Coversheet

Housing and Redevelopment Authority Board Action Request
19-HCHRA-0038


Item Description: Authorize the issuance and sale of one or more multifamily housing revenue bonds for a 54-unit affordable housing project at 114 5th St SE, Mpls


AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF ITS MULTIFAMILY HOUSING REVENUE OBLIGATIONS; APPROVING THE FORMS OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF THE MULTIFAMILY HOUSING REVENUE OBLIGATIONS AND RELATED DOCUMENTS; APPROVING A HOUSING PROGRAM; AND TAKING OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the Hennepin County Housing and Redevelopment Authority (the “Issuer”) is a housing and redevelopment authority and a public body corporate and politic duly organized and existing under the Constitution and laws of the State of Minnesota and is authorized under the Laws of Minnesota 1987, Chapter 177, as amended, and Minnesota Statutes, Chapter 462C, as amended (the “Housing Act”), to issue revenue obligations to finance multifamily housing developments; and WHEREAS, pursuant to the Housing Act, the Issuer is authorized to carry out the public purposes described in the Housing Act by issuing revenue bonds or other obligations to finance multifamily housing developments, and as a condition to the issuance of such revenue obligations, adopt a housing program providing the information required by Section 462C.03, subdivision 1a of the Housing Act; and WHEREAS, Holmes Housing Partners, LP, a Minnesota limited partnership, whose general partner is Holmes Housing Management, LLC, a Minnesota limited liability company, or its affiliate or assigns (collectively, the “Borrower”) has requested that the Issuer issue its revenue obligations under the Housing Act and lend the proceeds thereof to the Borrower to finance the following: (i) the acquisition, rehabilitation, and equipping of an approximately 54-unit existing multifamily rental housing development and facilities functionally related and subordinate thereto located at 114 Fifth Street SE, Minneapolis, within Hennepin County, Minnesota (the “County”), for occupancy by persons and families of low and moderate income (the “Project”), to be owned and operated by the Borrower; (ii) fund any required reserves; (iii) finance capitalized interest, if necessary; and (iv) pay costs of issuing the obligations; and WHEREAS, on June 11, 2019, the Board of Commissioners of the Issuer (the “Board”) adopted Resolution No. 19-HCHRA-0025 (the “Preliminary Resolution”), under the terms of which the Issuer (i) granted preliminary approval to the issuance of one or more series of multifamily housing revenue bonds or other obligations (the “Obligations”) in an aggregate principal amount not to exceed $10,000,000, pursuant to the Housing Act to finance the Project; (ii) authorized the submission of an application to the Minnesota Department of Management and Budget (“MMB”) for an allocation of bonding authority under Minnesota Statutes, Chapter 474A, as amended (the “Allocation Act”), in a principal amount not to exceed $10,000,000; and (iii) authorized the preparation of a housing program with respect to the Project in accordance with the requirements of the Housing Act and authorized the submission of the housing program to the Metropolitan Council for its review and comment; and (iv) authorized a public hearing to be conducted by the Board of the Issuer on such other date, and at such time and place, as is deemed appropriate by the Clerk of the Board, with respect to the Project, the housing program, and the proposed issuance of revenue obligations by the Issuer to finance the Project; and WHEREAS, the Preliminary Resolution constitutes a reimbursement resolution and an official intent of the Issuer to reimburse expenditures with respect to the Project from the proceeds of tax-exempt revenue obligations in accordance with the provisions of Treasury Regulations, Section 1.150-2; and WHEREAS, on July 23, 2019, the Board adopted Resolution No. 19-HCHRA-0028 calling for a public hearing to be conducted by the Board of the Issuer on August 20, 2019 with respect to the Project, the housing program, and the proposed issuance of revenue obligations by the Issuer to finance the Project; and WHEREAS, under Section 146 of the Internal Revenue Code of 1986, as amended (the “Code”), the Obligations must receive an allocation of