HomeMy WebLinkAboutMN-IURAED-2014-08-12Approved:10/28/14
108 E. Green Street
Ithaca
Urban
Renewal
Agency
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 PM, Tuesday, August 12, 2014
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Doug Dylla, Chris Proulx, Heather Harrick, Jennifer Tegan, Heather Filiberto
Excused: Leslie Ackerman
Staff: Nels Bohn, Charles Pyott
Guests: Lex Chutintaranond, Italthai, LLC
I. Call to Order
Chair Dylla called the meeting to order at 3:40 P.M.
II. Agenda Additions/Deletions ― None.
III. Public Comments (3‐minute maximum per person) ― None.
IV. Review of Meeting Minutes: June 10, 2014
Tegan moved, seconded by Harrick, to approve the June 10, 2014 minutes, with no
modifications. Carried Unanimously 5‐0.
V. Community Lending
A. Request from Italthai, LLC to Execute Subordination Agreement with Lender to
Facilitate Consolidation, Refinancing, & Extension Loan
Bohn explained the applicant is seeking to refinance the existing debt on his businesses,
Zaza's Cucina and Mia Tapas Bar & Restaurant (and both buildings), for which he
originally received a series of loans from M&T Bank and the IURA. He just received a
$1.15M, 20‐year term loan commitment from Chemung Canal Trust Company, which he
intends to use to pay off his M&T Bank debt and his IURA loan on the Plantation
Building. He is asking the IURA to subordinate its loans to the other loans.
IURA EDC Minutes
August 12, 2014
Page 2 of 8
Bohn noted in the worst‐case scenario Chemung Canal Trust Company could
conceivably foreclose on one of the properties to recover their principal and IURA
collateral value would be reduced to zero, so the proposed resolution includes the
distribution of the IURA’s collateral between the two propertiesfor each IURA loan. The
combined value of the applicant’s assets is $2M, so there is plenty of collateral value in
total. Bohn recommended approval of the resolution, conditioned on a Mortgage
Modification Agreement that the IURA collateral be distributed between the two
properties. The third IURA loan would be repaid. (The final loan is a $900,000 Restore
NY grant, which is a 30‐year loan to the developer at 0% interest and no payments due
until year #30, so the Chemung Canal Trust Company loan will be paid off before the
first loan payment is due on this loan. All three loans would be subordinate to the new
Chemung Canal Trust Company loan.
Moved by Filiberto, seconded by Harrick:
Subordination Agreement for ItalThai, LLC Consolidation Loan
(HODAG #16, CD‐RLF #31, Gateway #4 & Restore NY Loan)
WHEREAS, on July 29, 2014, Lex Chutintaranond of ItalThai, LLC submitted a request
to subordinate several IURA mortgage liens to Chemung Canal Trust Company (Bank)
to facilitate a consolidation loan, and
WHEREAS, on August 26, 2014, Lex Chutintaranond submitted a supplemental
request to subordinate an additional IURA mortgage lien, and
WHEREAS, the Bank has committed to issue a 20‐year consolidation, refinancing,
and extension loan subject to first mortgage liens on properties located at 622
Cascadilla Street (ZaZa's Cucina) and 130‐132 E. State/MLK Jr. Street (Mia's), and
WHEREAS, the IURA has issued the following four loans to corporations controlled
by Mr. Chutintaranond:
IURA Loan #1
Plantation Building ― upper story housing (HODAG #16)
Borrower: Ithalthai, LLC
Outstanding principal balance: $71,126.19
Final due date: 2031
Collateral: ‐ subordinate mortgage lien on 130‐132 E. State St. behind M&T
IURA Loan #2
Mia Noodle Bar (CD‐RLF #31)
Borrower: Mia Noodle Bar, Inc.
IURA EDC Minutes
August 12, 2014
Page 3 of 8
Outstanding principal balance: $59,895.64
Final due date: 2018
Collateral: ‐ subordinate mortgage lien on 622 Cascadilla St.
