HomeMy WebLinkAboutMN-IURAED-2012-09-11Approved 11/13/12
Ithaca
Urban
Renewal
Agency
108 E. Green Street
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 PM, Tuesday, September 11, 2012
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Ayana Richardson, Leslie Ackerman, Martha Armstrong
Absent: Doug Dylla, Jennifer Tegan
Staff: Nels Bohn
Guests: Matthew Riis, J. G. McGuire, Inc.
Doug Levine, Executive Director, The State Theatre
Mack Travis, Board Chair, The State Theatre
Linda Santos, Warren Real Estate
Paul Schultz, President, EMF Corporation
Adam A. Klausner, Adam A. Klausner Attorney‐at‐Law, (o.b.o., Mad2nd, LLC)
I. Call to Order
Vice‐Chairperson Richardson called the meeting to order at 3:31 P.M.
II. Agenda Additions/Deletions ― None
III. Public Comments (3‐minute maximum per person) ― None
IV. Review of Meeting Minutes: June 19, 2012 & July 10, 2012
Armstrong moved, seconded by Ackerman, to approve the June 19, 2012 and July 10,
2012 meeting minutes, with no modifications. Carried Unanimously 3‐0
IV. Community Lending
A. Request from J.C. McGuire, Inc., Owner of Lot 10 Kitchen & Lounge, for Loan
Modification to Extend Repayment Schedule (PBLF #5)
Bohn recapitulated the salient details of the request. He noted that Lot 10’s summer
business sales did not meet financial projections (which was apparently also the case
with numerous other restaurants and retailers in the downtown area).
IURA EDC Minutes
September 11, 2012
Page 2 of 13
Bohn indicated that Lot 10 initiated a number of steps for increasing its profitability,
which already appear to have had a positive impact on their sales, since their sales
bounced up in August. Lot 10 is seeking a 6‐month extension of the interest‐only
payment period (3 months), before it is required to make its full principal and interest
(P&I) payments (≈$1,100). Bohn remarked he believes the owners have taken some
reasonable steps to increase profitability, which should give them a good chance to get
back on track, so they can make the full payments. Bohn recommended the EDC
approve the request.
Richardson asked if the IURA itself had initiated the establishment of the 3‐month
interest‐only payment period. Bohn replied that the IURA’s underwriters suggested the
initial loan structure. It is a typical approach to have interest‐only payments, while a
business gets started, and begins to generate revenues and a regular clientele. He
noted August would have been Lot 10’s first month of P&I payments.
Armstrong moved, seconded by Ackerman:
J.G. McGuire, Inc., dba Lot 10 Kitchen & Lounge, Loan Modification (PBLF #5)
Whereas, on February 24, 2012, the IURA issued a $64,500 loan to J.G. McGuire, Inc.
(McGuire) for a $194,5000 project for start‐up and operation of the Lot 10 Kitchen &
Lounge, a restaurant, lounge and performing arts venue located at 106‐112 S. Cayuga
Street, Ithaca, NY, and
Whereas, the loan has a term of 5 years and 3 months an interest rate of 4% and a
repayment schedule requiring interest‐only payments of $186.41 due for the first 3
months and level monthly payments of principal and interest of $1,187.86 beginning
in August 2012, and
Whereas, McGuire projected creation of at least 10 FTE jobs, and
Whereas, McGuire reports that sales during the summer months fell short of
projections thereby exhausting their working capital budget and requests an extension
of 6‐12 months of interest‐only payments on the IURA loan; and
Whereas, McGuire has created over 10 FTE jobs, and
Whereas, management has taken a series of proactive steps to increase profitability,
and recent monthly sales show increased sales since institution of management
reforms, and
Whereas, the business remains current on all bank loans and vendors, and
IURA EDC Minutes
September 11, 2012
Page 3 of 13
Whereas, the business’ private lender has agreed to accept interest‐only payments for
the next six months, and
Whereas, several downtown retailers and restaurants report slower than expected
sales this summer, and
Whereas, at their September 11, 2012 meeting, the IURA Economic Development
Committee reviewed this matter and recommends the following; now, therefore, be it
RESOLVED, that the IURA hereby approves a modification to the loan agreement with
J.G. McGuire to modify the repayment schedule to extend the interest‐only payment
period by six months subject to submission of quarterly profit & loss statements for
the next 12 months; and be it further
RESOLVED, that beginning on February 1, 2013 payment of monthly principal and
interest loan repayments are due to resume, and be it further
RESOLVED, that the Director of Community Development is authorized to issue a loan
modification commitment in accordance with the resolution and the IURA
Chairperson, upon the advice of IURA legal counsel, is hereby authorized to execute all
necessary and appropriate documents to implement this resolution.