the bonding authority of the State of Minnesota, and an application for such an allocation was made pursuant to the requirements of Minnesota Statutes, Chapter 474A, as amended (the “Allocation Act”); and WHEREAS, in accordance with the authority granted under the Preliminary Resolution, the Chair of the Issuer and the Executive Director of the Issuer (the “Chair” and the “Executive Director”), and Kennedy & Graven, Chartered, acting as bond counsel (“Bond Counsel”), in cooperation with the Borrower, submitted an application for an allocation of bonding authority to MMB, in the amount of $10,000,000, pursuant to Section 146 of the Code and the requirements of the Allocation Act; and WHEREAS, on August 5, 2019, the Issuer received Certificate of Allocation No. 359 from the Minnesota Department of Management & Budget allocating bonding authority of the State of Minnesota to the Issuer in the amount of $10,000,000, pursuant to the Allocation Act; and WHEREAS, on August 20, 2019, in accordance with the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”), and Section 462C.04, subdivision 2 of the Housing Act, the Board of the Issuer held a public hearing at which a reasonable opportunity was provided for interested individuals to express their views, both orally and in writing, with respect to the Project and the proposed issuance of revenue obligations to provide financing for the Project; and WHEREAS, the public hearing was preceded by publication of a notice of public hearing published in Finance and Commerce, the official newspaper of the Issuer, and in the Star Tribune, a newspaper of general circulation in the jurisdiction of the Issuer on a date at least fifteen (15) days prior to the public hearing; and WHEREAS, in accordance with the Housing Act and the Preliminary Resolution, a housing program (the “Housing Program”) with respect to the Project was prepared and submitted to Metropolitan Council for its review and comment in accordance with the requirements of the Housing Act; and WHEREAS, the Borrower has requested that the Issuer issue, sell, and deliver a portion of the principal amount of the Obligations as its Multifamily Housing Revenue Bonds (Holmes Greenway Project), Series 2019A (the “Series 2019A Bonds”), which will be sold publicly and underwritten by Dougherty & Company LLC (the “Bond Underwriter”); and WHEREAS, the Borrower has requested that the Issuer issue, sell, and deliver the remaining portion of the principal amount of the Obligations as its Multifamily Housing Revenue Note (Holmes Greenway Project), Series 2019B (the “Series 2019B Note”), which will be sold privately to TCF Investments Management, Inc., or an affiliate thereof, or another commercial lender selected by the Borrower (the “Note Purchaser”); and WHEREAS, the Series 2019A Bonds are expected to be issued pursuant to an Indenture of Trust (the “Bond Indenture”) between the Issuer and U.S. Bank National Association, a national banking association, or another trustee selected by the Borrower (the “Bond Trustee”), the proceeds of which will be loaned to the Borrower pursuant to a Loan Agreement (the “Bond Loan Agreement”) between the Issuer and the Borrower; and WHEREAS, the loan repayments to be made by the Borrower under the Bond Loan Agreement will be fixed so as to produce revenue sufficient to pay the principal of, premium, if any, and interest on the Series 2019A Bonds when due, and such loan repayments will be assigned to the Bond Trustee pursuant to the Bond Indenture; and WHEREAS, the proceeds of the Series 2019B Note are expected to be loaned to the Borrower pursuant to a Loan Agreement (the “Note Loan Agreement”) between the Issuer and the Borrower; and WHEREAS, the loan repayments to be made by the Borrower under the Note Loan Agreement will be fixed so as to produce revenue sufficient to pay the principal of, premium, if any, and interest on the Series 2019B Note when due, and such the loan repayments to be made by the Borrower under the Note Loan Agreement will be assigned to the Note Purchaser along with the Issuer’s right, title and interest in, to, and under, the Loan Agreement (except as therein provided) pursuant to an Assignment of Loan Agreement (the “Assignment of Note Loan Agreement”) between the Issuer and the Note Purchaser; and WHEREAS, to ensure compliance with certain rental and occupancy restrictions imposed