Loading...
4.3 SR 12-16-2024City of Elk - River To City Council Meeting Date December 16, 2024 Item Description Resolution 24-74 and Agreements 24-32 and 24-33 Subordination of Restrictive Covenants for Dove Tree Apartments Request for Action Item Number 4.3 Prepared By Brent O'Neil, Economic Development Director Reviewed by Cal Portner Action Requested Adopt, by motion, Resolution 24-74 authorizing the execution of agreements with Northmarq Capital Finance, LLC, and Elk River Prop I LLC, subordinating existing regulatory agreements for the Dove Tree Apartments. Background/Discussion The Dove Tree Apartments, located at 1 105 Lions Park Drive, were constructed in the mid-1990s and participated in a financing program that required covenants ensuring affordability standards for tenants. In 2010, the property participated in a multifamily housing bond program through the city in which the city issued conduit bonds to support the renovation of all units. Utilization of the bond program required that affordability standards be extended 15 years, expiring in late 2025, through two regulatory agreements. The bonds have been repaid; however, the regulatory agreements continue to be in effect until they expire next year. The property is now under a purchase agreement for acquisition by a new owner, Elk River Prop I LLC. The new owner's lender has requested the city subordinate its regulatory agreements as the new debt will be backed by Fannie Mae, and Fannie Mae standards make its participation conditional on this subordination. This subordination request leaves the standards in place but would allow a court more latitude to discharge these requirements in the event of a foreclosure or bankruptcy proceeding. As the affordability standards are set for expiration in 2025, it is highly unlikely this subordination will come into play within the next year. Bond counsel has advised in this process and does not object to this subordination. Financial Impact None. The conduit bonds have been paid off. Mission/Policy/Goal Meet changing needs - agile. The Elk River Vision A avelcoming community with revolutionary and spirited resourcefulness, exceptional service, and community p p W E R E U A Y engagement that encourages and inspires prosperity 273 Attachments I. Resolution Approving Subordination Agreements 2. Agreement Subordinating the October 28, 2010 Regulatory Agreement 3. Agreement Subordinating the October I, 2010 Regulatory Agreement Page 48 of 273 THE CITY OF ELK RIVER, MINNESOTA RESOLUTION NO.24-74 RESOLUTION APPROVING A SUBORDINATION OF THE REGULATORY AGREEMENT RELATED TO CONDUIT BONDS ISSUED FOR THE DOVE TREE APARTMENTS PROJECT WHEREAS, the City of Elk River, Minnesota (the "City") issued its Multifamily Housing Revenue Bonds (Dove Tree Apartments Project), Series 2010 (the "Bonds"), in the original aggregate principal amount of $3,485,000 and its Subordinate Multifamily Housing Revenue Note (Dove Tree Apartments Project), Series 2010 in the original aggregate principal amount of $2,856,000 (the "Note" and together with the Bonds, the "Obligations"), the proceeds of which were loaned to Elk River Leased Housing Associates III, Limited Partnership, a Minnesota limited partnership (the `Borrower") for the purposes of financing the acquisition and renovation of a 68-unit multifamily rental housing development located at 1105 Lions Park Drive in the City (the "Project"); and WHEREAS, the Bonds were issued by the City pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "Indenture"), between the Issuer and U.S. Bank National Association, as trustee (the "Trustee") and the Note was sold to U.S. Bank National Association, a national banking association (the "Subordinate Lender") and issued pursuant to a Loan Agreement, dated as of October 1, 2010, between the City and the Borrower. The Obligations were issued in accordance with Minnesota Statutes, Chapter 462C, as amended (the "Act"); and WHEREAS, the Issuer, the Subordinate Lender, and the Borrower entered into a Regulatory Agreement (Subordinate Note), dated as of October 28, 2010, and the Issuer, the Trustee, and the Borrower entered into a Regulatory Agreement (together, the "Regulatory Agreements"), dated as of October 28, 2010, which set forth the terms of the Borrower's compliance with the Act and Section 142(d) of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable Treasury Regulations promulgated thereunder; and WHEREAS, the Obligations have been paid off in full; and WHEREAS, the Borrower has determined to sell the Project to Elk River Prop I LLC, a Minnesota limited liability company and has obtained financing (the "Mortgage Loan") from NorthMarq Capital Finance L.L.0 (the "New Lender"), which will be secured by a Multifamily Mortgage, Assignment of Lease and Rents, Security Agreement and Fixture Filing (the "Security Instrument") from the Borrower to the Lender and insured by Fannie Mae ("Fannie Mae"); and WHEREAS, as a condition to receiving financing from the New Lender, Fannie has required that the Regulatory Agreements be subordinated to the lien, covenants, and enforcement of the Security Instrument; and WHEREAS, there has been presented to the City Council two Subordination Agreements (the "Subordination Agreements") proposed to be entered into between the City, the New Lender and the Borrower, pursuant to which the City will agree to subordinate the Regulatory Agreements to the Security Instrument. