HRA 02/25/1988 - 29650�"'1
QTY OF FRIDLEY
SPECIAL HQJSIl\TG & R��'.O�PMENP AUZHQRITY MEETIltTG, FEB. 25, 198�
�Ar r, TO 012DER:
Vice-Chairperson Schnabel called the February 25, 198�, Special Housing &
Redevelopnent Authority l�eeting to order at 7:18 g. m.
RQLL CALL:
Members Present: Virginia Schnabel, Duane prairie, Walter Rasa�ssen
Members Ab�ent : Larry Ccenmers, John Meyer
Others Preserit : Jock Robertson, bceca�tive Director of I�dA
Uave Newman, ffiZA Attorney
Jime anc7 Louis Ltmdgren, 343 Rellogg Blvd. , St. Paul
Russell Jawbson, Javobson Consultirag. Inc.
l�ancy Jorgenson, Cotmcilmenber-at-Larc�
PRO��►r. BY LOUIS LU��:
A9r. Robertson stated that at the February llth HRA meeting, the HRA had
olirected him to meet with Mr. Lundgren, his consultant, and the other
c�veloper interested in the project and get pro formas and analyses from
^ then, anol aome back to the March meeting with an analysis of b�th proposals
' and a staff recvm¢nendation. At the same time, the HRA hacl directed him to
wllect Mr. Lumdgren's letter of credit.
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Mr. Robertson stated he had met several times with Mr. Ltuzdgren and Mr.
Russell Jacot�.son. This culminated two days ago in a meeting with Mr.
Ltmclgr'en. Mr. J'ac�obson, Revin Jens�n, Presi�ent of the Bank of Sprinc�ielci.
David N�wman, and himself. At that meeting, a proposal was discussed an�
that proposal was now before the HRA in a letter from Mr. Jacobson olated
Feb. 22, 1988. After about 1 L2 hours of �iscussion, Mr. Newman and he
c�ecidec7 the praposal was encouraging enough that sa�ne time should be spent
to go through the pro fornna before c,�ing ahea,d and receiving the letter of
crec]it. At t11at meeting, Mt. Limdgren and Mr. Jacolzson stated that if the
HRPi proc�eeded to collect the letter o� credit (aclmowlec�ging it was a val id
d�nan� and they u�ould surrender it ), the proj ect was dead.
Mr. Robertson stated the�r first call� Larry Co�ners ancl Virginia Schnabel
to ask if they woulol suspend the HRA's directive to staff to collect the
letter of credit tuitil a special meeting could be called to review Mr.
Ltmdgren's new proposal, get some policy direction from the HRA to review
the proposal, and bring it back to the HRA at their Mfarch meeting. &-�sec7 on
that decisio�►►, if the HRA then aic7 not accept the proposal, staff wotalc3
proceed to collect the letter of creclit. Mr. Jensen has alreaay
aclaiowleclged that he will surrender tYse $200,000 upon receiving the demand
notiee fran Mr. Newman, the HRA attorr�ey.
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^ Mr. Robertson stated the new proposal proposes HRA participation in a
greater anotmt than the previous groposal. The other developer has saicl
that if the HRA accepts this as a policy direction, they will also ffiake a
proposal that is struc.tuu�ecl in the satae way.
Mr. Newman stated staff needs some authorization fran the HRA to delay the
collecting of Mr. Lunclgren's letter of cre�it. What Mr. Lundgren v�as
proposing was a deviation froa� what the HRA has looked at in the past. If
it is something the HRA wants staff to explore further, staff r�eds to know
that, becat�se both parties shoul� be operating withi.n the same guidel ines.
Staff inerely wants sa�ne direction that this is something the HRA wants them
to look at ana spend some time on.
Ms. Schnabel stated that wheri Nir. Robertson and Mr. Newman callea her anci
askec7 for an opinic� on this new proposal, she was very reluctam to make a
decision to say "yes, g� ahead and ob an irY-depth analysis" or "yes, hold
the letter of credit beyond a oertain time framne" without other members of
the HRA concturing or taking part in that clecisioa�i. So, she had concurrea
with the suggestion that a special �eeting be called.
Mr. Newman stated they c�o not want to enter into a formal development
oontract taltil they have furtlaer assuranoes that the proj ect will go. Mr.