by the Housing Act and Section 142(d) of the Code, the Issuer, the Borrower, the Bond Trustee, and the Note Purchaser are expected to enter into a Regulatory Agreement (the “Regulatory Agreement”); and WHEREAS, the obligations of the Borrower under the Bond Loan Agreement and the Note Loan Agreement shall be secured by such mortgages, assignments of mortgages, security agreements, assignments of rents, guarantees, and other security instruments and documents as are required by the Bond Underwriter or the Note Purchaser, including but not limited to, an assignment of a portion of equity installments attributable to low-income housing tax credits for the Project and one or more guaranties (collectively, the “Security Documents”); and WHEREAS, the Obligations and the interest thereon (i) shall be payable solely from the revenues pledged and security provided therefor under the Bond Loan Agreement and the Note Loan Agreement and additional sources of revenue provided by or on behalf of the Borrower; (ii) shall not constitute a debt of the Issuer or the County within the meaning of any constitutional or statutory limitation; (iii) shall not constitute or give rise to a pecuniary liability of the Issuer or the County or a charge against their general credit or taxing powers; (iv) shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the Issuer or the County other than the Issuer’s interest in the Bond Loan Agreement and the Note Loan Agreement; and (v) shall not constitute a general or moral obligation of the Issuer or the County.

Resolution:

BE IT RESOLVED, that the Board of Commissioners of the Hennepin County Housing and Redevelopment Authority approves the following:

The Housing Program, in the form substantially on file with the Issuer, is hereby adopted, ratified and approved.
The Issuer acknowledges, finds, determines, and declares that the issuance of the Obligations is authorized by the Housing Act and is consistent with the purposes of the Housing Act and that the issuance of the Obligations, and the actions of the Issuer under the Bond Indenture, Bond Loan Agreement, the Note Loan Agreement, the Assignment of Note Loan Agreement, the Regulatory Agreement, and this resolution, constitute a public purpose and are in the interests of the Issuer. The Project constitutes a “qualified residential rental project” within the meaning of Section 142(d) of the Code and a “multifamily housing development” authorized by the Housing Act and furthers the purposes of the Housing Act. In authorizing the issuance of the Obligations for the financing of the Project and the related costs, the Issuer’s purpose is and the effect thereof will be to promote the public welfare of the Issuer and its residents by providing multifamily housing developments for low- or moderate-income residents of the County and otherwise furthering the purposes and policies of the Housing Act.
For the purposes set forth above, there is hereby authorized the issuance, sale, and delivery of the Obligations in one or more series in the aggregate principal amount not to exceed $10,000,000. The Obligations may be given a different designation and may be issued in any additional series, as the Chair of the Issuer and the Executive Director of the Issuer (the “Chair” and the “Executive Director,” respectively, and together, the “Issuer Officials”), in their discretion, shall determine. All of the provisions of the Obligations, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Issuer hereby authorizes all or a portion of the Obligations to be issued as “tax-exempt bonds” the interest of which is excludable from gross income for federal and state income tax purposes.
The Obligations shall be special, limited obligations of the Issuer payable solely from the revenues provided by the Borrower pursuant to the Bond Loan Agreement, the Note Loan Agreement, and other funds pledged pursuant to the Bond Indenture and the Bond Loan Agreement.
The Series 2019A Bonds shall bear interest at the rates, shall be designated, shall be numbered, shall be dated, shall mature, shall be in the aggregate principal amount, shall be subject to redemption prior to maturity, shall be in such form, and shall have such other terms, details, and provisions as are prescribed in the Bond Indenture, substantially in the form now on file with the Issuer, with the amendments referenced herein.
