$6,100,000. Housing Revenue Bonds, Series 2014 (Seward Square Apartments Project)

Transcription

1 NEW ISSUE Book-Entry Only RATING: STANDARD & POOR S AA+ (See RATING herein) In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and continuing compliance with certain covenants, interest on the Bonds is excludable from gross income for federal income tax purposes, except for interest on any Bond for any period during which such Bond is held by a substantial user of the facilities financed by the Bonds or a related person within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the Code ), and interest on the Bonds is not a specific preference item or included in adjusted current earnings of corporations for purposes of the federal alternative minimum tax. Bond Counsel is also of the opinion that, under existing State of Minnesota statutes, interest on the Bonds is not includable in taxable net income of individuals, trusts and estates for Minnesota income tax purposes and is not an item of tax preference for purposes of the Minnesota alternative minimum taxes imposed on individuals and corporations. For a more complete description of such opinions of Bond Counsel, see TAX MATTERS herein. $6,100,000 City of Minneapolis Housing Revenue Bonds, Series 2014 (Seward Square Apartments Project) Dated as of the Date of Issuance CUSIP : 60374TAU2 Maturity Date: as shown below The Bonds are issuable only as fully registered bonds without coupons in Authorized Denominations with interest payable on each June 1 and December 1, commencing June 1, Purchasers of the Bonds will not receive certificates representing their interests in the Bonds. Bonds will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York. Principal of and interest on the Bonds is payable by The Huntington National Bank, as trustee (the Trustee ), to Cede & Co., which is to remit such payments to the Direct Participants (as defined herein) for subsequent disbursement to the purchasers of the Bonds. See APPENDIX F - BOOK-ENTRY ONLY SYSTEM herein. The Bonds are being issued by the City of Minneapolis (the Issuer ), pursuant to a Trust Indenture (the Indenture ), dated as of January 1, 2014, by and between the Issuer and the Trustee, to provide financing to Seward Renewal LLC, a Minnesota limited liability company (the Borrower ), for the acquisition, rehabilitation, improvement, and equipping of an 81-unit multifamily rental housing development and facilities functionally related and subordinate thereto, located in the City of Minneapolis, Minnesota (the Project ). The Bonds, when, as and if issued will be special obligations of the Issuer, payable solely from the revenues and other moneys assigned by the Indenture to secure that payment, which include the payments required to be made by the Borrower under the Loan Agreement dated as of January 1, 2014 (the Loan Agreement ) between the Borrower and the Issuer. $6,100,000, 0.50% Bonds Due December 1, 2015, Price 100% The Bonds are subject to optional redemption prior to maturity. See THE BONDS herein. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE TRUST ESTATE (AS DEFINED HEREIN) PLEDGED UNDER THE INDENTURE AND NOT FROM ANY OTHER REVENUES, FUNDS OR ASSETS OF THE ISSUER. THE BONDS ARE NOT GENERAL OBLIGATIONS, DEBT OR BONDED INDEBTEDNESS OF THE ISSUER OR OF THE STATE OF MINNESOTA (THE STATE ) OR ANY POLITICAL SUBDIVISION THEREOF, AND THE HOLDER THEREOF DOES NOT HAVE THE RIGHT TO HAVE TAXES LEVIED BY THE ISSUER OR BY THE STATE OR ANY POLITICAL SUBDIVISION THEREOF FOR THE PAYMENT OF THE PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS. The Bonds are offered when, as and if issued and received by the Underwriter, subject to the legal opinion of Kutak Rock LLP, Minneapolis, Minnesota, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Eichner Norris & Neumann PLLC, Washington, DC, and for the Borrower by its counsel, Winthrop & Weinstine, P.A, Minneapolis, Minnesota. It is expected that the Bonds will be available for delivery to The Depository Trust Company in New York, New York, on or about January 16, January 9, 2014 (a) Copyright 2011, CUSIP Global Services (see Regarding This Official Statement).

