CR 06-081 Request for Lien Subordination-
C\TY OF
June 29, 2006
m
HOPKINS
Council Report 2006-081
REQUEST FOR LIEN SUBORDINATION - MEADOW CREEK CONDOMINIUMS
ProDosed Action
Staff recommends adoption of the following motion: Move to approve a reauest to
subordinate the City of Hopkins' lien on Meadow Creek Condominium assets for the
purpose of short-term financina of a pool proiect.
With this motion staff will work with the Meadow Creek Association and their lender in
executing a subordination(s) of the City of Hopkins' lien on Association assets.
Ov rview
In 1995 the City of Hopkins provided Meadow Creek condominium owners with
financing to make common area improvements through the creation of a housing
improvement area. As security against default, the City of Hopkins required a first
position lien on Association assets.
This summer, the Meadow Creek Association began a pool replacement project. The
majority of the cost has been paid by the owners through a special assessment.
Approximately $77,000 is owed but has not been collected. The Association would like
to secure a private loan to pay final payments to the contractors while the Association
goes through the process of collection. To obtain a private loan the lender is requiring a
lien on Association assets ahead of the City of Hopkins' lien, and has requested a
subordination.
The collection of housing improvement area fees has been adequate and staff feels
there has been enough history to feel confident that collection will continue to be
sufficient. In addition, staff feels there is benefit in the pool project. Therefore, staff is
recommending the request for subordination of the City's lien position be granted.
Primary Issues to Consider
What is the status of the Meadow Creek bond issue?
ek Condominium Association representatives
Financial Impact: $_0 Budgeted: Y/N
Related Documents (CIP, ERP, etc.):
Notes:
Source:
CR 2006-081
Page 2
Primary Issues to Consider:
What is the status of the Meadow Creek bond issue?
The collection of fees used to pay the bond payments has been more than sufficient
and it is very likely that all debt will be retired early (originally scheduled for 2012) as the
City has been able to pre-pay the principal. In addition, there is a significant reserve
fund balance.
The City Finance Director has reviewed the request and is comfortable with
subordinating our lien position for the proposed purpose.
Alternatives:
The City Council has the following alternatives regarding this issue:
· Grant the subordination request as proposed.
· Elect not to grant the request.
Meadow Creek
Condominiums
(952) 935-9565
Fax (952) 935-9269
E-mail: office@meadowcreekcondos.com
823 Old Settlers Trail, Suite 101 · Hopkins, MN 55343
June 20, 2006
Ms. Kersten Elverum,
Housing & Development Coordinator
City of Hopkins
1010 First Street South
Hopkins, MN 55343
Re: Re Re: 2006 Pool Project
Dear Kersten,
Attached is a copy of Meadow Creek's request to Western Bank that the Bank make a
loan of $76,950 to Meadow Creek. The purpose of the loan would be to fmance amounts
which the Association will collect in the next six months. With the $76,950 in hand, the
Association will be able to make final payments to the contractors that are working on the
pool project. Those final payments will be due within the next 20 to 30 days.
I realize now that in planning out the cash flow needed to fund the pool project, I did not
take into account the time needed for the City to approve a subordination of their interests
to the six-month loan by Western Bank. How quickly do you think the City could
approve such a subordination? Can I assume that such an approval will be considered
routine? Based on the last information supplied to me by Christine Harkess about the
bond account, Meadow Creek owners should now owe only $395,000 with about $35,000
in the bond account.
Please call or email with any questions. Thank you very much for your help.
~
Dougla . Strandness
Property Manager
Enclosures
Cell: 651.402.7824
Email: doug@dunbarstrandness.com
M-IA
~ -.., MEMBER
Managed by Dunbar Strandness, Inc.
(5)
EQUAL HOUSING
OPPORTUNITY
" .
Meadow Creek
Condominiums
(952) 935-9565
Fax (952) 935-9269
E-mail: office@meadowcreekcondos.com
823 Old Settlers Trail, Suite 101 · Hopkins, MN 55343
June 20, 2006
Mr. Jason Helgemoe
Western Bank
2711 N.E. Highway 10
Mounds View, Minnesota 55112
Re: 2006 Pool Project
Dear Jason:
This year, Meadow Creek is replacing its original pool with a much larger, much more
attractive pool complex. Accompanying this request is a copy of the plans for the new
pool complex. Work on the pool project started in March with the demolition of the old
pool and pool house. The project should be complete by July 15th.
As part of the funding for the new complex, the Association levied a special assessment
on its members of $480,000. Of that amount, all but the following has been collected:
Payment plans (195 owners)
For-sale, lender-owned units (4)
Unit owners current on dues/no pmt plan (10)
Unit owners in arrears on dues/no pmt plan (6)
Total outstanding
Balance Due
$63,510.21
3,931.84
9,514.12
5.862.72
$ 82,818.89
Of this amount, we would like to borrow $76,950. Basically, this represents all of the
above except for the unit owners who are in arrears on their dues and have no payment
plan with the Association for the special assessment. For such a loan by the Bank, we
would propose that it be repaid in equal monthly payments of $12,825 with interest, the
payments to be withdrawn from Meadow Creek's Operating Account by automatic debit
on the 30th of each month, beginning with July and continuing through December.
Weare confident of collecting this amount from the unit owners for the following
reasons:
1. ' We have payment plans with 195 of the unit owners (please see the
accompanying 3-ring binder). These plans are based on automatic
M-IA
- ---, MEMBER
Managed by Dunbar Strandness, Inc.
EQUAL HOUSING
OPPORTUNITY
,4
I
"
MEADOW CREEK: Letter to Jason Helgemoe
June 20, 2005
Page 2
withdrawals by the Association from the owners' bank accounts on the
20th of each month. We have been collecting payments based on these
plans since January, and the collection process has been very routine.
2. The lenders will be forced to pay all that is owed when they sell their
units, and there is every reason to believe that the units will be sold within
the next six months.
3. Unless owners signed up for a payment plan in January, the special
assessment was due April 20th. At that point, we had over 30 owners who
were otherwise current on their obligations to the Association, but for
some reason had not paid their share of the special assessment to the
Association. We have reduced that number to 10, and there is every
reason to believe that we will either collect in full from these owners
within the next 30 days, or (more likely) get them on a payment plan with
automatic monthly payments.
Regarding the last six owners referenced above (unit owners in arrears on dues/no pmt
plan), it is not clear when or if the Association will collect from them. Accordingly, we
are not prepared to borrow against what they owe the Association.
Please let me know if the Bank is prepared to make such a loan. If the Bank is prepared
to make a loan to the Association, what additional information do you need, and how
soon do you think the Bank could make the loan?
Please call me when you have a chance. Thank you for your consideration.
Cell: 651.402.7824
Enclosures
cc. Board of Directors
Kersten Elverum