All of the provisions of the Series 2019A Bonds, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Series 2019A Bonds shall be substantially in the form of the Bond Indenture on file with the Issuer, which form is hereby approved, with such necessary and appropriate variations, omissions, and insertions (including changes to the aggregate principal amount of the Series 2019A Bonds, the stated maturities of the Series 2019A Bonds, the interest rates on the Series 2019A Bonds and the terms of redemption of the Series 2019A Bonds) as the Issuer Officials, in their discretion, shall determine. The execution of the Series 2019A Bonds with the manual or facsimile signatures of the Issuer Officials and the delivery of the Series 2019A Bonds by the Issuer shall be conclusive evidence of such determination.
The Series 2019B Note shall bear interest at the rate, shall be designated, shall be numbered, shall be dated, shall mature, shall be in the aggregate principal amount, shall be subject to redemption prior to maturity, shall be in such form, and shall have such other terms, details, and provisions as are prescribed in the form of Series 2019B Note now on file with the Issuer, with the amendments referenced herein.
All of the provisions of the Series 2019B Note, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Series 2019B Note shall be substantially in the form on file with the Issuer, which form is hereby approved, with such necessary and appropriate variations, omissions, and insertions (including changes to the aggregate principal amount of the Series 2019B Note, the stated maturity of the Series 2019B Note, the interest rate on the Series 2019B Note and the terms of redemption of the Series 2019B Note) as the Issuer Officials, in their discretion, shall determine. The execution of the Series 2019B Note with the manual or facsimile signatures of the Issuer Officials and the delivery of the Series 2019B Note by the Issuer shall be conclusive evidence of such determination.
The Issuer Officials are hereby authorized and directed to execute and deliver the Bond Indenture, the Bond Loan Agreement, the Note Loan Agreement, the Assignment of Note Loan Agreement, the Regulatory Agreement, and, with respect to the sale of the Series 2019A Bonds, a Bond Purchase Agreement between the Issuer, the Borrower, and the Bond Underwriter. All of the provisions of such documents, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The aforementioned documents shall be substantially in the forms on file with the Issuer which are hereby approved, with such variations, omissions and insertions as do not materially change the substance thereof, and as the Issuer Officials, in their discretion, shall determine, and the execution thereof by the Issuer Officials shall be conclusive evidence of such determinations.
The Issuer hereby authorizes the Borrower to provide such security for the payment of its obligations under the Bond Loan Agreement and the Note Loan Agreement and for the payment of the Obligations, and the Issuer hereby approves the execution and delivery of such security, including the Security Documents.
The Issuer will not participate in the preparation of the Preliminary Official Statement or the Official Statement relating to the offer and sale of the Series 2019A Bonds (together, the “Official Statement”) and will make no independent investigation with respect to the information contained therein, including the appendices thereto, except for the information set forth in the Official Statement regarding the Issuer and certain matters relating to litigation, and the Issuer assumes no responsibility for the sufficiency, accuracy, or completeness of such information. Subject to the foregoing, the Issuer hereby consents to the distribution and the use by the Bond Underwriter of the Official Statement in connection with the offer and sale of the Series 2019A Bonds. The Official Statement is the sole material consented to by the Issuer for use in connection with the offer and sale of the Series 2019A Bonds.
The Issuer Officials are hereby authorized to execute and deliver, on behalf of the Issuer, such other documents and certificates as are necessary or appropriate in connection with the issuance, sale, and delivery of the Obligations, including assignments of the Security Documents, various certificates of the Issuer, one or more Information Returns for Tax-Exempt Private Activity Bond Issues, Form 8038 (Rev. September 2018), one or more endorsements of the Issuer to the tax certificate or certificates of the Borrower, and similar documents, and all other documents and certificates as shall be necessary and appropriate in connection with the issuance, sale, and delivery of the Obligations. The preparation and filing of Uniform Commercial Code financing statements with respect to the assignment of the interests of the Issuer in the Bond Loan Agreement and the Note Loan Agreement (excluding any unassigned rights as provided therein) are hereby authorized. The Issuer hereby authorizes Bond Counsel to prepare, execute, and deliver its approving legal opinions with respect to the Obligations.