L�dgren had indicatecl to th�n that he had ftimd a mortc3age oompany that was
very rec�ptive to the proposal; but before he reoeives a forma]. answer from
the mortgage company, he must make an appl ication which will cost him
524,000. Mr. Lundgren is re].uctant to spend that kind of money anal
� resotu�es and time; if, in the event he is not succ�essEul, the HRA woula end
up entertaining proposals fran �er developers and he would not be able to
proceed.
Mr. Newman stated that at the ldlarch meeting, Staff woulol like to present to
the HRA two general proposals. Mr. Lulclgren has inolicated that if the HRA
likes his proposal and wants him to proceed, he will r�eed frcaa the HRA what
is tantamoualt to t�e first option for a 90 day period, beca�e it will take
75 aays to process and r�view his loan application. During that period.
they will have to negotiate fornnal terms and specif ics and sewrity for the
HIZA. If, at the ena of the 90 days, Mr. Lundgren is able to arrange
financing and staff was able to arrange an analysis to the SRA's
sati�facti�, they will then enter ir�to a c�evelopae,nt agreeiaerit.
Mr. Rasnussen stated this just seemed like �other lang delay.
Mr. Newman stated that was true, but when Mr. Ltmdgren f irst presentecl this
new proposal to th�, what intriguec7 b�th Mr. Robertson ana himself was that
Mr. Ltmdgren felt he had a mortga� �p�ny that was prepared to proceed
with the project. It was his ��erstanding that to put housing on that
corner was the first priority as opposed to alternative types of
develoFment. It was his tmderstanding that other prposals submittea to
staff dic7 not include the dollar amotuit and value that Mr. Lunc7gren was
proposing. He agreecl with Mr. Rasmussen that the �RA has been in this
position n�nnerous times, but beca�e of the potemial ber�fit if the project
�, does arme tog+ether, rbeither Mr. Robertson nor he were prepared to close the
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�„� door on Mr. Lu¢�agren. They haci tolcl Mr. Limdgren they did not have the
authority to extenc] the ti.me on the letter of credit, that the on].y boc7y
that �oula do that was the HRA, and they also wanted to attempt to verify
the ir�ormati� Mr. L�dgren haol given then about the responsibleness of the
mortc�age �ompany.
Mr. Newmar� �ated they had inmaediately oontacted Centeranial Mortc,�ge Co. in
South Benci, Incliana, and talked to Mr. Schwala, who does the tuiderwriting
f or Centennial. Mr. Schuval a indicate� to him that he was f amil ier with the
proposal, he hacl reviewed the feasibility study, anc7, based on the
information he had reoeived to date, Y� was very enw�arag+ed by the project,
was vety irYterested and felt there was a good 1 ikel ihood of success that
they c�ulcl pro�ic3e mortgac�e f inancing f or the proj ect.
Mr. Newman �ated that, b�asecl on his experience with mortgage bankers, he
was somewhat surprised at haw positive Mr. Schuvala seemecl to be about the
projec�. �e stated that, in general, mortgag�e bankers are very reluctant to
ooQmnit to anythiny until they have a complete package. Because of the
positive response they reoeived fraa the mort�age oomnpany, Mr. Robertson anc]
he decic�c7 to take the next step which was to o�ritact the HRA to ssee if this
proposal merited a little more ti.me to see how viable the projec,t really
was.
Mr. Newman statecl the extension was c7raftecl to the effect that �less they
have agreed in writing to another extension or �less they have agreec7 in
writing to release the letter of credit, then autoanatically on March 25, the
/'� HR� will reaeive $200,000. If the HRA aoes not take any action at this
meeting, then on March 25th, the money will be d+elivered.
Mr. Prairie stated he dic7 not feel it was any probl.en extenoling this u¢�til
the March lOth HRF, meeting, but there �ulc� be a prohlen on March lOth.
Mr. Ltmdgren stated Centennial Mortgage has all the information he has been
able to put together wnoerni.ng the �'ridley area, the Twin Cities area, the
housing area, a11 statistical clata, the Maxfield studies, aric7 all four
phases of tYie projec:k. They expressecl an interest after having received
that ir�formation. Mr. Allen Rouse anc7 he traveled to South Bend, Inc7iana,
to meet with Ceritennial Mortqage, and as a result of that visit, Centennial
wrote a letter stating they would encourage Mr. Lundgren to file an
applicati�. Ae stated they wouldl not have said that �less they expected
to cb the project. They did rtm all the niunbers, ancl he hacl given those
nianbers to city staff. The ti.me they �ere talking about was the time that
was neaessary to file an application. He felt the probabilities of the
project were �er 95�.