Carried Unanimously 3‐0
B. Request from State Theatre of Ithaca, Inc. for Loan Assistance to Undertake “State
North Community Center” Project at 115‐117 N. Cayuga Street
Levine recapitulated the salient details of the request. He noted the State Theatre has
been growing its board and its organization, and currently hosts about 75 events/year
that attract close to 50,000 patrons/year. He noted the State Theatre is already a
landlord, owning 2 apartments, a retail store, and offices and classrooms for the New
Roots Charter School (a 15 month‐old relationship, which has helped strengthen the
organization’s bottom line). Levine remarked that fundraising is a key part of the
theatre’s operations ― it has surpassed its goal every single year and raised it by
$20,000 each year. In the last fiscal year, it brought in over $250,000.
IURA EDC Minutes
September 11, 2012
Page 4 of 13
Levine stressed that the acquisition of the former Masonic Temple building would
substantially strengthen both the State Theatre and the wider community, providing the
theatre with a secondary performing arts space (particularly useful for those shows
which currently only draw 350‐400 people and only use ¼ of the theatre’s capacity) and
filling the void left by the demolition of the Women’s Community Building. The
acquisition would provide the theatre with income from management fees. Theatre
staff would be taking a very hands‐on approach, providing sound assistance, lighting
assistance, etc. Furthermore, Levine noted, many local theatre groups are constantly
approaching the theatre, looking for space, so this would provide them with highly‐
sought additional space, for performances, rehearsals, classrooms, and so on. Overall,
transforming the dormant historic building into a community asset would be a
considerable boost for the downtown area.
Travis spoke in support of the project. He noted this kind of real estate development
project can be a tremendous financial stimulant to help sustain a non‐profit, like the
State Theatre; and the theatre’s staff and board have the kind of management and
fundraising experience necessary to make the project a success. Travis noted he has
personally been involved in two large and successful IURA‐funded projects (Eddygate
and Gateway). As a result, he believes he has a demonstrably good track record. Travis
indicated he would be willing to personally guarantee repayment of the loan, if the
project could be exempted from PILOT/tax payments.
Travis added that the recent upsurge in major downtown development projects (e.g.,
Seneca Way, Cayuga Place Residences, etc.) can ultimately be partially attributed to the
renovation of the State Theatre. It provided just enough additional downtown
economic activity to turn the tide; and the overall tax base has also increased, as a
result.
Armstrong indicated several aspects of the project trouble her. The price for the
building just seems to be higher than its worth. While she would love to see the
building used again, and the proposed uses seem very good, there is no indication of
whether the State Theatre could even raise the necessary $1M. Furthermore, the State
Theatre group is already appr. $800,000 in debt. While she understands the risk would
be low for the IURA, she is not certain the project is necessarily the best possible use of
scarce public resources.
IURA EDC Minutes
September 11, 2012
Page 5 of 13
Travis agreed that the price is high, but he stressed it is necessary to get the current
owner to sell the building. Regarding the debt issue, in his experience, managed debt
can be a highly productive engine for growth and the State Theatre has the necessary
financial and operational expertise to support it. He believes it is worth the risk.
Richardson noted she is also concerned with the high cost of the building, as Armstrong
expressed.
Armstrong observed that the Finger Lakes Wine Center just closed its doors, with
$100,000 IURA loan ― it, too, was running largely on an events‐operating business
model. She went on to ask if the applicant would be adding staff. Levine responded,
yes.
Levine stressed it is important to keep in mind that New Roots would be an anchor
tenant, which would help tremendously. He also noted that the theatre has already
communicated with a number of community theatre groups, who have expressed an
interest in renting some of the space.
Ackerman remarked she is less concerned with the price of the building, than she is with
the project’s ability to generate all the required revenue.
Bohn noted it is important to understand that the debt service would be structured as
interest‐only payments, with periodic principal balloon repayments. Adding up all the
projected cash flow, through the 10th year, results in appr. $750,000, which could retire
a portion of the debt, but not the entire debt. He noted this would be a significant
concern for the IURA, since its funds need to be returned on a very tight time schedule;
and since Year 2 and Year 3 income projections do not show enough income generated
from the project to repay the IURA, the success of the capital campaign would be
critical. In light of this, he did not underwrite the loan as a payable loan based on cash
flow, but has treated it as a collateral loan instead.
