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Home My WebLink AboutMN-IURAED-2010-09-21Approved October 12, 2010 Ithaca Urban Renewal Agency 108 East Green Street Ithaca, New York 14850 (607) 274-6559 (607) 274-6558 (fax) MINUTES Economic Development Committee 3:30 PM, Tuesday, September 21, 2010 Present: Leslie Ackerman, Martha Armstrong, Jennifer Tegan Excused: Doug Dylla Staff: Nels Bohn, Alice Vargo Guests: Avi Smith, Unity Inn LLC I. Call to order The meeting was called to order at 3:40 p.m. by acting chairperson Armstrong. II. Additions to or deletions from the agenda ‐ None III. Public comment ‐ None IV. Review of Minutes for July 13, 2010 Tegan moved, seconded by Ackerman, to adopt the minutes. Carried Unanimously. V. Community Development Revolving Loan Fund – Request by Unity Inn LLC for loan assistance to start‐up and operate the Argos Inn, an 11‐room Inn with bar/lounge at 408 E. State/MLK Street Smith provided an update on his negotiations with M&T Bank for a Small Business Administration (SBA) 504 loan in conjunction with the New York Business Development Council (NYBDC). Smith understood that M&T would approve a loan if a collateral reserve account in the amount of $250,000 was established during construction, which he agreed to. Just recently, M&T increased its collateral reserve requirement to $500,000 with an indeterminate date for releasing the reserve, according to Smith. Smith indicated the new terms are unacceptable and he is now working with another local lender on an SBA 504 loan structure, who has indicated strong interest in the project with a $250,000 collateral reserve. Members reviewed collateral issues for the proposed IURA loan. Bohn indicated that mortgages on rental property located out‐of‐state posed practical challenges to perfect the filing and to collect in the event of default. He suggested accessing the income from this rental property through a personal guarantee and an assignment of rents and leases. Ackerman moved, seconded by Tegan, the following: IURA Economic Development Committee September 12, 2010 Minutes Page 2 of 7 CD‐RLF – Loan Assistance to Unity Inn LLC for Start‐up & Operation of Argos Inn Whereas, on June 11, 2010, Unity Inn LLC applied for $100,000 of loan assistance for a $1.645 million project to acquire and renovate the historic McCormick‐Cowdry house located at 408 E. State/MLK Street to an 11‐room inn with a public bar/lounge to be known as the Argos Inn, and Whereas, on July 22, 2010, the Ithaca Urban Renewal Agency (IURA) indicated strong interest in a possible loan at such time as primary lender financing terms and collateral requirements are solidified, and Whereas, Unity House LLC has secured a verbal loan offer, from a lender to provide primary financing on the project in the amount of $960,000, and Whereas, Avi H. Smith (Smith) is the sole member of Unity Inn LLC, and Whereas, Unity Inn LLC is securing primary financing through the Small Business Administration (SBA) 504 program whereby a private sector lender loans up to 50% of the project cost secured by a senior lien, an SBA504 lender loans up to 30% of the project cost secured by a junior lien (& backed by a 100% SBA guarantee) and the borrower provides the remaining 20% of project cost, and Whereas, a funding gap of at least $100,000 in project financing is projected, and Whereas, the primary objectives of the Community Development Revolving Loan Program (CD‐ RLF) is provision of direct financing for economic development activities to create employment opportunities, facilitate the expansion of business activity within the City of Ithaca and expansion of the City’s commercial and industrial tax base, and Whereas, CD‐RLF financing policy establishes maximum loan amount of $40,000 for a retail business and $75,000 for a non‐retail business except where the IURA determines that the project will result in an extraordinary degree of public benefit, and Whereas, the project is projected to create eight (8) full‐time equivalent (FTE) employment positions, of which at least 51% will be filled by low‐ and moderate‐income persons, thereby meeting the CDBG public benefit test to generate at least one FTE job for every $35,000 of assistance, and Whereas, all new full‐time positions are projected to receive at least $12.11/hour thereby providing local living wages to all full‐time employees, and Whereas, the proposed uses of project funds are: $350,000 property acquisition $41,000 construction completed $898,000 new construction $89,000 construction contingency IURA Economic Development Committee September 12, 2010 Minutes Page 3 of 7 $131,000 furnishings, fixtures & equipment $82,000 professional fees & other soft costs $16,000 bar inventory $62,000 working capital $1,669,000 