2 REGARDING THIS OFFICIAL STATEMENT No broker, dealer, salesman or other person has been authorized by the Issuer or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such information or representations must not be relied upon as having been authorized by the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The Issuer has not and does not assume any responsibility as to the accuracy or completeness of the information in this Official Statement, other than the information concerning the Issuer under the caption THE ISSUER and ABSENCE OF LITIGATION-The Issuer. The other information set forth herein has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy and is not to be construed as a representation of such by the Underwriter or the Issuer. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein since the date hereof. The Issuer has not confirmed, and assumes no responsibility for, the accuracy, completeness, sufficiency or fairness of any statements in this Official Statement or any amendments thereof or supplements thereto, or in any reports, financial information, offering or disclosure documents or other information relating to the Borrower, the Project, or the history, businesses, properties, organization, management, financial condition, market area or any other matter relating to the Borrower or contained otherwise in this Official Statement. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by Standard & Poor's. CUSIP data herein are provided by Standard & Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers have been assigned by an independent company not affiliated with the Issuer or the Borrower and are included solely for the convenience of the Holders of the Bonds. The Issuer, the Bond Counsel and the Underwriter are not responsible for the selection or use of these CUSIP numbers and make no representation as to their correctness on the Bonds or the Cover or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions and events. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission (the Commission ) or with any state securities agency. The Bonds have not been approved or disapproved by the Commission or any state securities agency, nor has the Commission or any state securities agency passed upon the accuracy or adequacy of this Official Statement. Any representation to the contrary is a criminal offense. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT TEND TO STABILIZE OR MAINTAIN THE MARKET PRICE FOR THE BONDS ABOVE THE LEVELS THAT WOULD OTHERWISE PREVAIL. SUCH ACTIVITIES, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

3 TABLE OF CONTENTS Page INTRODUCTION... 1 THE ISSUER... 2 THE BONDS... 2 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS... 4 THE PROJECT... 5 THE BORROWER... 6 THE TRUSTEE... 7 ESTIMATED SOURCES AND USES OF FUNDS... 7 CERTAIN BONDHOLDERS' RISKS... 9 TAX MATTERS UNDERWRITING RATING CERTAIN LEGAL MATTERS ABSENCE OF LITIGATION CONTINUING DISCLOSURE MISCELLANEOUS APPENDIX A DEFINITIONS OF CERTAIN TERMS APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT APPENDIX E FORM OF OPINION OF BOND COUNSEL APPENDIX F BOOK-ENTRY ONLY SYSTEM APPENDIX G PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT

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5 OFFICIAL STATEMENT $6,100,000 City of Minneapolis Housing Revenue Bonds, Series 2014 (Seward Square Apartments Project) INTRODUCTION This Official Statement sets forth certain information concerning the issuance and sale by the City of Minneapolis (the Issuer ), a municipal corporation and political subdivision duly organized and validly existing under its charter and the laws of the State of Minnesota (the State ), of $6,100,000 aggregate principal amount of Housing Revenue Bonds, Series 2014 (Seward Square Apartments Project) (the Bonds ). The Bonds will be issued pursuant to Minnesota Statutes, Chapter 462C, as amended (the Act ), and a resolution of the Issuer (the Bond Resolution ) and secured by a Trust Indenture, dated as of January 1, 2014 (the Indenture ), between the Issuer and The Huntington National Bank, as trustee (in such capacity, the Trustee ). The Bonds are being issued to make a loan (the Loan ) to Seward Renewal LLC, a Minnesota limited liability company (the Borrower ), for the acquisition, rehabilitation, improvement, and equipping of an 81-unit multifamily rental housing development and facilities functionally related and subordinate thereto, located in the City of Minneapolis, Minnesota (the Project ). The terms of the financing are to be as set forth in the Loan Agreement, dated as of January 1, 2014, between the Issuer and the Borrower (the Loan Agreement ). The obligation of the Borrower to repay the Loan pursuant to the Loan Agreement will be evidenced by a promissory note (the Note ). Under the terms of the Indenture, an amount equal to the proceeds of the Bonds is to be deposited in the Project Fund and the Bond Fund established under the Indenture, and invested in Eligible Investments, as defined in the Indenture. See APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Investment of Special Funds and Rebate Fund herein. The principal of and interest on the Bonds are payable from the security pledged under the Indenture, including the payments on the investment of funds under the Indenture. Under the Indenture, the Trustee is to invest amounts held under the Indenture in Eligible Investments. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS and APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Investment of Special Funds and Rebate Fund herein. The Borrower's operation of the Project will be subject to the terms of a Regulatory Agreement dated as of January 1, 2014 (the Regulatory Agreement ), among the Borrower, the Trustee and the Issuer, which contains covenants required to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes. The Regulatory Agreement will require that for the Qualified Project Period (as defined therein) at least 40% of the dwelling units in the Project be occupied by families or individuals of low or moderate income, defined as families or individuals whose income does not exceed 60% (adjusted for family size) of the median gross income for the area in which the Project is located. Brief descriptions of the Issuer, the Bonds, the security for the Bonds, the Borrower, the Project, Eligible Investments, the Indenture and the Loan Agreement, are included in this Official Statement. All references herein to the Indenture, the Loan Agreement and other documents and agreements are qualified in their entirety by reference to such documents and agreements, copies of which are available for inspection at the offices of the Trustee.