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River, that: 436069v1 JAE RC125-290 Page 49 of 273 1. The City Council hereby approves the subordination of the Regulatory Agreements to the Security Instrument, pursuant to the terms of the Subordination Agreements. 2. The Subordination Agreements presented to the City Council and on file with the City Clerk is hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the Mayor and City Administrator; provided that execution of such document by such officials shall be conclusive evidence of approval. 3. The Mayor and City Administrator are hereby authorized to execute the Amendment to Regulatory Agreement on behalf of the City and to carry out on behalf of the City the City's obligations thereunder. Adopted by the City Council of the City of Elk River, Minnesota this 16t' day of December, 2024. ATTEST: City Clerk Mayor 2 436069v1 JAE RC125-290 Page 50 of 273 Prepared by, and after recording return to: Moss & Barnett (EHK) A Professional Association 150 South Fifth Street, Suite 1200 Minneapolis, MN 55402 SUBORDINATION AGREEMENT GOVERNMENTAL ENTITY Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 51 of 273 SUBORDINATION AGREEMENT GOVERNMENTAL ENTITY FOR REGULATORY AGREEMENT REGULATORY AGREEMENT ONLY/NO SUBORDINATE DEBT THIS SUBORDINATION AGREEMENT FOR REGULATORY AGREEMENT (this "Agreement") is effective as of the day of December, 2024, by The City of Elk River, Minnesota, a municipal corporation under the laws of the State of Minnesota ("Governmental Entity"), and Elk River Prop I LLC, a Minnesota limited liability company ("Borrower"), for the benefit of NORTHMARQ CAPITAL FINANCE, L.L.C., a Nebraska limited liability company, its successors and assigns ("Lender"). RECITALS: A. Simultaneously herewith Lender is making a loan to Borrower in the original principal amount of $7,760,000.00 ("Loan") pursuant to a Multifamily Loan and Security Agreement between Lender and Borrower (as supplemented or amended from time to time, the "Loan Agreement") and evidenced by a Multifamily Note by Borrower to Lender (as supplemented or amended from time to time, the "Note"). The Loan is to be secured by a Multifamily Mortgage, Assignment of Lease and Rents, Security Agreement and Fixture Filing that will be recorded among the records of Sherburne County, Minnesota ("Official Records") (as supplemented or amended from time to time, the "Mortgage") of certain improved real property located in Elk River, Sherburne County, Minnesota, as more particularly described on Exhibit A attached hereto ("Property"). The Loan Agreement, the Note and the Mortgage, together with all other documents executed with respect to the Loan, are hereinafter collectively referred to as the "Loan Documents". B. In connection with the construction and development of the Property, Borrower's predecessor -in -interest entered into a certain Regulatory Agreement (Subordinate Note) dated as of October 28, 2010 ("Regulatory Agreement") in favor of the Governmental Entity, which was recorded in Sherburne County, Minnesota of the Official Records, pursuant to which the Property was subjected to certain restrictions. C. As a condition to making the Loan, Lender requires that the lien of the Mortgage be superior to the lien of the Regulatory Agreement. Lender will not make the Loan unless Governmental Entity and Borrower agree to subordinate their rights and obligations under the Regulatory Agreement. D. Borrower and Governmental Entity hereby agree to subordinate the Regulatory Agreement on and subject to the terms, conditions and requirements set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 1 Page 52 of 273 I. Recitals. The foregoing Recitals are hereby incorporated into this Agreement as agreements among the parties. 