Mr. Lwzdgren stated the only que�tion at all was concerning the exact
mortga�e amo�t which ooulcl vary cluring the tmderwriting, and he woulcl hope
it would increase wer the nt�ber they Y�ave now. Centennial had indicated
that as far as the fimding was ooncerr�ed, the day he has a firnn oommitment,
they can move within 2-3 clays to sell it a1 the Ginnie Mae market an�l will
end up with cash in han�. This al so will be a commitment f or the
^ construction mone� as well as the enol loan. The end loan on this is a HUD
3-
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guarariteeal mortc�age.
Nlr. Ltmdgren stated that at the last meeting, there was some discussion
abotzt an out-of-town ooritractor, ancl some strong opini�s were e�ressed in
a rbegative fashion. As a result of that cliscussion, he has been talking to
several �ajor local oontractor�. So, in the package in the fina7. analysis,
they might be able to have a l�a]. wrrtrac�or.
Mr. Ltuiclgren stated he has prwi.deol two cash flaw situations based upon the
land val�e. He set a law value of 5142,000 and an upper value of 5500,000
wilich sho�ws wha.t happens to cash in those particular situations if they
extend it out for 15 years. So, in the final ar�].ysis, they were asking for
r�o money, r� forgiveness, everything will be �zid back. They are asking for
a laan of $850,000 and that all will be p�icl Ixick. Unfortt�ately, all these
ntmnbers were just gi.ven to Mr. Robertson at this meeting and neither he or
Ntr. l�e�n had hacl time to laok thea wer.
Nir. Prairie asked that if the letter of credit was cashed, woulc7 the whole
proj ect f a].1 throuqh?
Nir. Ltmdgren �ated that he r�eded help on the f ront encl. By cashing the
letter o� crecv.t, that woulc7 take another $200,000 that he would not have to
spend on the project. Zherefore, he would not be able to do this projec�.
Mr. laasmussen asked if staff felt they could make a recommenclation by the
March lOth HRA meeting.
Mr. Rober�son stated they fee.]. they can work out the cletails anc7 give the
HRA a reoon¢nendation on 1+9sarch lOth. If the rew�unendation was that the HRA
should g� with Nir. Ltuldgren, he woulc7 then r�ed a minimun aF 75 days to get
to the poirit where Centeranial N�ortgage would make the �derwriting decisiora.
Mr. Robertson stated that if the HRA authorizes staff to analyze Mr.
Iamdgren's project, then he was �ing to i.nform the ather developer so the
ather clevelager c,an bri.ng i.n a oomparable proposal that Mr. Newman and he
will look at al�g with Mr. Ltmdgren's.
� by Mr. Prairie, seaonded by Mr. l�nussen, to apprave the amendments
to the letter of credit so as to conform with Dave Newman's January 24,
198�, letter to the State Bank of Springf ielc7. In addition, staff was
authorizecl to vonsic�r the change in Mr. Ltuzdgren's proposal ancl to come
back to the March 10, 1988, F�tA meeting with a recommendation on both
proposals.
Mr. Ras�n�sen stated he dic] sympathize with Mr. L�dgren's position, but he
thought t1�ey should get on with the clevelopnent of this praperty.
UPON A VOICE �701.'E, ALL �OrING A�, VI(��:AHAIRPERS01�1 SCHN�EL DECLARID THE
1�TION CARRIED UNAIITIl+�iJS'LY.
z� 1� a� �vi?�a
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� SPECIAL HOUSIlV�� & R�EVELAPMEN'.P AUI�iORITY N�ING, FEBRUARY 25, 1988
N�OTION bv Mr. Prairie, seconded by Mr. Rasnussen, to ad.�ourn the meetinq. Upon
a voice vote, all voting aye, Vic�Chairperson Schnabel declared the Feb. 25, 1988,
Special Housing & Redevelopment Authority meeting adjourned at 8:00 p.m.
Respectfully submitted,
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t.e. '`-,
e S a
Re ording Secretaxy
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