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HEDRA Memorandum
To: HEDRA Commissioners
From: Rusty Fifield, Economic Development Coordinator
Date: July 3, 2019
Item: Resolution: Economic Development Revolving Loan Fund– T&S Properties, LLC
– 216 4th Street East (Hastings Art Center)
Request
Adopt the attached resolution authorizing staff to proceed with an Economic
Development Revolving Loan for T&S Properties LLC in the amount of $13,810. The
original application request of $14,000 has been amended in order to comply with
HEDRA’s policy of granting loans of no greater than 50% of project cost.
Background
T&S Properties is seeking funding to assist with the installation of a new roof system
over the existing roof of the Hastings Art Center building located at 216 4th Street East.
The application indicates roof evaluation and bids from three companies. The application
includes a written bid for the work in the amount of $27,620.
HEDRA provided a $47,950 loan ($42,000 principal and $5,950 in accumulated interest)
in 2014 to assist with the initial acquisition and renovation of this building. Repayment of
this loan is scheduled to begin 12/1/19 and run through 12/1/2029. HEDRA has a
mortgage interest in the property and personal guarantees of the owners.
The applicant has provided Profit and Loss Statements for 2017, 2018 and the first half of
2019. The Statements show operating losses for 2017 and 2019 year-to-date. 2018
yielded a profit due to the consolidation of higher interest rate debt. Rental income (the
primary source of revenue) fell from 2017 to 2018 and is on track to remain below 2017
level in 2019.
Loan Terms
HEDRA may provide a 10 year loan, for machinery and equipment, at zero percent the
first year, and 0.25% above the Prime Rate (currently 5.25%) for years 2-10. The loan
would be recalibrated to reflect changes in the Prime Rate every two years. Loan
proceeds would be disbursed upon proof of qualified expenses. The loan would be
secured with a mortgage and/or personal guaranty.
RLF T&S Properties LLC
July 3, 2019
Page 2
Analysis
This loan request creates a bit of a “Catch-22” situation. The operating data raises
concerns about the long-term viability of the Art Center. The financial pressures increase
with added costs of repaying two HEDRA loans. On the other hand, replacing the roof
can be delayed but not eliminated. Failure to make this improvement has negative
consequences for the business and the building. The improvements will become more
expensive as time passes. It is unlikely that the project would meet conventional lending
criteria.
It seems likely that HEDRA will play a role in financing roof replacement under any
circumstances. This historic building and the Art Center activities are an important part of
the Downtown. HEDRA has already demonstrated its support with the 2014 loan. The
best outcome is to help current operations to succeed and repay both loans. If the current
business does not succeed, then roof improvements would be needed to reuse the
building. While HEDRA does not own the building, it will play a role in any reuse.
The project meets other HEDRA lending criteria:
Eligibility – Building renovations and purchase of machinery and equipment are
eligible expenses.
Business Subsidy – The loan does not exceed the $150,000 limit for constituting
a business subsidy under state law.
Purpose – The loan would assist in providing a “beneficial impact to Downtown
Hastings”, an established priority in granting loans.
Funding Availability – Approximately $170,000 remains for both commercial
and residential loans. Upon funding the $13,810 request, $156,190 would remain
for additional loans in 2019.
The applicant will be at the meeting to answer any questions.
Recommendation
Approval of the loan as presented is recommended.
ACTION – Adopt Resolution 2019-02 – Approving a $13,810 Economic
Development Revolving Loan Fund for T&S Properties LLC
Please see the attached resolution for further information.
RLF T&S Properties LLC
July 3, 2019
Page 3
HASTINGS ECONOMIC DEVELOPMENT
AND REDEVELOPMENT AUTHORITY
RESOLUTION NO. 2019-02
APPROVAL OF AN ECONOMIC DEVELOPMENT REVOLVING LOAN TO
T&S PROPERTIES LLC FOR IMPROVEMENTS TO HASTINGS ART CENTER
LOCATED AT 216 4TH STREET EAST
Commissioner ______________ introduced the following resolution and moved its
adoption:
WHEREAS, the Hastings Economic Development and Redevelopment Authority
(HEDRA) has established an Economic Development Revolving Loan Fund and
Guidelines pursuant to Minnesota State Statutes 469.01 on April 13, 2017; and
WHEREAS, T&S Properties LLC, has applied for a $13,810 loan to partially
finance installation of a new roof system on the building located at 216 4th Street East,
legally described as follows:
Lot 3, Block 1, GUARDIAN ANGELS OF HASTINGS COMMUNITY CENTER,
Dakota County, Minnesota.
WHEREAS, the total investment in the project is estimated to be $27,620 for items
qualified under the Program Guidelines; and
WHEREAS, HEDRA finds that the loan is not a business subsidy under Minnesota
State Statutes 116J.993; and
WHEREAS, HEDRA finds that the work and costs meet the Economic
Development Revolving Loan Fund Program Guidelines.
NOW THEREFORE BE IT RESOLVED that HEDRA approves a loan in the
amount of $13,810 subject to the following conditions:
1. Proof of financing and/or equity for the balance of the Total Investment amount
not financed through the Revolving Loan Fund.
BE IT FURTHER RESOLVED that upon submittal of proof of financing,
HEDRA directs staff to prepare and have executed the loan and security documents and
disburse the funds with usual conditions of the program.
RLF T&S Properties LLC
July 3, 2019
Page 4
Commissioner _____________ seconded the resolution and upon being put to a
vote it was adopted:
Ayes:
Nays:
Absent:
The resolution was duly adopted this 11th day of July, 2019.
________________________
Scott Sinclair, President
ATTEST:
_______________________________
John Hinzman, Secretary