2. Subordination. The Governmental Entity hereby agrees that the Regulatory Agreement is and shall at all times continue to be, subordinate, subject and inferior to the rights of Lender under the Loan Documents and that the liens, rights (including approval and consent rights), remedies, payment interests, priority interests, and security interests granted to Governmental Entity pursuant to or in connection with the Regulatory Agreement are hereby expressly acknowledged to be in all respects and at all times, subject, subordinate and inferior in all respects to the liens, rights (including approval and consent rights), remedies, payment, priority and security interests granted to Lender pursuant to the Loan Documents and the terms, covenants, conditions, operations and effects thereof. Notwithstanding the above, Governmental Entity may exercise the remedies of specific performance or injunctive relief at any time in the event of a default under or breach of the terms of the Regulatory Agreement. 3. Financing, Encumbrance and Transfer Approval. Governmental Entity hereby approves and acknowledges the transfer of the Property to Borrower and the financing evidenced by the Mortgage. Governmental Entity further agrees that any transfer of the Property in connection with foreclosure of the Mortgage or a deed in lieu thereof shall not require Governmental Entity's consent but shall require notice to Governmental Entity. 4. Reserved. 5. Lender Notice of Default. In consideration of Governmental Entity's agreements contained in this Agreement, Lender agrees that in the event of any default by Borrower under the Loan Documents, Governmental Entity shall be entitled to receive a copy of any notice of default given by Lender to Borrower under the Loan Documents. Neither the giving nor the failure to give a notice to Governmental Entity pursuant to this Section 5 will affect the validity of any notice given by Lender to the Borrower. 6. Governmental Entity Notice of Default. Governmental Entity shall give Lender a concurrent copy of each material notice (including without limitation each notice of default) given by Governmental Entity under or with respect to the Regulatory Agreement, and agrees that Lender, at Lender's sole election, shall have the right (but not the obligation) to cure any default by Borrower under the Regulatory Agreement on its and/or Borrower's behalf. 7. Governmental Entity's Rights. Except as set forth in Sections 2 and 8 of this Agreement, nothing in this Agreement is intended to abridge or adversely affect any right or obligation of Borrower and/or Governmental Entity, respectively, under the Regulatory Agreement; provided that, (A) the Regulatory Agreement may be released but it may not be modified, amended, changed or otherwise altered without the prior written consent of Lender so long as the Loan is secured by the Property and (B) for so long as the Loan is secured by the Property, notwithstanding the terms of the Regulatory Agreement to the contrary, neither Borrower nor Governmental Entity will, without Lender's prior written consent, exercise or seek any right or remedy under the Regulatory Agreement or available at law or in equity which will or could result in (i) a transfer of possession of the Property or the control, operations or management thereof, (ii) the collection or possession of rents or revenues from or with respect to the Property Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 2 Page 53 of 273 by any party other than Borrower or Lender; (iii) appointment of a receiver for the Property; (iv) the application of insurance or condemnation proceeds other than as approved by Lender pursuant to the Loan Documents; (v) the removal or replacement of the existing property manager of the Property; or (vi) a material adverse effect on Lender's security for the Loan. 8. Foreclosure by Lender. hi the event of foreclosure, deed in lieu of foreclosure, or similar disposition of the Property by Lender, no consent shall be required from Governmental Entity. 9. Entire Agreement. This Agreement represents the entire understanding and agreement between the parties hereto with regard to the subordination of the Regulatory Agreement to the lien or charge of the Loan Documents, and shall supersede and cancel any prior agreements with regard to this subject matter. 10. Binding Provisions. The covenants and agreements contained in this Agreement shall be binding upon the heirs, personal representatives, successors and assigns of the respective parties to this Agreement. 11. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. 12. Modifications. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the parties hereto or their respective successors in interest. 