La Crosse commission approves subordination for Haven on Main despite lender limits

City planning staff and developer counsel told the Economic and Community Development Commission that approving a subordination agreement was necessary to move a TIF-supported development from construction financing to permanent financing.

Miss Emsley summarized staff review and legal involvement and said the subordination is “relatively standard.” Developer attorney Joe Shuma described negotiations with Freddie Mac and what the lender would and would not accept. Shuma said the lender refused to add language that would commit it to approve requested modifications or to make denials subject to a reasonableness standard: “They don’t want to put it in the document … If we deny it, we deny it,” he said, and added that Freddie Mac’s rationale is to avoid disputes over whether a denial was reasonable.

Shuma warned of a practical consequence if the city did not grant the subordination: the developer could lose access to construction draws. “We have to show that soon, or we will stop getting money to build the building,” he told commissioners.

Staff recommended approval after legal review. Council Member Goggin moved to approve the subordination; Commissioner Miller seconded. The commission voted to approve the subordination unanimously.

The approved subordination ranks the permanent lender ahead of the city’s development-agreement lien for the project, a common term in permanent-financing documents, but staff noted that Freddie Mac’s refusal to accept “reasonable denial” language limits the city’s contractual remedies if a future modification is denied by the lender.