CR 97-217 Oaks Of Mainstreet4 T
y 5
November 25, 1997 ° a K ~ ~ Council Report 97-217
THE OAKS OF MAINSTREET
Prouosed Action
Staff recommends adoption of the following motion: Move to annrove Resolution 97-116,
authorizins the notification of the trustee for the bonds issued to finance The Oaks of Mainstreet
proiect that exercise of remedies as a result of a specific default under the bond documents is not
necessary at this time.
Overview
Real Estate Equities is the developer of this townhouse project on Shady Oak Road and
Mainstreet. To date, 41 of the 66 units have been sold. Substantial completion of the project is
now proposed for January 1998,
Approval of the subject action is being requested by the developer in order to allow City staff to
provide notification to the bond trustee to waive the default request detailed in the bond
documents relating to the completion of the project within a 12-month period.
This request has been reviewed by both Bob Deike of Bradley &Deike and Mark Ruff of Ehlers
and Associates, Inc., (see attached memos). Representatives from Real Estate Equities will be
present at the meeting to answer questions and provide an update on the status of the project.
Mr. Ruff will also be present at the meeting.
Primary Issue to Consider
What are the specifics of the action being requested?
Sunportin¢ Documents
Resolution 97-116
Jim Kerrigan ~ `
Planning & Economi Development Director
Council Report 97-217, November 25, 1997 -Page 2
Primarv Issue to Consider
What are the specifics of the action being requested?
The proposed resolution involves the City/HRA notifying the bond trustees that it is
acceptable for the trustee to waive the requirement that the project be completed within a
12-month period. The language presently in the bond documents requires the project to be
completed by November of this year (12 months from the start of construction).
Noncompliance with this requirement would allow the trustee to find the developer in default
and allow for certain remedies to be undertaken (this could potentially allow for a foreclosure
by the Series A bondholders).
Staff feels that Real Estate Equities has made good progress on completing the project.
Approximately 90 percent of the total project is completed and substantial completion is
proposed for January 1998. As a result, staff would support the developer's request to waive
the 12-month construction default requirement.
As detailed in Item 2 of the proposed resolution, if at a future date it was determined that the
developer was failing to make satisfactory progress to complete the project, the authority
would have the ability to notify the trustee that it desires to have the trustee exercise remedies.
Alternatives
The City Council has the following alternatives regarding this matter:
1. Approve the action as recommended by staff. Following approval, a letter will be provided to
the trustee stating that the City/ARA has no objection to waiving construction default.
2. Continue for additional information. With this action, the Council needs to detail the specific
information that is required to make a decision on this matter.
Deny the action as proposed. This action could jeopardize the economic viability of the
project and seriously inhibit completion of the project.
CITY OF HOPKINS, MINNESOTA
Hennepin County, Minnesota
RESOLUTION N0.97-116
A RESOLUTION AUTIiORIZING THE NOTIFICATION OF THE
TRUSTEE FOR THE BONDS ISSUED TO FINANCE THE. OAKS
OF MAINSTREET .PROJECT THAT EXERCISE OF REMED)(ES
AS A RESULT OF A SPECIFIC DEFAULT UNDER THE BOND
DOCUMENTS IS NOT NECESSARY AT THIS TIME
WHEREAS, the Housing and Redevelopment Authority In and For the City of Hopkins,
Minnesota (the "Authority's and the City of Hopkins, Minnesota (the "City'
issued the $3,975,000 Housing Development Gross Revenue Bonds (Oaks of
Mainsheet Project) Taxable Series 1996A of IiRA and $3,975,000 Unlimited Tax
General Obligation Bonds (Oaks of Mainsheet Project) Taxabke Series 1996B of
City, respectively (collectively, the "Bonds") to finance the development by Oaks
of Mainsheet, LLC, (the "Developer's of a townhouse development (the
"project") within the City; and
WHEREAS, the Developer has requested that the Authority and City notify First Trust
National Association, the Trustee for the Bonds, that the Authority and City have
no objection if the Trustee does not exercise its remedies under the Bond
documents as a result of a default by the Developer in completing the Project
within one year from commencement of construction as required by the Bond
documents; and
WHEREAS, the City believes that the Developer's request is reasonable and that the granting
of such request would be in the best interest of the City.
NOW, THEREFORE, be it hereby resolved by the City Council of the City that staff of
the City are hereby authorized to notify First Trust National Association drat it is acceptable and
desirable to the City if the Trustee refrains from exercising at this time its remedies under the
Bond documents due to the default existing under section 3.1(3) of the Loan Agreement related
to the Developer's failure to complete construction of the Project when required. Nothing in this
Resolution shall waive any other default or preclude the City from notifying the Trustee at any
time in the future that it desires the Trustee to exercise remedies on account of the existing
default or any other default that may arise under the Bond documents.
Adopted by the City Council of the City of Hopkins, Minnesota, this ____ day of
1997.
Mayor
Clezk