13. Notices. All notices required or permitted hereunder shall be deemed to have been received either (i) when delivered by hand and the party giving such notice has received a signed receipt thereof, or (ii) three (3) days following the date deposited in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed as follows (or addressed in such other manner as the party being notified shall have requested by written notice to the other Pam') If to Governmental Entity: The City of Elk River 13065 Orono Parkway Elk River, Minnesota 55330 Attn: City Administrator If to Lender: NORTHMARQ CAPITAL FINANCE, L.L.C. 3500 American Boulevard West, Suite 500 Bloomington, Minnesota 55431 Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 3 Page 54 of 273 Attention: Servicing Department If to Borrower: Elk River Prop I LLC 13000 Hilltop Rd Burnsville, Minnesota 55337 Attention: Patrick Bagan 14. Further Instruments. Each of the parties hereto will, whenever and as often as they shall be requested to do so by the other, execute, acknowledge and deliver, or cause to be executed, acknowledged or delivered, any and all such further instruments and documents as may be reasonably necessary to carry out the intent and purpose of this Agreement, and to do any and all further acts reasonably necessary to carry out the intent and purpose of this Agreement. 15. Valid Authorization. Each person executing this Agreement on behalf of a party hereto represents and warrants that such person is duly and validly authorized to do so on behalf of such parry with full right and authority to execute this Agreement and to bind such party with respect to all of its obligations hereunder. 16. Counterparts. This Agreement may be executed in counterparts each of which shall be deemed an original and all of which when taken together constitute one and the same instrument, binding on all of the parties. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN THE REGULATORY AGREEMENT BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF THE MORTGAGE. Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 4 Page 55 of 273 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year above written. GOVERNMENTAL ENTITY The City of Elk River, Minnesota, a municipal corporation of the State of Minnesota By: Name: John J. Dietz Title: Mayor By: Name: Tina Allard Title: City Clerk STATE OF MINNESOTA ) ss. COUNTY OF 1 This instrument was acknowledged before me on , 2024, by John J. Dietz, the Mayor and Tina Allard, the City Clerk of The City of Elk River, Minnesota, a municipal corporation of the State of Minnesota, on behalf of the municipal corporation. (Seal, if any) Signature of Person Taking Acknowledgement Title or rank Serial Number, if any Subordination Agreement (Governmental Entity) Dove Tree Apartments Page S-1 Page 56 of 273 BORROWER: Elk River Prop I LLC, a Minnesota limited liability company By: Wagan Management North LLC, a Minnesota limited liability company Its: Manager By: Name Its: Patrick Bagan Manager STATE OF MINNESOTA ) ss. COUNTY OF ) This instrument was acknowledged before me on , 2024, by Patrick Bagan, the Manager of Wagan Management North LLC, a Minnesota limited liability company, the Manager of Elk River Prop I LLC, a Minnesota limited liability company, on behalf of the limited liability company. (Seal, if any) Signature of Person Taking Acknowledgement Title or rank Serial Number, if any Subordination Agreement (Governmental Entity) Dove Tree Apartments Page S-2 Page 57 of 273 LENDER: NORTHMARQ CAPITAL FINANCE, L.L.C., a Nebraska limited liability company By: Name: Nancy Kunkel Title: Vice President STATE OF ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 2024, by Nancy Kunkel, as Vice President of NORTHMARQ CAPITAL FINANCE, L.L.C., a Nebraska limited liability company, on behalf of the limited liability company. Signature of Person Taking Acknowledgement Title Serial Number, if any Subordination Agreement (Governmental Entity) Dove Tree Apartments Page S-3 Page 58 of 273 EXHIBIT A Legal Description PARCELI: That part of Lot 4, Auditor's Subdivision No. 3, Sherburne County, Minnesota, according to the recorded plat thereof, also being part of the Southeast Quarter of the Northeast Quarter of Section 33, Township 33 North, Range 26 West, lying Northeasterly of the Northeasterly line of the right-of-way of the Burlington Northern, Inc., formerly Northern Pacific Railway, described as follows: Commencing at the intersection of said Northeasterly line of the railroad right-of-way with the East line of the public road (now known as Proctor Avenue and County State Aid Highway No. 1), running North and South along the West line of said Southeast Quarter of the Northeast Quarter, (said East line of the public road being a line 33.00 feet, East of as measured at right angles to the West line of said Southeast Quarter of the Northeast Quarter); thence Northerly along said East line of the public road about 85.00 feet, (73.30 feet, more or less measured to intersect the North line of said Southeast Quarter of the Northeast Quarter); thence North 89 degrees 04 minutes 19 seconds East, on an assumed bearing along the said North line for 735.00 feet, to the point of beginning of the land to be described; thence South 89 degrees 04 minutes 19 seconds West, a distance of 285.00 feet; thence South 00 degrees 55 minutes 40 seconds East, a distance of 469.00 feet; thence South 89 degrees 04 minutes 19 seconds West, a distance of 16.26 feet to the Northeasterly right-of-way of the said Burlington Northern Railroad; thence South 48 degrees 37 minutes 54 seconds East, along said Northeasterly right-of-way line, a distance of 407.29 feet; thence North 00 degrees 55 minutes 41 seconds West, a distance of 743.09 feet, to the point of beginning. PARCEL 2: Together with the benefit of easements for street, utility and drainage purposes as set forth in Easement and License Agreement dated October 28, 2010, filed October 28, 2010, as Document No. 721545. 