Richardson asked if the personal guarantee being offered represents a fair exchange for
eliminating the Payment‐in‐Lieu of Taxes (PILOT) requirement. Bohn replied that such a
personal guarantee and assignment of life insurance would significantly mitigate loan
repayment risk. As the purpose of the project is largely publicly‐spirited in nature, he
would support eliminating that particular condition, in return for getting the higher level
of security repayment.
Richardson indicated she would be willing to move the resolution, with the PILOT
section removed.
IURA EDC Minutes
September 11, 2012
Page 6 of 13
Armstrong asked if New Roots would continue to rent the State Theatre space it now
rents. Levine replied, yes, it would retain all the classroom space. The only space that
New Roots would no longer need would be the theatre stage itself.
Richardson moved, seconded by Armstrong:
Gateway Proceeds – Loan Assistance to State Theatre of Ithaca, Inc. for “State North
Community Center” Project (Gateway #4)
Whereas, on September 7, 2012, State Theatre of Ithaca Inc. (STI) applied for $400,000
of loan assistance for a $1.3 million project to acquire the former Masonic Temple
building to renovate and operate it for “State North Community Center” (SNCC)
located at 115‐117 N. Cayuga Street, Ithaca, NY, and
Whereas, STI indicates it has reached an agreement in principal with the owner of the
property at 115‐117 N. Cayuga Street to acquire the property for $1 million, and
Whereas, the project is intended to benefit the community as well as generate income
over the long‐term to enhance the financial sustainability of STI, and
Whereas, the proposed SNCC is further intended in part to address a shortage of
community meeting and assembly space in the community resulting from the sale
and demolition of the Women’s Community Building that in 2008 hosted over 80 uses
of its auditorium and over 120 uses of its meeting room, and
Whereas, the building is proposed to be leased to a variety non‐profit organizations,
including the New Roots Charter School (NRCS) as the anchor ground floor tenant,
provide a performance/assembly space to be managed by the STI for community and
performance use when not being utilized by NRCS, provide nonprofit organization
office space and access to the NRCS kitchen for community use, and
Whereas, the proposed uses of project funds are:
$1,000,000 property acquisition
$250,000 renovations
$26,000 property taxes
$25,000 working capital
$1,300,000 Total, and
Whereas, the proposed sources of project funds are:
$500,000 Park Foundation loan
$400,000 IURA loan
$200,000 Bank loan
IURA EDC Minutes
September 11, 2012
Page 7 of 13
$200,000 TCAD loan
$1,300,000 Total, and
Whereas, all project debt is structured as interest‐only debt payments with balloon
payments due at various loan terms extending to 10 years in duration, and
Whereas, the proposed project does not create affordable housing or commit to
create jobs, so the project is not eligible for funding assistance from CDBG, HOME or
HODAG funds administered by the IURA, and
Whereas, the project is an eligible use of Gateway proceeds (current approximate
balance $447,000), administered by the IURA subject to Common Council approval,
but $100,000 per year of Gateway proceeds are earmarked as contributions to the
Housing Fund to support affordable housing, so only short‐term, low‐risk use of
Gateway proceeds is appropriate, and
Whereas, the project is an eligible use of UDAG and other non‐HUD funds
administered by the IURA, but the total amount of such funds available is only
approximately $200,000, and
Whereas, STI proposes to repay IURA principal on the following schedule:
$250,000 will be repaid after 2 years
$150,000 will be repaid after 3 years
$400,000
Whereas, the anchor tenant lease covers 87% of projected operating expenses,
including interest‐only debt service payments, and
Whereas, STI plans to retire project debt through a capital campaign with guidance
from West Wind Consulting Strategies in Fundraising, LLC pay principal, and
Whereas, after two years the project is projected to have accumulated cash flow of
approximately $120,000, an amount insufficient to meet the principal repayment
schedule to the IURA unless the capital campaign is successful thereby requiring
substantial loan security to ensure timely repayment for a short‐term loan, and
Whereas, the former Masonic Temple building is a locally designated landmark
building, located within the Urban Renewal Area Plan map, that has remained largely
vacant for over ten years, and
Whereas, the acquisition, renovation and utilization of the highly visible and
historically significant building at 115‐117 N. Cayuga Street furthers the Urban
IURA EDC Minutes
September 11, 2012
Page 8 of 13
Renewal Plan’s objective to improve the social, physical and economic characteristics
of the Plan’s neighborhoods, and
Whereas, the project will convert a taxable building to tax‐exempt status reducing City
property tax revenues by approximately $8,500 annually, and
Whereas, making the auditorium and kitchen facility available for community use is a
public benefit that may compensate for the reduction in property tax revenues, and
Whereas, at their May 8, 2012 and September 11, 2012 meetings, the IURA Economic
Development Committee reviewed this loan application, and recommend the
following; now, therefore, be it
RESOLVED, that the IURA hereby approves a loan in accordance with the loan
application, and supplemental submissions, subject to the following terms:
Borrower: State Theatre of Ithaca, Inc.
