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CASE # FLAHERTY AND COLLINS RESIDENTIAL PROJECT By: Darren Lazan, Development Manager BACKGROUND: The development team had been working with Flaherty and Collins who has interest in developing upscale apartments in the Town Center project. In late April, Flaherty and Collins delivered an LOI which was considered by the team, summarized, and presented to the HRA on April 23rd, 2010 where there was considerable discussion. A response to the LOI was prepared based on some limited direction by the HRA, and we have continued to work with the developer to structure a development around those deal points. The critical timeline for the commencement of construction is the financing of the project. Currently the HUD programs are the best option for the project, but given the recent changes to the HUD lending requirements, that application needs to be made prior to the likely completion of a final contract, or will be subject to new rules that make it tougher to finance. Since the first discussions, it has been determined that the success of this project would depend on receiving approval for, and funding the construction of the Northstar Rail Station. While it is critical to the COR ad a development, this housing product in particular is catered to renters who would use the train on a regular basis. Flaherty's primary attraction to the site is the idea that their product would be the only one of it's kind in the market, and without the station the concept of this product comes into question. Included in the LOI, and detailed in the April 23rd deal summary presented to the HRA was the concept of an Escrow Agreement. This concept contemplated a shared effort between the HRA and the developer to get the project underway by making a timely application to HUD. To accomplish this, the developer and the HRA would each deposit $25,000 into an escrow account at the City's agent. The developer would draw on those funds to pay for certain pre - development activities necessary to make the HUD application. The current draft of this agreement is included in your packet. The current thought on structuring a deal on this project is to enter into this escrow agreement and immediately begin the pre -development activities necessary to make a timely application for financing the project. While that effort is underway, the development team will work with Flaherty and Collins to finalize the full agreement that has a number of challenging deal points and is likely to take longer to resolve. To consider the escrow agreement, the team feels it is necessary for the HRA to consider the current outline of the overall deal. Attached is a summary of all current deal points and the status of each. Any or all of these can be addressed in detail at the meeting.