6 THE ISSUER The following information has been provided by the Issuer for use herein. While the information is believed to be reliable, none of the Trustee, the Borrower, the Underwriter nor any of their respective counsel, members, officers or employees make any representations as to the accuracy or sufficiency of such information. The Issuer is a home rule charter city, duly organized and validly existing under the laws of the State and its charter. The Bonds are authorized and issued by the Issuer under the provisions of Act, and pursuant to the Bond Resolution. By virtue of the authority of the Constitution and the laws of the State, and particularly the Act and the Issuer's charter, the Issuer is authorized to issue bonds, and to use the proceeds of bonds to make loans to provide housing. The Issuer neither has nor assumes responsibility for any information in this Official Statement, except for the information under this caption and the caption ABSENCE OF LITIGATION-The Issuer as it relates to the Issuer. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE TRUST ESTATE (AS DEFINED HEREIN) PLEDGED UNDER THE INDENTURE AND NOT FROM ANY OTHER REVENUES, FUNDS OR ASSETS OF THE ISSUER. THE BONDS ARE NOT GENERAL OBLIGATIONS, DEBT OR BONDED INDEBTEDNESS OF THE ISSUER OR OF THE STATE OF MINNESOTA (THE STATE ) OR ANY POLITICAL SUBDIVISION THEREOF, AND THE HOLDER THEREOF DOES NOT HAVE THE RIGHT TO HAVE TAXES LEVIED BY THE ISSUER OR BY THE STATE OR ANY POLITICAL SUBDIVISION THEREOF FOR THE PAYMENT OF THE PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS. THE BONDS The Bonds are available in book-entry only form. See APPENDIX F - BOOK-ENTRY ONLY SYSTEM. So long as Cede & Co., as nominee of The Depository Trust Company, is the registered owner of the Bonds, references herein to the Bondholders or holders or registered owner or owners of the Bonds mean Cede & Co. and not the beneficial owners of the Bonds. General The Bonds are issuable in Authorized Denominations. The Bonds will be dated the date of issuance, will bear interest at the rate set forth on the cover page hereof and will mature on December 1, Interest will be payable on each June 1 and December 1, commencing June 1, 2014 (each, a Payment Date ) in accordance with the provisions of the Indenture. Interest will be calculated and be due on the basis of a 360-day year consisting of twelve (12) thirty (30) day months. Principal of and interest on the Bonds will be payable by the Trustee to Cede & Co. as nominee of DTC. See APPENDIX F - BOOK-ENTRY ONLY SYSTEM. Limited Obligations The Bonds shall be special limited obligations of the Issuer and the Bond Service Charges thereon shall be payable equally and ratably solely from the Pledged Revenues, including but not limited to moneys and investments in the Special Funds, the payment of Bond Service Charges on the Bonds shall be secured by the assignment of Pledged Revenues under the Indenture, and payments due on the Bonds also shall be secured by the Note. Notwithstanding anything to the contrary in the Bond 2

7 Resolution, the Bonds or the Indenture, the Bonds do not and shall not represent or constitute a debt or pledge of the faith and credit, moneys or the taxing power of the Issuer or of the State or of any political subdivision, municipality or other local agency thereof. Redemption Prior to Maturity In the event the Borrower exercises any option to prepay the Note and amounts are paid from the proceeds of refunding bonds or otherwise from Available Money, the Bonds shall be subject to redemption prior to maturity upon the written direction of the Borrower delivered to the Issuer and the Trustee with the written consent of R4 SSMN Acquisition LLC (the Investor Member ), as a whole on or after the later to occur of (i) the date that the Project is placed in service, and (ii) December 1, 2014, at par, plus accrued interest to the redemption date. On the redemption date the Trustee shall transfer to the Registrar, but only from and to the extent of funds held by the Trustee under the Indenture available for such purpose, an amount sufficient to pay the redemption price of all Bonds to be redeemed on such redemption date. Not less than twenty (20) days prior to the redemption date, the Trustee shall give written notice of redemption to the Holders (with a copy to the Borrower and the Investor Member) by first class mail, postage prepaid, at their respective addresses appearing on the Bond Register. The notice shall state: (1) the redemption date; (2) the redemption price; (3) that on the redemption date the redemption price of the Bonds will become due and payable to the extent of funds on deposit with the Trustee for that purpose, and that interest on the principal amount of the Bonds shall cease to accrue on such date; (4) the place where the Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the designated office of the Trustee; and (5) such additional information as the Trustee or the Issuer shall deem appropriate. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in such further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption given under the Indenture shall contain the information required above for an official notice of redemption and in addition (i) the complete official title, including Series designation, delivery date, interest rate and maturity date of each Bond being redeemed, (ii) the certificate and CUSIP number of each such Bond, (iii) the date of mailing of official notice of redemption, and (iv) any other descriptive information needed to identify accurately the Bonds being redeemed. Further notices of redemption shall be sent by first class mail. Further notices of redemption shall be sent by first-class mail or overnight delivery service to any Holder owning, on the date such notice is sent, Bonds in the aggregate principal amount of $1,000,000 or more. If the Bonds are not then being held under a book-entry system, each further notice of redemption shall be sent at least fifteen (15) days before the redemption date by first class mail or overnight delivery service to the Information Services. This further notice of redemption sent to the Securities Depositories pursuant to the preceding sentence shall be sent at such time as shall insure that such notice is received at least two (2) Business Days before official notice of such redemption is received. A second notice of redemption shall be sent by the same means as the first such notice not later than sixty (60) days after the redemption date to any Holder who shall not have presented for payment the Bond or Bonds called for redemption within thirty (30) days after such date. In the event the Bonds are called for redemption under circumstances resulting in discharge of the Indenture more than ninety (90) days before the redemption date, additional official and further notice of redemption satisfying the requirements of this section shall be given not less than thirty (30) nor more than sixty (60) days prior to such redemption date. Failure to 3