Loan Amount: Up to $400,000
Sources of Funds: Gateway Proceeds: $250,000
UDAG & non‐CDBG funds: $150,000
Project: Acquisition, renovation, and operation of the former
Masonic Temple building for the State North
Community Center at 115‐117 N. Cayuga Street, Ithaca,
NY
Total Project Cost: $1,300,000
Projected Use of IURA
Funds:
Property acquisition
Term: 3 years
Interest Rate: 2% annually
Repayment: Interest‐only payments due with $250,000 principal
payment due on the 2nd year anniversary and $150,000
principal payment due on the 3rd year anniversary
IURA EDC Minutes
September 11, 2012
Page 9 of 13
Security: 1. Personal guarantee of Mack Travis and/or other
persons of sufficient net worth and liquidity to
repay the loan in the event of a default as
evidenced by submission of a satisfactory personal
financial statement as determined by the IURA
Chairperson.
2. Assignment of a total of $400,000 face value life
insurance from guarantors securing the loan
Job Creation Requirement: None.
Conditions: 1. City of Ithaca Common Council approval for use of
Gateway Funds;
2. Submission of written funding commitments for
match funding totaling at least $900,000; and
3. Submission of anchor lease commitment consistent
with assumptions contained in the loan application.
Reporting: Annual submission of profit & loss statement for the
State North Community Center
Annual submission of inventory of community use of
the auditorium and kitchen
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.
Carried Unanimously 3‐0
C. Other
Bohn announced that staff has received the loan materials from the Neighborhood Pride
grocery store, so that particular funding request should be on the next EDC agenda for
action.
IURA EDC Minutes
September 11, 2012
Page 10 of 13
VI. Industrial Park
A. Request from Evaporated Metal Films Corp. (EMF) to Modify Lease Agreement for
245‐247 Cherry Street (Tax Map #96.‐2‐1.22) to Allow Early Exercise of Option to
Purchase Property to Facilitate Resale of Property to Mad2nd, LLC
Bohn reviewed the request. He noted that in the past the IURA has encouraged higher
utilization of the parcel. The parcel was originally purchased and sold for a project to
expand operations on that site; however, that project did not work out, due to no fault
of EMF, and the parcel has since remained vacant. The proposed new owner, Mad2nd,
LLC, would build a 10,000 SF multi‐use building, to support its rental/residential business
and provide space for an additional tenant.
In this situation, Bohn noted, the IURA would normally be concerned with the proposed
use of the property. EMF is in year #18 of a least/purchase agreement that allows them
to exercise their purchase option in year #20 without any IURA approval. He noted that
some Common Council members have been concerned that the Cherry Street Industrial
Park is not as active as it should be and has not been generating enough economic
development‐related benefits for the community. As a result, the IURA may want to
examine the use of the property, and determine how it is going to provide revenue for
the City and promote further economic development activity.
Bohn recommended approval of the early exercise of the purchase, but suggested
instituting a reporting agreement between the IURA and the new buyer, so that the
IURA can be in a position to understand all of the economic impacts associated with the
sale (e.g., job creation, community impacts, etc.).
Schultz presented an overview of Evaporated Metal Films Corporation and noted that
the company would reinvest the proceeds of the sale in its Cherry Street location. He
anticipates the investment would likely increase the number of employment
opportunities at the company.
Bohn asked if Mad2nd, LLC would be amenable to a separate contractual agreement to
share information about its economic development activities on the site with the IURA
(on a once‐a‐year basis for five years).
Klausner replied, yes, although he would prefer a very simple form of reporting, (e.g.,
we’ve created this many jobs, this is what we’re doing, etc.) Richardson responded it
would be very simple.