Total, and Whereas, the proposed sources of project funds are: $600,000 lender #1 $360,000 SBA 504 lender #2 $609,000 equity $100,000 IURA $1,669,000 Total, and Whereas, the project implements IURA policy to strengthen the vitality of the downtown, encourage in‐fill development in lieu of sprawl development, promote renovation of historic structures and create jobs paying living wages, and Whereas, at their September 21, 2010 meeting, the IURA Economic Development Committee reviewed the terms of SBA 504 loan offer and collateral available to secure an IURA loan and applicable provisions of the IURA Economic Development Policy Guidelines and Operating Plan, and recommended the following; now, therefore, be it RESOLVED, that the IURA hereby approves an IURA loan from the Community Development Revolving Loan Fund in accordance with the loan application, and the following terms: Borrower: Unity House LLC, a NYS limited liability company formed in 2009 Loan Amount: Up to $100,000 Project: Start up and operation of Argos Inn, an 11‐room inn and bar/lounge located at 408 E. State/MLK Street, Ithaca, NY Total Project Cost: $1,669,000 Projected Use of IURA Funds: Non‐construction project costs such as FF&E, inventory, professional fees and/or working capital Term: 20 years Interest Rate: 4% annually, reset to 3% upon submission of satisfactory job reports documenting that job creation goals have been achieved for two consecutive quarters and borrower is in compliance with all other terms of the loan agreement. Repayment: Interest‐only payments for 12 months, then level monthly principal and interest payments due to fully amortize the loan over the remaining 19 IURA Economic Development Committee September 12, 2010 Minutes Page 4 of 7 year term (approximately $627/month @ 4%). Collateral: 1. 2nd collateral mortgage on Brookton Market property at 491 Brooktondale Rd., Caroline, NY (tax #11.‐1‐14), behind a first mortgage held by M&T Bank. 2. 1st security lien on 2006 Toyota Tacoma truck. 3. Assignment of leases and rents on residential rental property owned by Avi Smith on Boonville Road, Ukiah, CA. Guarantor(s): 1. Personal guarantees of Avi H. Smith, individually. 2. Additional limited financial guarantors of satisfactory individuals subject to appraisal of Brookton Market property, to achieve a total IURA collateral value of at least $100,000. Conditions: 1. Submission of loan commitment(s) from lender(s) in an amount sufficient to complete the project. 2. Creation of at least eight (8) full‐time equivalent employment positions of which at least 51% must be held by low‐ and moderate‐ income persons. 3. Payment of living wages to all full‐time employees. 4. Submission of satisfactory appraisal for 491 Brooktondale Rd. 5. Site plan and ILPC project approval. 6. Annual submission of balance sheet and profit and loss statements and federal income taxes for Unity Inn LLC. And be it further RESOLVED, that the IURA hereby waives the maximum $75,000 loan amount from the CD‐RLF for this application in recognition of exceptional public benefits resulting from the project, including:  renovation of a historic building in the local East Hill historic district;  Establishment of business that will pay a living wage to all full‐time employees;  Strengthening the vitality of the downtown and reducing the need for visitors to travel by automobile;  Match fund leveraging exceeding 10:1, and be it further RESOLVED, that the Director of Community Development for the IURA is authorized to issue a loan commitment letter in accordance with this resolution. Approved Unanimously 3‐0 VI. Restore NY3 – request from Justin Hjortshoj and Domenica Brockman, dba Petrune, to modify their project to rehabilitate upper levels at 128‐130 E. State/MLK St. from residential to commercial/production use Bohn reviewed Petrune’s draft proposal to modify their project to renovate the 3rd and 4th floor of the Petrune Building to production and commercial uses. He reported that Petrune was unable to secure bank financing for the residential project, in part due to a concern that property taxes IURA Economic Development Committee September 12, 2010 Minutes Page 5 of 7 would increase by $14,000 due to the project, thereby consuming significant income generated by the project. Members reviewed the proposal and requested the sponsors attend the next meeting to describe the revised project in greater detail, explain its economic development impact and demonstrate financial feasibility. VII. Cayuga Green Private/Public development project – request from Cayuga Green II LLC for an extension of the purchase and sale agreement of parcel ‘D’ (tax map #81.