8 give any official or further notice or any defect therein shall not affect the validity of the proceedings for redemption of any Bond with respect to which no such failure or defect has occurred or exists. Any notice of the redemption of Bonds may state that such notice is conditional and that if the conditions for redemption of the Bonds on the scheduled redemption date are not satisfied (including the availability of funds sufficient to redeem such Bonds), the Bonds will not be redeemed on such date and any Bonds tendered for payment on such date will be returned to the Holders thereof. Notice of redemption having been given as aforesaid, except as provided in the Indenture, the principal amount of the Bonds so to be redeemed shall become due and payable on the redemption date at the redemption price specified, and on and after such date (unless the Issuer shall default in the payment of the redemption price) such principal amount of the Bonds shall cease to bear interest. Upon surrender of any such Bond for redemption in accordance with such notice, such Bond shall be paid at the redemption price thereof to the extent that money is on deposit with the Registrar for that purpose. Neither the failure of a Holder to receive such notice nor any defect in any notice shall affect the sufficiency of the proceedings for such redemption. If any Bond called for redemption shall not be so paid on the redemption date upon proper surrender of the Bond for redemption, the redemption price and, to the extent lawful, interest thereon shall, until paid, bear interest from the redemption date at the rate borne by the Bond immediately before the redemption date. No Additional Parity Bonds The Indenture does not permit the Issuer to issue additional indebtedness prior to or on a parity with the Bonds. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS The Bonds will be secured under the Indenture by all right, title and interest of the Issuer in and to (i) the Pledged Revenues, as defined herein, including, without limitation, all payments by the Borrower pursuant to the Note (the Loan Payments ) and other amounts receivable by or on behalf of the Issuer under the Loan Agreement in respect of repayment of the Loan, (ii) the Special Funds, as defined herein, including all accounts in those Funds and all money deposited therein and the investment earnings on such money, (iii) subject to the provisions of the Bond Resolution, all right, title and interest of the Issuer in the proceeds derived from the sale of the Bonds, and any securities in which money in the Special Funds are invested, and (except for moneys in the Rebate Fund or moneys required to be rebated to the United States of America under the Code) the proceeds derived therefrom, and any and all other real or personal property of every name and nature from time to time pledged, assigned or transferred, as and for additional security under the Indenture by the Issuer or by anyone in its behalf, or with its written consent, to the Trustee, and (iv) the Loan Agreement, except for certain unassigned rights of the Issuer. Such assets are referred to herein as the Trust Estate. Except as otherwise set forth in the Indenture, amounts deposited in the Special Funds are to be invested in Eligible Investments (as defined herein). See APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Investment of Special Funds and Rebate Fund herein. The Bonds are special obligations of the Issuer payable from the Trust Estate. The Bonds and the interest thereon do not represent or constitute a general obligation, debt or bonded indebtedness or a pledge of the faith and credit, moneys or taxing power of the Issuer, the State, or any political subdivision of the State within the meaning of any constitutional, charter or statutory limitations. Neither the Issuer nor the State nor any political subdivision of the State will be obligated to pay the principal of and the 4