9862747v2 Subordination Agreement (Governmental Entity) Dove Tree Apartments Page A-1 Page 59 of 273 Prepared by, and after recording return to: Moss & Barnett (EHK) A Professional Association 150 South Fifth Street, Suite 1200 Minneapolis, MN 55402 SUBORDINATION AGREEMENT GOVERNMENTAL ENTITY Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 60 of 273 SUBORDINATION AGREEMENT GOVERNMENTAL ENTITY FOR REGULATORY AGREEMENT REGULATORY AGREEMENT ONLY/NO SUBORDINATE DEBT THIS SUBORDINATION AGREEMENT FOR REGULATORY AGREEMENT (this "Agreement") is effective as of the day of December, 2024, by The City of Elk River, Minnesota, a municipal corporation under the laws of the State of Minnesota ("Governmental Entity"), and Elk River Prop I LLC, a Minnesota limited liability company ("Borrower"), for the benefit of NORTHMARQ CAPITAL FINANCE, L.L.C., a Nebraska limited liability company, its successors and assigns ("Lender"). RECITALS: A. Simultaneously herewith Lender is making a loan to Borrower in the original principal amount of $7,760,000.00 ("Loan") pursuant to a Multifamily Loan and Security Agreement between Lender and Borrower (as supplemented or amended from time to time, the "Loan Agreement") and evidenced by a Multifamily Note by Borrower to Lender (as supplemented or amended from time to time, the "Note"). The Loan is to be secured by a Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing that will be recorded among the records of Sherburne County, Minnesota ("Official Records") (as supplemented or amended from time to time, the "Mortgage") of certain improved real property located in Elk River, Sherburne County, Minnesota, as more particularly described on Exhibit A attached hereto ("Property"). The Loan Agreement, the Note and the Mortgage, together with all other documents executed with respect to the Loan, are hereinafter collectively referred to as the "Loan Documents". B. In connection with the construction and development of the Property, Borrower's predecessor -in -interest entered into a certain Regulatory Agreement dated as of October 1, 2010 ("Regulatory Agreement") in favor of the Governmental Entity, which was recorded in Sherburne County, Minnesota of the Official Records, pursuant to which the Property was subjected to certain restrictions. C. As a condition to making the Loan, Lender requires that the lien of the Mortgage be superior to the lien of the Regulatory Agreement. Lender will not make the Loan unless Governmental Entity and Borrower agree to subordinate their rights and obligations under the Regulatory Agreement. D. Borrower and Governmental Entity hereby agree to subordinate the Regulatory Agreement on and subject to the terms, conditions and requirements set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 1 Page 61 of 273 I. Recitals. The foregoing Recitals are hereby incorporated into this Agreement as agreements among the parties. 2. Subordination. The Governmental Entity hereby agrees that the Regulatory Agreement is and shall at all times continue to be, subordinate, subject and inferior to the rights of Lender under the Loan Documents and that the liens, rights (including approval and consent rights), remedies, payment interests, priority interests, and security interests granted to Governmental Entity pursuant to or in connection with the Regulatory Agreement are hereby expressly acknowledged to be in all respects and at all times, subject, subordinate and inferior in all respects to the liens, rights (including approval and consent rights), remedies, payment, priority and security interests granted to Lender pursuant to the Loan Documents and the terms, covenants, conditions, operations and effects thereof. Notwithstanding the above, Governmental Entity may exercise the remedies of specific performance or injunctive relief at any time in the event of a default under or breach of the terms of the Regulatory Agreement. 3. Financing, Encumbrance and Transfer Approval. Governmental Entity hereby approves and acknowledges the transfer of the Property to Borrower and the financing evidenced by the Mortgage. Governmental Entity further agrees that any transfer of the Property in connection with foreclosure of the Mortgage or a deed in lieu thereof shall not require Governmental Entity's consent but shall require notice to Governmental Entity. 