The Issuer Officials are authorized and directed to execute any additional documents deemed necessary by Bond Counsel to carry out the intentions of this resolution and to complete the financing described herein.
Except as otherwise provided in this resolution, all rights, powers, and privileges conferred and duties and liabilities imposed upon the Issuer or the Board by the provisions of this resolution or of the aforementioned documents shall be exercised or performed by the Issuer or by such members of the Board, or such officers, board, body or agency thereof as may be required or authorized by law to exercise such powers and to perform such duties. No covenant, stipulation, obligation or agreement herein contained or contained in the aforementioned documents shall be deemed to be a covenant, stipulation, obligation or agreement of any member of the Board, or any officer, agent or employee of the Issuer in that person’s individual capacity, and neither the Board nor any officer or employee executing the Obligations shall be personally liable on the Obligations or any such documents or be subject to any personal liability or accountability by reason of the issuance of the Obligations or the execution and delivery of such documents. No provision, covenant or agreement contained in the aforementioned documents, the Obligations, or in any other document relating to the Obligations, and no obligation therein or herein imposed upon the Issuer or the breach thereof, shall constitute or give rise to a general or moral obligation of the Issuer or the County or any pecuniary liability of the Issuer or the County or any charge upon their general credit or taxing powers. In making the agreements, provisions, covenants, and representations set forth in such documents, the Issuer has not obligated itself to pay or remit any funds or revenues, other than funds and revenues derived from the Note Loan Agreement and the Bond Loan Agreement which are to be applied to the payment of the Obligations, as provided therein.
Except as herein otherwise expressly provided, nothing in this resolution or in the aforementioned documents expressed or implied is intended or shall be construed to confer upon any person or firm or corporation, other than the Issuer, any holders of the Obligations issued under the provisions of this resolution, any right, remedy or claim, legal or equitable, under and by reason of this resolution or any provisions hereof, this resolution, the aforementioned documents, and all of their provisions being intended to be and being for the sole and exclusive benefit of the Issuer, and any holder from time to time of the Obligations issued under the provisions of this resolution.
In case any one or more of the provisions of this resolution, other than the provisions contained in the Section 4 hereof, or of the aforementioned documents or the Obligations issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this resolution, the aforementioned documents, or the Obligations, but this resolution, the aforementioned documents, and the Obligations shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein.
The Obligations, when executed and delivered, shall contain a recital that they are issued pursuant to the Housing Act, and such recital shall be conclusive evidence of the validity of the Obligations and the regularity of the issuance thereof, and that all acts, conditions, and things required by the laws of the State of Minnesota relating to the adoption of this resolution, to the issuance of the Obligations, and to the execution of the aforementioned documents to happen, exist, and be performed precedent to the execution of the aforementioned documents have happened, exist, and have been performed as so required by law.
The authority to approve, execute, and deliver future amendments to any of the documents referred to in this resolution or other documents executed and delivered by the Issuer in connection with the issuance of the Obligations is hereby delegated to the Issuer Officials, subject to the following conditions: (i) such amendments do not materially adversely affect the interests of the Issuer; (ii) such amendments do not contravene or violate any policy of the Issuer; and (iii) such amendments are acceptable in form and substance to the Hennepin County Attorney, Dorsey & Whitney LLP, in its capacity as counsel to the Issuer (the “Issuer’s Counsel”), and Bond Counsel. The authorization hereby given shall be further construed as authorization for the execution and delivery of such certificates and related items as may be required to demonstrate compliance with the agreements being amended and the terms of this resolution. The execution of any instrument by the Issuer Officials shall be conclusive evidence of the approval of such instruments in accordance with the terms hereof.