9 interest on the Bonds or other costs incident thereto except from revenues pledged therefor and received under the Indenture, all as more fully set forth in the Indenture. THE PROJECT The following information concerning the Project has been provided by representatives of the Borrower and has not been independently confirmed or verified by any other person. Although the information shown below has been obtained from sources believed to be reliable, no representation is made herein by the Issuer or any of their officers or employees as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. The Project, known as the Seward Square Apartments Project, consists of the acquisition, rehabilitation, improvement, and equipping of an 81-unit rental housing project located in the City of Minneapolis, Minnesota. The Project will not be pledged as security for the Bonds. Units contain a living room, kitchens with wood cabinets, refrigerators and electric ranges, ceiling fan, coat closet, hand rails and pulls cords. Project amenities include on-site management, a meeting room and community room, central laundry, parking garage and off-street parking. The unit mix of the Project is as follows: The Managing Agent Unit Type Number Square Feet One Bedroom, One Bath Two Bedroom, One Bath Total 81 52,174 The Project will be managed by Real Estate Equities Management, LLC (the "Manager"). The Management executive team possesses over 40 years of experience in developing and managing Section 8 housing and LIHTC properties. Real Estate Equities Management, LLC currently manages over 3,000 apartment units, most of which are targeted towards low-income households. The Contractor The Contractor for the Project is Frerichs Construction Company (the "Contractor"). Established in 1983, Frerichs has extensive experience in everything from tenant improvements and building new hotels to renovating large multi-family residences while still occupied. Frerichs has completed over 6,000 units of occupied rehab involving various agency including HUD and Minnesota Housing Finance Agency with contract values from $50,000 to $23,000,000. The Architect The architect for the Project is Kaas Wilson Architects, LLC (the "Architect"). The principal architect has developed or renovated over 2,000 affordable housing units nationally. The principal architects have a combined 38 years of experience in all aspects of architectural design and construction administration of multi-family and senior/supportive housing projects. Although formed in 2007, the team members at Kaas Wilson have worked together for a combined 28 years. 5

10 The Senior Lender Oak Grove Commercial Mortgage, LLC (the "Senior Lender") will, upon satisfaction of certain conditions precedent, make the HUD Funds (as defined below) disbursement to the Borrower. The Senior Lender is a mortgage banking firm specializing in FHA-insured construction and permanent mortgage loans, Fannie Mae forward commitments and permanent mortgage loans, and both Fannie Mae and FHA bond credit enhancements for multifamily and seniors housing projects across the United States. The Senior Lender has been approved by HUD as an eligible issuer and servicer of loans guaranteed by GNMA. To be approved by GNMA to issue GNMA guaranteed certificates with respect to long-term mortgages on multifamily projects, the Senior Lender is required to have a net worth (based on audited financial statements) equal to at least $500,000 plus 0.2% of any securities outstanding in excess of $35 million. THE BORROWER The following information concerning the Borrower has been provided by representatives of the Borrower and has not been independently confirmed or verified by either the Underwriter or the Issuer. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. The Borrower of the Project will be Seward Renewal LLC, a Minnesota limited liability company. The managing member of the Borrower is Seward Manager LLC (the Managing Member ), a Minnesota limited liability company. The Borrower does not intend to acquire any substantial assets or engage in any substantial business activities other than those related to the ownership of the Project. However, the Borrower's members and affiliates may engage in the acquisition, development, ownership and management of similar types of housing projects. Renewal Housing, Inc. ( RHI ) is the sole member of the Managing Member. RHI is a Maryland nonprofit corporation and was granted exempt status as an organization under Section 501(c)(3) of the Internal Revenue Code. The specific charitable and public purposes for which the corporation is organized are to provide low income persons and families with housing services and facilities predicated upon the provision, operating and maintenance thereafter. Neither the Borrower nor its members or affiliates will be personally liable to pay the principal of and interest on the Bonds. Furthermore, no representation is made that the Borrower will have substantial funds available for the Project. Accordingly, neither the Borrower's financial statements nor those of its affiliates or members are included in this Official Statement. Investor Member Prior to the issuance of the Bonds, the Borrower expects to enter into a commitment with the Investor Member to offer to it a 99.99% ownership interest in the Borrower. Pursuant to the offer, the equity funding arrangements for the funding of the tax credit equity are expected to be approximately $3,681,000 paid in stages during and after rehabilitation of the Project. These funding levels and the timing of the funding are subject to numerous adjustments and conditions which could result in the amounts funded and/or the timing or even occurrence of the funding varying significantly from the estimates set forth herein and neither the Issuer nor the Underwriter makes any representation as to the availability of such funds. 6