‐2‐4) for construction of housing adjacent to the Cayuga Garage ‐ resolution Following review of the plans, the purchase and sale contract, and discussion of Cayuga Green II LLC’s financing strategy, Tegan moved, seconded by Armstrong, the following: Cayuga Green Project Phase IIB, Parcel “D” – 2nd Extension of Purchase and Sale Contract Whereas, Cayuga Green II LLC requests an extension of the purchase and sale contract for parcel ‘D’ (tax parcel #81.‐2‐4) for construction of rental housing located adjacent to the Cayuga Garage to provide time to secure project financing through the HUD 221(d)4 Insured Mortgage Financing program, and Whereas, the IURA and City previously amended the original sales contract in 2009 to allow construction of rental housing units and to extend the term by 12 months in response to the developers inability to secure project financing for residential condominiums, and Whereas, the commercial credit market has been extremely tight for loans to construct new high‐ rise housing for several years and remains extremely limited, and Whereas, the principals of Cayuga Green II LLC have recently utilized the HUD 221(d)4 mortgage insurance program to secure financing from a HUD‐approved private lender for a housing project in Ohio, and Whereas, through the HUD 221(d) 4 program, the Federal Home Administration provides mortgage insurance to HUD‐approved lenders to for‐profit or non‐profit borrowers, and Whereas, the HUD 221(d) 4 program requires federal prevailing wages to be paid for new construction, and Whereas, a HUD 221(d)4 review and approval process requires submissions of detailed construction plans and specifications, cost detail, market study and marketing plan, and takes 9‐ 12 months if all information is in order, and Whereas, a HUD 221(d) 4 mortgage insurance application process requires documentation of fee simple ownership of the project site, and IURA Economic Development Committee September 12, 2010 Minutes Page 6 of 7 Whereas, Cayuga Green II LLC has been pursuing HUD 221(d) 4 approval for several months and is awaiting an invitation to submit a “firm commitment” application, and Whereas, initial construction plans to build adjoining the Cayuga Garage have been modified to provide a 10‐foot separation to avoid the need for retrofits to the Cayuga Garage to meet New York State Building Code requirements regarding wall openings and fire egress routes at the Garage, and Whereas, the Cayuga Green II LLC has submitted revised preliminary plans for construction of a 7‐ story, 39‐unit rental housing project at Parcel ‘D’ that are consistent with the original designs for the Cayuga Green project, and Whereas, the IURA wishes to facilitate the construction of additional housing units in downtown Ithaca that will expand the property tax base; now, therefore, be it Resolved, the IURA hereby approves an extension of the existing Purchase and Sale Contract on Cayuga Green Project Phase IIB ‐ Parcel D, for 12 months from the date of Common Council approval, and be it further Resolved, that the legal description of the parcel to be sold pursuant to the sales contract be revised and reduced in size in accordance with a lot adjustment plan dated January 22, 2010, prepared by T.G. Miller PC, to avoid the need for retrofits to the Cayuga Garage, and be it further Resolved, that payment on the balance of the $280,000 purchase price of the property will be based on a 10‐year term loan at an interest rate of 5.5%, and be it further Resolved, the above approvals are subject to Common Council approval of the property disposition, and be it further Resolved, the IURA Chairperson, upon the advice of IURA legal counsel, is hereby authorized to execute all necessary and appropriate documents to implement this resolution, including but not limited to executing an amended purchase and sale contract. Approved Unanimously 3‐0 VIII. Staff Report A. August 2010 loan repayment report All loans are current except for Diane State Street Auto, who remains 2 months late. Bohn is waiting to hear from her to set up a meeting and go over her financials. B. Loan application pipeline – Bohn reported two loan applications have been distributed but he does not expect receipt of any applications in the near future. C. Project updates IURA Economic Development Committee September 12, 2010 Minutes Page 7 of 7 Bohn provided updates on the 19,000 SF Neighborhood Pride grocery store under development for the former P&C Plaza at Hancock Street and Buffalo Street Books, who is considering a not‐for‐ profit ownership model. IX. Old and Other Business – none X. Next meeting date: October 12, 2010 XI. Adjournment The meeting was adjourned by consensus at 4:52 p.m. END Minutes prepared by A. Vargo, edited by N. Bohn j:\community development\admin files\minutes\edc\2010\9september\edc 9-21-10 nb edit.doc