The officers of the Issuer, the Issuer’s Counsel, Bond Counsel, other attorneys, engineers, and other agents or employees of the Issuer are hereby authorized to do all acts and things required of them by or in connection with this resolution, the aforementioned documents, and the Obligations, for the full, punctual, and complete performance of all the terms, covenants, and agreements contained in the Obligations, the aforementioned documents, and this resolution. If for any reason the Chair or the Executive Director is unable to execute and deliver the documents referred to in this resolution, such documents may be executed by any member of the Board or any officer of the Issuer delegated the duties of the Chair or the Executive Director with the same force and effect as if such documents were executed and delivered by the Chair or the Executive Director.
The Borrower has agreed to pay the administrative fees of the Issuer when due in accordance with the terms of the Bond Loan Agreement and the Note Loan Agreement. The Borrower will also pay, or, upon demand, reimburse the Issuer for payment of, any and all costs incurred by the Issuer in connection with the Project and the issuance of the Obligations, whether or not the Obligations are issued, including any costs for reasonable attorneys’ fees.
It is understood and agreed by the Borrower that the Borrower shall indemnify the Issuer and the County against all liabilities, losses, damages, costs, and expenses (including attorneys’ fees and expenses incurred by the Issuer) arising with respect to the Project and the Obligations, as provided for and agreed to by and between the Borrower and the Issuer in the Bond Loan Agreement and the Note Loan Agreement.
This resolution shall be in full force and effect from and after its approval, conditioned upon final approval by the Board of Commissioners of the County.


Background: History: The Hennepin County Housing and Redevelopment Authority (“HCHRA”) is authorized to issue conduit financing, including housing revenue bonds, pursuant to the provisions of Minnesota Statutes, Chapters 462C and 469. The bonds are repayable solely from revenue and assets pledged in their support by the developer and are not a debt or property tax obligation of Hennepin County or the HCHRA. Vitus Development III, LLC, (the “Developer”), on behalf of Holmes Housing Partners, LP, submitted an application for housing revenue bond financing to assist in acquisition and rehabilitation of 54 affordable rental housing units at 114 Fifth Street SE (the “Project”) in Minneapolis. The Project contains 18 one-bedroom and 36 two-bedroom apartments. All 54 units will be affordable to households at or below 60 percent of area median income (AMI), as determined by the U.S. Department of Housing and Urban Development (HUD). The current 60 percent annual income limits established by HUD for Hennepin County range from $42,000 for a one-person household to $60,000 for a four-person household. The project has an existing Section 8 rental assistance contract for 50 of the 54 units. The developer has committed to retaining the Section 8 contract and extending the affordability period for an additional 30 years. In addition to the housing revenue bonds, Project costs will be financed by four percent low-income housing tax credits and developer equity. The project meets the guidelines for conduit financing established by Resolution 02-HCHRA-32. Conduit financing requests typically follow a series of formal actions by the HCHRA Board: 1) consideration of preliminary approval; 2) establishment and holding of a public hearing; and 3) consideration of final approval. The HCHRA authorized preliminary approval for this Project on June 11, 2019; and held a public hearing on the Project on August 20, 2019. During this final approval phase, the Hennepin County Board of Commissioners will also be considering a companion resolution approving this HCHRA action. Since 2000, the HCHRA has issued approximately $187.4 million in conduit financing for eight projects supporting 1,289 affordable housing units. Another four projects, including the Holmes Greenway Apartments, totaling approximately $142.0 million in revenue bonds and 529 affordable housing units, currently have obtained HCHRA’s preliminary approval for future issuance. Current Request: This request is for authorization to issue multifamily housing revenue bonds to finance a 54-unit affordable housing project at 114 5th St SE, Minneapolis. Impact/Outcomes: Issuance of multifamily housing revenue bonds will rehabilitate and preserve the affordability of 54 housing units serving households at or below 60 percent of area median income, of which 50 units will have project-based Section 8 rental assistance. This request aligns with Hennepin County efforts to reduce housing disparities by increasing the supply of affordable housing.


Recommendation from County Administrator: Recommend Approval