11 Limited Recourse to Borrower The Borrower and its members will not be personally liable for payments on the Note, the payments on which are to be applied to pay the principal of and interest on the Bonds; nor will the Borrower be personally liable under the other documents executed in connection with the issuance of the Bonds and the making of the Loan. Furthermore, no representation is made that the Borrower will have substantial funds available for the Project. Accordingly, neither the Borrower s financial statements nor those of its members and managers are included in this Official Statement. THE TRUSTEE The information under this heading has been provided solely by the Trustee and has not been independently verified. No representation whatsoever as to the accuracy, adequacy or completeness of such information is being made. The Huntington National Bank will act as Trustee pursuant to the Indenture. The obligations of the Trustee are described in the Indenture. The Trustee has undertaken only those duties and obligations that are expressly set forth in the Indenture. The Trustee has not independently passed upon the validity of the Bonds, the security of the payment therefor, the value or condition of any assets pledged to the payment thereof, the adequacy of the provisions for such payment, the status for federal or state income tax purposes of the interest on the Bonds, or the investment quality of the Bonds. Except for the contents in this section, the Trustee has not reviewed or participated in the preparation of this Official Statement and has assumed no responsibility for the nature, content, accuracy or completeness of the information included in this Official Statement. ESTIMATED SOURCES AND USES OF FUNDS The following information concerning the Borrower has been provided by representatives of the Borrower and has not been independently confirmed or verified by either the Underwriter or the Issuer. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. Sources and Uses of Funds of the Bonds The proceeds expected to be deposited under the Indenture upon closing are to be applied as follows: Sources of Funds Principal Amount of Bonds $6,100,000 Available Money 58,000 Total Sources $6,158,000 Uses of Funds Deposit to Project Fund $6,100,000 Deposit to Bond Fund 58,000 Total Uses $6,158,000 7

12 Plan of Financing The Borrower will use the funds for the acquisition, rehabilitation, improvement, and equipping of the Project. Funds are loaned to Borrower by (i) the United States Department of Housing and Urban Development ( HUD ) under Section 221(d)(4), and (ii) the Minnesota Housing Financing Agency ( MHFA ), simultaneously with the issuance of the Bonds, as well as with funds available from the proceeds from the sale of the Bonds and certain equity contributions as shown below. The costs of the Project and the sources of funds to pay those costs are estimated by the Borrower as follows: Sources of Funds Bonds $6,100,000 FHA Loan 6,539,000 HOME Loan 750,000 Tax Credit Equity 3,681,000 Seller's Note 950,000 Interim Income 497,803 Deferred Developer Fee 621,467 Total $19,139,270 Uses of Funds Redemption of Bonds $6,100,000 Acquisition 6,000,000 Rehabilitation Costs 3,634,331 Soft Costs 1,404,646 Costs of Issuance 164,501 Reserves 573,797 Developer Fee 1,261,995 Total $19,139,270 All costs of issuing the Bonds, including underwriter's fee, will be paid by the Borrower. The Issuer has directed the Trustee to deposit all payments made by the Borrower pursuant to the Note and the Loan Agreement into the Bond Fund established and maintained pursuant to the Indenture. Bond Service Charges shall be payable as they become due, (i) in the first instance from the moneys on deposit in the Bond Fund, (ii) second, from moneys on deposit in the Project Fund and transferred as necessary to the Bond Fund, and (iii) third, from moneys on deposit in the Assignment Fund and transferred as necessary to the Bond Fund. Investment of moneys in the Bond Fund and the Assignment Fund will mature or be redeemable at the times and in the amounts necessary to provide moneys to pay Bond Service Charges on the Bonds on each Interest Payment Date. Each investment of moneys in the Project Fund will mature or be redeemable at such times and as may be necessary to make payments from the Project Fund. All investment earnings from amounts on deposit in the Project Fund and the Assignment Fund will be credited to the Bond Fund. See APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE herein. In addition to the Bond proceeds, the following additional sources of funds will be available to pay costs of the Project. 8