4. Reserved. 5. Lender Notice of Default. In consideration of Governmental Entity's agreements contained in this Agreement, Lender agrees that in the event of any default by Borrower under the Loan Documents, Governmental Entity shall be entitled to receive a copy of any notice of default given by Lender to Borrower under the Loan Documents. Neither the giving nor the failure to give a notice to Governmental Entity pursuant to this Section 5 will affect the validity of any notice given by Lender to the Borrower. 6. Governmental Entity Notice of Default. Governmental Entity shall give Lender a concurrent copy of each material notice (including without limitation each notice of default) given by Governmental Entity under or with respect to the Regulatory Agreement, and agrees that Lender, at Lender's sole election, shall have the right (but not the obligation) to cure any default by Borrower under the Regulatory Agreement on its and/or Borrower's behalf. 7. Governmental Entity's Rights. Except as set forth in Sections 2 and 8 of this Agreement, nothing in this Agreement is intended to abridge or adversely affect any right or obligation of Borrower and/or Governmental Entity, respectively, under the Regulatory Agreement; provided that, (A) the Regulatory Agreement may be released but it may not be modified, amended, changed or otherwise altered without the prior written consent of Lender so long as the Loan is secured by the Property and (B) for so long as the Loan is secured by the Property, notwithstanding the terms of the Regulatory Agreement to the contrary, neither Borrower nor Governmental Entity will, without Lender's prior written consent, exercise or seek any right or remedy under the Regulatory Agreement or available at law or in equity which will or could result in (i) a transfer of possession of the Property or the control, operations or management thereof, (ii) the collection or possession of rents or revenues from or with respect to the Property Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 2 Page 62 of 273 by any party other than Borrower or Lender; (iii) appointment of a receiver for the Property; (iv) the application of insurance or condemnation proceeds other than as approved by Lender pursuant to the Loan Documents; (v) the removal or replacement of the existing property manager of the Property; or (vi) a material adverse effect on Lender's security for the Loan. 8. Foreclosure by Lender. hi the event of foreclosure, deed in lieu of foreclosure, or similar disposition of the Property by Lender, no consent shall be required from Governmental Entity. 9. Entire Agreement. This Agreement represents the entire understanding and agreement between the parties hereto with regard to the subordination of the Regulatory Agreement to the lien or charge of the Loan Documents, and shall supersede and cancel any prior agreements with regard to this subject matter. 10. Binding Provisions. The covenants and agreements contained in this Agreement shall be binding upon the heirs, personal representatives, successors and assigns of the respective parties to this Agreement. 11. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. 12. Modifications. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the parties hereto or their respective successors in interest. 13. Notices. All notices required or permitted hereunder shall be deemed to have been received either (i) when delivered by hand and the party giving such notice has received a signed receipt thereof, or (ii) three (3) days following the date deposited in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed as follows (or addressed in such other manner as the party being notified shall have requested by written notice to the other Pam') If to Governmental Entity: The City of Elk River 13065 Orono Parkway Elk River, Minnesota 55330 Attn: City Administrator If to Lender: NORTHMARQ CAPITAL FINANCE, L.L.C. 3500 American Boulevard West, Suite 500 Bloomington, Minnesota 55431 Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 3 Page 63 of 273 Attention: Servicing Department If to Borrower: Elk River Prop I LLC 13000 Hilltop Rd Burnsville, Minnesota 55337 Attention: Patrick Bagan 14. Further Instruments. Each of the parties hereto will, whenever and as often as they shall be requested to do so by the other, execute, acknowledge and deliver, or cause to be executed, acknowledged or delivered, any and all such further instruments and documents as may be reasonably necessary to carry out the intent and purpose of this Agreement, and to do any and all further acts reasonably necessary to carry out the intent and purpose of this Agreement. 