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<br />Cottage Homesteads at West Oaks, LLC <br />Cottage Homesteads at West Oaks, LLC <br />7300 Metro Boulevard #360 <br />Edina, MN 55439 <br />952.830.0161 <br />Fax: 952.831.1215 <br />June 13, 2006 <br />Jeremy Barnhart <br />City of Elk River <br />13065 Orono Parkway <br />Elk River, MN 55330 <br />Dear Jeremy, <br />I am in receipt of your letter regarding our master plan that you asked us to submit for West <br />Oaks. Your letter states that staff generally supports our building one-level townhomes and <br />recognizes the need "to be flexible to the current market conditions," however, you are requiring <br />two-story townhomes on building pads 4, 5, and 12. This requirement would pose an extreme <br />hardship on us. <br />Our lender, who had agreed to finance all 122 townhomes, now wants out of the loan because of <br />the slow sales of the first 18 two-story units that we had constructed. They have already funded <br />additional building lots that have not yet been built on and want those mortgages paid off as well. <br />The only way to do that is to refinance the project with another bank. As you know, we have <br />replatted four building pads, to fit one-level units. Two of those buildings have already been <br />built. We are anticipating construction on the other two later this month. While there are very <br />few buyers looking for two-stories at this time, and they expect deep discounts, there seems to be <br />more activity in the one-level market. Our sales people have taken orders for one-level units in <br />buildings four and five. <br />We bought West Oaks from George Sanford who had previously developed all of the lots. <br />George told me that the approvals he obtained from the city did not designate any particular <br />building or number of units to be two-story. Our contract calls for us to take down lots from him <br />over a period of time. The last phase to the west is not to be built on until we have taken down <br />most of the other lots. <br />Here is our situation at this time: we have owned the property for nearly two years and have <br />already paid out more than $250,000.00 in interest to George Sanford and $289,000.00 to the <br />bank. Before the end of this month, we are obligated to pay an additional $94,000.00 in interest. <br />Interest keeps accruing daily. Ordinarily, sales activity pays the interest payments but that has <br />not occurred in this case. In addition to interest payments coming due, we also are required to <br />pay George Sanford quarterly principle payments of about $150,000.00. We need to keep <br />