13 FHA Loan The Borrower will enter into a $6,539,000 United States Housing and Urban Development FHA insured Section 221(d)(4) loan (the HUD Funds ). The obligation to repay the HUD Funds will be set forth in a promissory note (the Mortgage Note ) from the Borrower to Oak Grove Commercial Mortgage, LLC (the Senior Lender ). The Mortgage Note will be secured by a mortgage against the Project. The Mortgage Note is a 42-year term and requires monthly principal and interest payments based on a 40-year amortization schedule commencing on April 1, 2015 and bear interest at a rate of 4.23% per annum. HOME Loan In addition, the Project will utilize a $750,000 HOME Loan from the State of Minnesota to the Borrower (the HOME Loan ). The obligation to repay the HOME Loan will be set forth in a promissory note (the HOME Note ) from the Borrower to the State and will be repayable out of cash flow and other non-project sources on the terms and conditions set forth therein. The HOME Note will be secured by a mortgage against the Project. The HOME Note will have a term equal to that of the HUD Funds and will bear interest at the rate of 0% per annum, with principal due on the earlier of (i) the sale or transfer of the Property, or (ii) maturity. Tax Credit Equity In addition to the proceeds of the Bonds, the Project will be financed with tax credit equity, which will pay for the costs of issuance of the Bonds and a portion of the other costs including construction costs. The Investor Member or one of its affiliates, will own a 99.9% interest in the Borrower. In connection with this interest, the tax credit equity is expected to be approximately $3,681,000, which is expected to be funded pursuant to the terms of Borrower's Amended and Restated Operating Agreement. CERTAIN BONDHOLDERS' RISKS The purchase of the Bonds will involve a number of risks. The following is a summary, which does not purport to be comprehensive or definitive, of some of such risk factors. Limited Security; Investment of Funds The Bonds are special obligations of the Issuer payable solely from the Trust Estate, which includes certain funds pledged to and held by the Trustee pursuant to the Indenture. The Bonds are offered solely on the basis of the amounts held under the Indenture and are not offered on the basis of the credit of the Borrower, the feasibility of the Project or any other security. As a consequence, limited information about the Project and no information about the financial condition or results of operations of the Borrower is included in this Official Statement. The Bonds are offered only to investors who, in making their investment decision, rely solely on the amounts held under the Indenture and not on the credit of the Borrower, the feasibility of the Project or any other security. The principal of and interest on the Bonds are payable solely from and secured exclusively by certain revenues and funds pledged thereto under the Indenture. The Project will not be subject to any mortgage for the benefit of the Holders of the Bonds. An amount equal to the proceeds from sale of the Bonds is to be deposited in the Project Fund and invested in Eligible Investments pursuant to the Indenture. 9

14 The Trustee is required to invest amounts held in the Special Funds in Eligible Investments, as defined in the Indenture. See APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Investment of Special Funds and Rebate Fund herein. Debt service on the Bonds has been scheduled assuming that the amounts invested earn no interest. Taxability The Bonds are not subject to redemption, and the rate of interest on the Bonds is not subject to adjustment, by reason of the interest on the Bonds being included in gross income for purposes of federal income taxation. Such event could occur if the Borrower (or any subsequent owner of the Project) does not comply with the provisions of the Regulatory Agreement and the Loan Agreement that are designed, if complied with, to satisfy the continuing compliance requirements of the Code in order for the interest on the Bonds to be excludable from gross income for purposes of federal income tax. Enforceability of Remedies The remedies available to the Trustee and the owners of the Bonds upon an event of default under the Loan Agreement or the Indenture are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under the Loan Agreement or the Indenture may not be readily available, and the Borrower will have no personal liability for the satisfaction of any obligation of the Borrower under such agreements or of any claim against the Borrower arising out of such agreements or the Indenture. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Bonds and the documents described above is subject to limitations imposed by such things as the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or a court of equity), including judicial limitations on rights to specific performance and bankruptcy, insolvency, reorganization, moratorium or other similar laws heretofore or hereafter in effect affecting creditors' rights, to the extent constitutionally applicable. Secondary Markets and Prices The Underwriter will not be obligated to repurchase any of the Bonds, and no representation is made concerning the existence of any secondary market for the Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the Bonds contemplated by this Official Statement, and no assurance can be given that the Bonds can be resold at their initial offering prices for any period of time. General Matters TAX MATTERS In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is excludable from gross income for federal income tax purposes, except for interest on any Bond for any period during which such Bond is held by a substantial user of the facilities financed by the Bonds or a related person within the meaning of Section 147(a) of the Code, and interest on the Bonds is not a specific preference item or included in adjusted current earnings of corporations for purposes of the federal alternative minimum tax. The opinion described in the preceding sentence assumes the accuracy of certain representations and compliance by the Issuer and Borrower with covenants designed to satisfy the requirements of the Code that must be met subsequent to 10

