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5.05: Comparison of Final Pro -Forma and Current Draw Schedule in Regard to The Residence at The COR & Approve Agreement Related to Pre -payment — The Residence at The COR Chairperson McGlone recused himself due to a potential conflict of interest and left the Council Chambers at 8:16 p.m. Development Manager Lazan reviewed the staff report. Acting Chairperson Elvig noted that Development Manager Lazan is the development manager but also a commissioned salesperson with the development and has a partner with this development who is producing the draws being presented, which he found to be a conflict of interest. Development Manager Lazan clarified he is not a commissioned salesperson but receives a development fee on a monthly basis and on an incentive basis. Acting Chairperson Elvig stated he had raised questions about the original proforma and potential "leakage" through developer fees being paid prior to the HRA getting paid. He described his review of fees and concerns that the draws include builders overhead, builders profit, contingency, and that travel fees are up to $150,000. He stated to him that appears to be "leakage." Development Manager Lazan explained that builders overhead and builders profit were in the original proforma, have always been an expense, and have always been in the draw. The HRA has never discussed to withhold builders overhead and costs. Development Manager Lazan explained when the first draw came through, those costs were broken out and the travel item moved from developers fee/overhead to an item they could draw from out of their profit. He noted it was submitted prior to closing on the sample draw sheet originally prepared and presented for final approval and documentation. He stated it is correct that travel dollars moved from ineligible to draw to eligible but they also paid $200,000 prepaid interest on the loan before they drew on the loan. At the end, the HRA always knew there was about $1.2 million of profit for the developers that would be held until near the end of the project and that is still the case. He recommended the HRA accept the $500,000 to reduce the HRA's exposure. Acting Chairperson Elvig restated that the builders fee was not included in the original proforma. Stacy Kvilvang, Ehlers & Associates, stated she had prepared the proforma for analysis and assured the HRA that the builders fees/overhead were included in the original proforma in the construction costs. In the draw, the builders overhead and builders profit were broken out. Ms. Kvilvang advised that the overall initial sources and uses of dollars have not changed with the draw schedule. Acting Chairperson Elvig stated he understands sources and uses balance but was asking about leakage of equity and if they were using HRA money for equity. He stated he does not want to Housing and Redevelopment Authority / October 16, 2012 Page 4 of 11