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Council seeking further information on Westwind mortgage

WILLMAR -- On the advice of City Attorney Rich Ronning, the Willmar City Council took no action Monday night on a $350,000 loan to the owner of the Westwind Estates affordable housing project.

Money for the mortgage comes from a $350,000 federal housing grant funneled through the Minnesota Department of Employment and Economic Development to the city and would be part of the financing for the estimated $6 million Westwind project in southwest Willmar.

Ronning reviewed the two documents -- the mortgage and promissory note -- at the request of City Planning and Development Director Bruce Peterson after the council's Community Development Committee last week raised a few questions about the documents.

Ronning told council members a number of things would need to be "straightened out" with the mortgage and promissory note before he would recommend the city accept the documents.

Ronning said the legal description attached to the mortgage is his opinion is not a recordable legal description. He said the Kandiyohi County Recorder would reject the mortgage and return it to whoever was submitting the mortgage for recording.

Ronning said the mortgage purports to mortgage a lease-hold interest.

"In 30-some years of doing real estate work, I've never seen a real estate mortgage attempt to mortgage a lease-hold interest," he said. (Ronning explained later that a mortgage typically grants a lien on ownership interest and not on a lease-hold interest).

Also, Ronning said the promissory note does recite any kind of payment other than to imply a lump sum payment 30 years from now. Also, he said the current ownership -- Westwind Estates Townhomes Limited Partnership -- appears to be different than who is granting the mortgage and signing the note.

"I could go on," he said. "I want to research that a little bit more, and just the general format of the note and mortgage is not what I would call standard."

Mayor Les Heitke asked Lisa Onken, director of real estate development with the Southwest Minnesota Housing Partnership of Slayton, the project's developer, if she had any comments about Ronning's recommendation.

Onken said the documents were presented to the committee in draft form," so we were looking for any comments back on them. I realize the legal description is the meets-and-bounds description that represents the parcel before it was platted. So we will just simply replace that with the lot-and-block description of the subdivision as it is now platted."

Onken pointed out the paperwork was written to be as lease-hold property.

"We've been in front of the council in explaining this several times that the property underneath will be held by a community land trust, and the buildings -- improvements -- will be owned by the limited partnership," she said.

"Obviously, if we're going to have the separation of the improvements from the land, we're going to need to write the mortgages as a lease-hold," she continued. "I think you guys might have gone over that information with us."

Onken agreed with Heitke that she will be talking to Ronning in the future.