15 the issuance of the Bonds. Failure to comply with such covenants could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Issuer and Borrower have covenanted to comply with such requirements. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Bonds. The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the owners of the Bonds. The extent of these other tax consequences will depend upon such owner's particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States of America), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers entitled to claim the earned income credit, taxpayers entitled to claim the refundable credit in Section 36B of the Code for coverage under a qualified health plan or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Bonds. Bond Counsel is also of the opinion that, under existing State of Minnesota statutes, interest on the Bonds is not includable in taxable net income of individuals, trusts and estates for Minnesota income tax purposes and is not an item of tax preference for purposes of the Minnesota alternative minimum taxes imposed on individuals and corporations. Bond Counsel has expressed no opinion regarding other tax consequences arising with respect to the Bonds under the laws of the State of Minnesota or any other state or jurisdiction. Backup Withholding As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments to any owner of the Bonds that fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The reporting requirement does not in and of itself affect or alter the excludability of interest on the Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations. Changes in Federal and State Tax Law From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to under this heading TAX MATTERS or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation. 11

16 UNDERWRITING M.R. Beal & Company (the Underwriter ) is offering the Bonds at the price set forth on the cover hereof. The initial offering price may be changed from time to time and concessions from the offering price may be allowed to dealers, banks and others. The Underwriter has agreed to purchase the Bonds at a price equal to the principal amount thereof. The Purchase Contract provides that the Underwriter will receive compensation for its services from the Borrower in the amount of $42,168.44, from which the Underwriter will pay certain fees and expenses relating to the issuance of the Bonds. The obligations of the Underwriter to pay for the Bonds are subject to certain terms and conditions set forth in the Purchase Contract. The Underwriter does not guarantee a secondary market for the Bonds and is not obligated to make any such market in the Bonds. No assurance can be made that such a market will develop or continue. Consequently, investors may not be able to resell Bonds should they need or wish to do so for emergency or other purposes. RATING S&P has assigned the rating to the Bonds as set forth on the cover page hereof. An explanation of the significance of such rating may be obtained from S&P. The rating of the Bonds reflects only the view of S&P at the time such rating was given, and neither the Issuer, the Borrower nor the Underwriter makes any representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. CERTAIN LEGAL MATTERS Certain legal matters relating to the authorization and validity of the Bonds will be subject to the approving opinion of Kutak Rock LLP, Minneapolis, Minnesota, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Eichner Norris & Neumann PLLC, Washington, DC, and for the Borrower by its counsel, Winthrop & Weinstine, P.A, Minneapolis, Minnesota. The Issuer ABSENCE OF LITIGATION It is a condition precedent to the purchaser's obligation to purchase the Bonds on the Closing Date that the Issuer deliver a certificate to the effect that there is not now pending or, to the knowledge of the Issuer, threatened, any proceeding or litigation against the Issuer restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings or authority under which the Bonds are to be issued, neither the creation, organization or existence of the Issuer nor the title of any of the present members or other officers of the Issuer to their respective offices is being contested, and there is no litigation against the Issuer pending or, to the knowledge of the Issuer, threatened, that in any manner questions the right of the Issuer to enter into the Indenture, the Loan Agreement, the Regulatory Agreement or the Purchase Contract or to secure the Bonds in the manner provided in the Indenture and the Act. The Borrower There is no litigation now pending or threatened that if decided adversely to the interests of the Borrower would have a material adverse effect on the operations or financial position of the Borrower. 12

17 CONTINUING DISCLOSURE The Borrower has undertaken responsibility for any continuing disclosure to Bondholders as described below, and the Issuer will have no liability to the Holders of the Bonds or any other person with respect to such disclosures. The Borrower will covenant, pursuant to the Continuing Disclosure Agreement (the Disclosure Agreement ) to provide annually certain audited financial information and operating data relating to the Project by not later than June 1 of each year, commencing June 1, 2014 (the Annual Report ), and to provide notices of the occurrence of certain enumerated events such as a default under the Indenture or the Loan Agreement, a change in the rating on the Bonds, an event adversely affecting the tax-exempt status of the Bonds, or adversely affecting the Bondholders, or any event similar thereto. The Annual Report will be filed by the Trustee on behalf of the Borrower to The Municipal Securities Rulemaking Board (the MSRB ) in an electronic format as prescribed by the MSRB and containing such identifying information as is prescribed by the MSRB. The notices of material events will be filed by the Trustee on behalf of the Borrower, with the MSRB. See APPENDIX G - Proposed Form of Continuing Disclosure Agreement. MISCELLANEOUS The foregoing summaries and explanations do not purport to be comprehensive, and are expressly made subject to the exact provisions of documents referred to herein. Copies of the Indenture and the Loan Agreement may be obtained from the Trustee or, during the initial marketing of the Bonds, the Underwriter. Any statements in this Official Statement involving matters of opinion or forecast, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement among the Issuer, the Borrower, or the Underwriter and the purchasers or holders of any Bonds. [Remainder of page intentionally left blank] 13