHEREAS, Hazel Park Heights, LLC, (North East Neighborhood Development Company, Zeman Construction) developer, have been marketing these properties for more than 3 three years with minimal success; marketing has included Contract for Deed and lease purchase program. which ideas were discussed with the homeowner's association original 9 buyers, who also have been marketing through word of month; and
WHEREAS, Hazel Park Heights, LLC has a loss into the project at $600,000 plus which continues to grow in long term carrying costs, minimal sales; reduction of sales prices due to housing market; and
WHEREAS, Anchor Bank the holder of the original construction mortgage has sent a letter to Hazel Park Heights, LLC that they will not be renewing the construction mortgage again this year and are requiring full repayment of the construction mortgage, even though the owner/developer has never missed or been late on a payment; and
WHEREAS, the balance of forgivable loan is reflected on Hazel Park Heights, LLC books as a current liability and is adversely affecting debt covenants and ratios and is a liability to Hazel Park Heights, LLC in securing another loan for the building which could result in a foreclosure on the building since Anchor Bank does not want to continue carrying the construction loan.
WHEREAS, Hazel Park Heights, LLC has requested that the remaining amount of the forgivable loan be satisfied based on (1) consideration that the forgivable loan was never intended to be repaid, (2) improvements have been successfully completed for almost four years, and (3) property has been well maintained and no complaints from homeowners; and
NOW THEREFORE BE IT RESOLVED, that the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota, hereby makes the following findings;
1. That Hazel Park Heights, LLC, (North East Neighborhoods Development Corporation and Zeman
Construction) successfully completed the development of the Hazel Park Condominium Project and
has met all the terms and conditions of the Development Agreement executed on May 25, 2006,
except for completing the sale of all units as a result of the economic and housing market downturn.
2. That Hazel Park Heights, LLC has made and continues to maintain the property to a high quality and
continues to market the unsold units by developing a number of unique marketing tools.
3. That the $1,190,000.00 in gap assistance provided to Hazel Park Heights Condominium Project was
provided to cover the difference of total development costs and the actual value of the property to be
received on the sales of the units and was structured to be forgivable at the time of each sale.
4. That Hazel Park Heights, LLC has shown its ability to stay long term on this project and honor its
commitment to the sale and maintenance of the property.
5. That the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (HRA) hereby
approves the execution and issuance of a Satisfaction of Mortgage to Hazel Park Heights, LLC for full
forgiveness of the forgivable loan and its remaining balance effective as of December 31, 2011.