IURA EDC Minutes
September 11, 2012
Page 11 of 13
Ackerman moved, seconded by Armstrong:
Cherry Street Industrial Park – Modify Lease with Evaporated Metal Films Corp. to
Authorize Early Exercise of Their Option to Acquire Tax Parcel #96.‐2‐1.22 to
Facilitate Sale to Mad2nd, LLC
WHEREAS, the Ithaca Urban Renewal Agency (IURA) leases adjacent parcels in the
Cherry Street Industrial Park located at 239 and 245 Cherry Street to Evaporated
Metal Films Corporation (EMF), and
WHEREAS, on September 14, 1994, the IURA executed a 20‐year lease with EMF for a
planned business expansion on a 1.03 acre parcel at 245 Cherry Street (tax parcel
#96.‐2‐1.22) at an annual rent of $3,000 with an option for the lessee to acquire the
property in the 20th year of the lease for $31,617.50, and
WHEREAS, a planned business expansion by EMF on the leased parcel did not
materialize and the leased parcel has remained vacant for eighteen years, and
WHEREAS, the IURA has repeatedly encouraged economic activity on this
underutilized parcel, and
WHEREAS, EMF has executed a contract to sell the property to Mad2nd, LLC subject to
IURA approval, and
WHEREAS, on September 3, 2012, EMF requested IURA approval for early exercise of
the option to acquire the property, and
WHEREAS, Mad2nd, LLC is a locally owned real estate development and rental
management business controlled by Adam Klausner and James Demos, and
WHEREAS, Mad2nd, LLC proposes to acquire the leased parcel and construct an
approximately 10,000 square foot multi‐purpose facility on the property to serve their
real estate and storage business and to lease 5,000 square feet to a growing local
renewable energy business tenant that currently employees 10 persons, and
WHEREAS, Mad2nd, LLC projects to hire one employee upon construction of the
building and a total of 3 full‐time employees within three years of construction of the
building with all employees to be paid at least a local living wage ($12.78/hour
currently), and
IURA EDC Minutes
September 11, 2012
Page 12 of 13
WHEREAS, EMF indicates that net sales proceeds realized will be used to reinvest in
local operations and further indicates that they are currently undertaking an $89,000
upgrade of equipment at their Ithaca facility, and
WHEREAS, the proposed construction of the multi‐purpose building on the property
will increase the community’s property tax base, assist two local businesses meet
space needs, likely lead to job creation, and allow EMF to reinvest in their existing
Ithaca operations, and
WHEREAS, the IURA lease includes certain restrictions, conditions and covenants to
ensure future development will be compatible with the surrounding area, which will
become deed restrictions upon conveyance of the property, and
WHEREAS, past actions to allow early exercise of the purchase option have required
additional payments of future lease payments due, and
WHEREAS, considering the $31,617.50 option price and the net present value of
future rent due, the Economic Development Committee recommends setting the final
purchase price at $34,000, and
WHEREAS, EMF has agreed to this purchase price, and
WHEREAS, to track projected job creation and other economic development benefits
to be generated from this industrial park parcel will require a separate agreement
with the purchaser of the parcel, Mad2nd, LLC, and
WHEREAS, on September 11, 2012, the Economic Development Committee reviewed
this matter and recommended the following; now, therefore be it
RESOLVED, that the IURA hereby approve the request from Evaporated Metal Films,
Inc. to modify the lease agreement for tax parcel #96.‐2‐1.22 to allow early exercise of
the purchase option at a final price of $34,000 conditioned upon execution of an IURA
agreement with Mad2nd, LLC committing Mad2nd, LLC to report annually to the IURA
for 5 years on their economic development commitments to construct a new 10,000
square foot building, hire 3 full‐time equivalent workers to be paid at least the local
living wages (currently $12.78/hour) and reporting on the total employee count at the
site, and be it further
RESOLVED, that the IURA Chairperson, upon the advice of IURA legal counsel, is
hereby authorized to execute all necessary and appropriate documents to implement
this resolution, and be it further
IURA EDC Minutes
September 11, 2012
Page 13 of 13
RESOLVED, Lessee shall be responsible to pay actual IURA legal fees associated with
the lease modification.
Carried Unanimously 3‐0
B. Review of August 2012 Lease & Loan Payment Report
Bohn walked through the August 2012 Lease & Loan Payment Report. He noted that
the Finger Lakes Wine Center has been experiencing considerable financial difficulty,
which is why it is shown as delinquent on the report.
VII. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, October 9, 2012)
The meeting was adjourned by consensus at 4:53 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.