15. Valid Authorization. Each person executing this Agreement on behalf of a party hereto represents and warrants that such person is duly and validly authorized to do so on behalf of such parry with full right and authority to execute this Agreement and to bind such party with respect to all of its obligations hereunder. 16. Counterparts. This Agreement may be executed in counterparts each of which shall be deemed an original and all of which when taken together constitute one and the same instrument, binding on all of the parties. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN THE REGULATORY AGREEMENT BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF THE MORTGAGE. Subordination Agreement (Governmental Entity) Dove Tree Apartments Page 4 Page 64 of 273 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year above written. GOVERNMENTAL ENTITY The City of Elk River, Minnesota, a municipal corporation of the State of Minnesota By: Name: John J. Dietz Title: Mayor By: Name: Tina Allard Title: City Clerk STATE OF MINNESOTA ) ss. COUNTY OF 1 This instrument was acknowledged before me on , 2024, by John J. Dietz, the Mayor and Tina Allard, the City Clerk of The City of Elk River, Minnesota, a municipal corporation of the State of Minnesota, on behalf of the municipal corporation. (Seal, if any) Signature of Person Taking Acknowledgement Title or rank Serial Number, if any Subordination Agreement (Governmental Entity) Dove Tree Apartments Page S-1 Page 65 of 273 BORROWER: Elk River Prop I LLC, a Minnesota limited liability company By: Wagan Management North LLC, a Minnesota limited liability company Its: Manager By: Name Its: Patrick Bagan Manager STATE OF MINNESOTA ) ss. COUNTY OF ) This instrument was acknowledged before me on , 2024, by Patrick Bagan, the Manager of Wagan Management North LLC, a Minnesota limited liability company, the Manager of Elk River Prop I LLC, a Minnesota limited liability company, on behalf of the limited liability company. (Seal, if any) Signature of Person Taking Acknowledgement Title or rank Serial Number, if any Subordination Agreement (Governmental Entity) Dove Tree Apartments Page S-2 Page 66 of 273 LENDER: NORTHMARQ CAPITAL FINANCE, L.L.C., a Nebraska limited liability company By: Name: Nancy Kunkel Title: Vice President STATE OF ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 2024, by Nancy Kunkel, as Vice President of NORTHMARQ CAPITAL FINANCE, L.L.C., a Nebraska limited liability company, on behalf of the limited liability company. Signature of Person Taking Acknowledgement Title Serial Number, if any Subordination Agreement (Governmental Entity) Dove Tree Apartments Page S-3 Page 67 of 273 EXHIBIT A Legal Description PARCELI: That part of Lot 4, Auditor's Subdivision No. 3, Sherburne County, Minnesota, according to the recorded plat thereof, also being part of the Southeast Quarter of the Northeast Quarter of Section 33, Township 33 North, Range 26 West, lying Northeasterly of the Northeasterly line of the right-of-way of the Burlington Northern, Inc., formerly Northern Pacific Railway, described as follows: Commencing at the intersection of said Northeasterly line of the railroad right-of-way with the East line of the public road (now known as Proctor Avenue and County State Aid Highway No. 1), running North and South along the West line of said Southeast Quarter of the Northeast Quarter, (said East line of the public road being a line 33.00 feet, East of as measured at right angles to the West line of said Southeast Quarter of the Northeast Quarter); thence Northerly along said East line of the public road about 85.00 feet, (73.30 feet, more or less measured to intersect the North line of said Southeast Quarter of the Northeast Quarter); thence North 89 degrees 04 minutes 19 seconds East, on an assumed bearing along the said North line for 735.00 feet, to the point of beginning of the land to be described; thence South 89 degrees 04 minutes 19 seconds West, a distance of 285.00 feet; thence South 00 degrees 55 minutes 40 seconds East, a distance of 469.00 feet; thence South 89 degrees 04 minutes 19 seconds West, a distance of 16.26 feet to the Northeasterly right-of-way of the said Burlington Northern Railroad; thence South 48 degrees 37 minutes 54 seconds East, along said Northeasterly right-of-way line, a distance of 407.29 feet; thence North 00 degrees 55 minutes 41 seconds West, a distance of 743.09 feet, to the point of beginning. PARCEL 2: Together with the benefit of easements for street, utility and drainage purposes as set forth in Easement and License Agreement dated October 28, 2010, filed October 28, 2010, as Document No. 721545. 9862929vl Subordination Agreement (Governmental Entity) Dove Tree Apartments Page A-1 Page 68 of 273