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HomeMy WebLinkAboutIV.A - RLF Applications HEDRA MEMORANDUM To: HEDRA Commissioners From: Rusty Fifield, Economic Development Coordinator Date: November 12, 2019 Item: Loan Applications – 214 and 216 2nd Street East Action Requested 1. Adopt the attached resolution authorizing staff to proceed with an Economic Development Revolving Loan for Marathon Properties LLC in the amount of $6,337 for electric system improvements to 214 2nd Street East. 2. Adopt the attached resolution authorizing staff to proceed with an Economic Development Revolving Loan for River City Properties LLC in the amount of $$7,632 for electric system improvements to 216 2nd Street East. Background The loans had been requested to make electrical system improvements related to apartments in buildings at 214 2nd St. E. and 216 2nd St. E. The details of the proposed improvements and a quote for the work is attached to this memo. Loans for 214/216 2nd Street E November 12, 2019 Page 2 Loan Terms Both loans would be for a ten-year term 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 personal guaranty. HEDRA’s position would be subordinate to the existing mortgage on 216. There is no existing mortgage on 214. Analysis The attached information from the electrical contractor explains the need for these improvements. Replacing outdated electrical systems helps to provide safe housing in Downtown buildings. The owners are using other funds to cover the remaining costs. There is an element of risk in these loans. While the loans make necessary improvements, they do not necessarily generate the capacity for additional rental income. The ability to recover principal from the mortgage lien and personal guarantee is not certain. That said, the loans do serve a public purpose. It is in city’s best interest to help maintain safe housing in the downtown area. The potential trade-off is that the improvements do not occur or that housing units are taken off the market. The project meets other HEDRA lending criteria:  Eligibility – Building renovations 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 $150,000 is available for loans in the remainder of 2019. Recommendation Approval of the loans as presented is recommended. ACTION – Adopt Resolution 2019-04 – Approving an Economic Development Revolving Loan to Marathon LLC for Improvements to 214 2nd Street East in the amount of $6,337. ACTION – Adopt Resolution 2019-05 – Approving an Economic Development Revolving Loan to River City LLC for Improvements to 216 2nd Street East in the amount of $7,632. Please see the attached resolution for further information. Loans for 214/216 2nd Street E November 12, 2019 Page 3 HASTINGS ECONOMIC DEVELOPMENT AND REDEVELOPMENT AUTHORITY RESOLUTION NO. 2019-04 APPROVAL OF AN ECONOMIC DEVELOPMENT REVOLVING LOAN TO MARATHON PROPERTIES LLC FOR IMPROVEMENTS TO 214 2ND 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, Marathon Properties LLC, has applied for a $6,337 loan to partially finance electrical system improvements in the building located at 214 2nd Street East, legally described as follows: Mid 1/3 of Lot 2, Block 14, Town of Hastings, Dakota County, Minnesota. WHEREAS, the total investment in the project is estimated to be $12,675 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. Loans for 214/216 2nd Street E November 12, 2019 Page 4 NOW THEREFORE BE IT RESOLVED that HEDRA approves a loan in the amount of $6,337 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. Commissioner ______ seconded the resolution and upon being put to a vote it was adopted: Ayes: Nays: Absent: Abstention: The resolution was duly adopted this 14th day of November, 2019. ________________________ Scott Sinclair, President ATTEST: _______________________________ John Hinzman, Secretary Loans for 214/216 2nd Street E November 12, 2019 Page 5 HASTINGS ECONOMIC DEVELOPMENT AND REDEVELOPMENT AUTHORITY RESOLUTION NO. 2019-05 APPROVAL OF AN ECONOMIC DEVELOPMENT REVOLVING LOAN TO RIVER CITY PROPERTIES LLC FOR IMPROVEMENTS TO 216 2ND 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, River City Properties LLC, has applied for a $7,632 loan to partially finance electrical system improvements in the building located at 216 2nd Street East, legally described as follows: East 1/3 of Lot 2, Block 14, Town of Hastings, Dakota County, Minnesota. WHEREAS, the total investment in the project is estimated to be $15,265 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. Loans for 214/216 2nd Street E November 12, 2019 Page 6 NOW THEREFORE BE IT RESOLVED that HEDRA approves a loan in the amount of $7,632 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. Commissioner ______ seconded the resolution and upon being put to a vote it was adopted: Ayes: Nays: Absent: Abstention: The resolution was duly adopted this 14th day of November, 2019. ________________________ Scott Sinclair, President ATTEST: _______________________________ John Hinzman, Secretary