The Alexander Company Inc., which owned Main-Lake LLC, committed to building 10 residential units at 419-425 Main St. in 1993. But then the developer promised to build 13 residential units in 1995 and an amended agreement was made with Main-Lake, not The Alexander Company. While Madison-based Alexander Company Inc. still exists, Main-Lake LLC does not. Since the Main-Lake LLC project never got off the ground, a mortgage for the loan was never recorded and the property has changed more than once.
Arcade Partners LLC, the current owner of the building, explained to city officials that the loan was made to the previous owner.
City officials say that even though they intended for the loan to be paid back, contradictory language exists in the agreements that prevents the city from being able to collect on the loan.
In a memo dated June 2, city attorney Elaine Ekes explained to city officials that it was “unlikely” that The Alexander Company, Inc., the developer of Main-Lake LLC, would pay back the $800,000 home funds loan, even though the developer paid back a $450,000 tax incremental finance district loan.
The city loaned $800,000 through the HUD Home Investment Partnership Program (HOME) Funds.
“There is a likelihood that while judgement might be obtained, the entity no longer has assets because the asset was the Main Lake Property making a judgement likely not collectible,” Ekes wrote.
Amy Connolly, director of City Development, said the city’s lending practices in the 1990s were “less stringent” than the ones it employs now. Connolly has served as the City Development director since May.
“The City and any of our lending partners (RCEDC) require mortgages to back up our revolving loans, we use stringent underwriting standards, we use specialized legal counsel for these types of agreements and we track repayment of loans on a monthly basis,” Connolly state in a press release.
Connolly called the write off “concerning” and said the HOME program was new in the 1990s. Since then the city’s lending practices have “significantly evolved over the past 20 years” and she pointed out that it had passed the last HUD audit.
After receiving the information, the city finance department asked the city’s loan committee to look over the loan documents and make a recommendation to the Common Council that it write-off the loan.
The Loan Review Board is expected to meet at 10 a.m. Thursday at City Hall, 730 Washington Ave., in room 307 to discuss the matter.