‐ 3rd security lien on restaurant assets behind M&T and TCIDA
‐ Personal guarantees of S. Chutintaraond & F. Cervesa
IURA Loan #3
Plantation Building Restore NY (Gateway #4)
Borrower: Ithathai, LLC
Outstanding principal balance: $9,498.93
Final due date: 2014
Collateral: ‐ subordinate mortgage lien on 622 Cascadilla St.
‐ subordinate mortgage lien on 20 Rosina Dr.
IURA Loan #4 (assigned to IURA from City of Ithaca)
Restore NY Loan in Lieu of Grant
Borrower: Italthai, LLC
Outstanding principal balance: $900,000
Final due date: first and final payment due 2041
Collateral: ‐ subordinate 3rd mortgage on 130‐132 E. State Street
WHEREAS, proceeds from the consolidation loan will payoff M&T debt and IURA
loan #3, and
WHEREAS, Italthai, LLC requests the IURA subordinate its mortgage liens securing
IURA loans #1, #2, and #4 to the Bank, and
WHEREAS, Italthai, LLC and Mia Noodle Bar, Inc. are current on IURA debt
repayment, and
WHEREAS, foot traffic to businesses on The Commons has been adversely impacted
by two years of construction on The Commons, and
WHEREAS, to remain minimally secured, the sum of the IURA outstanding loan
balances due within the next 20 years and the new bank lien must remain below the
appraised value of the property securing IURA debt (100% Loan‐to‐Value), and
WHEREAS, separate Loan‐to‐Value (LTV) calculations for each loan yield the
following LTV:
• IURA loan #1, 130‐132 E. State Street: 89%
• IURA loan #2, 622 Cascadilla Street: 177%, and
IURA EDC Minutes
August 12, 2014
Page 4 of 8
WHEREAS, a LTV above 90%‐95% requires additional collateral and/or security to
meet prudent underwriting standards, and
WHEREAS, there is sufficient collateral value available between both parcels to
secure all IURA loans, but currently each IURA loan is only secured by a lien on a
single property, and
WHEREAS, at their August 12, 2014 meeting, the IURA Economic Development
Committee reviewed this matter and recommends the following; and
WHEREAS, Economic Development Committee members were polled by email
regarding the supplementary request to subordinate the mortgage securing IURA
loan #4 and unanimously recommend approving the supplemental request, now,
therefore, be it
RESOLVED, that the IURA hereby approves the request from Italthai, LLC to
subordinate IURA mortgage liens on properties located at 130‐132 E. State/MLK, Jr.
Street and 622 Cascadilla Street (securing IURA loans #1, #2, and #4) to facilitate
issuance of a consolidation loan by Chemung Canal Trust Company subject to the
following conditions:
1. IURA loan #1 (HODAG #16) ― ItalThai, LLC shall enter into a Mortgage
Modification Agreeement spreading the mortgage lien securing t his loan to
include the real property located at 622 Cascadilla Street as colla teral, and
2. IURA loan #2 (CD‐RLF #31) ― Mia Noodle Bar, Inc. shall enter into a Mortgage
Modification Agreement spreading the mortgage lien securing this loan to
include the real property located at 130‐132 E. State/MLK, Jr. Street as collateral,
and
3. that loan proceeds from the consolidation loan pay off IURA loan #3 (Gateway
#4) in full, and be it further
RESOLVED, that the IURA Chairperson, subject to review by IURA legal counsel, is
authorized to execute documents to implement this resolution.
Unanimous 5‐0
IURA EDC Minutes
August 12, 2014
Page 5 of 8
B. Review of July 2014 IURA Loan Repayment Report
Bohn reported fewer accounts are delinquent this month, compared to last month, with
only one delinquency. Alternatives Federal Credit Union (AFCU) has fully repaid its loan.
It may seek another IURA loan at some point in the future. The Bandwagon Brew Pub
and Diane’s Downtown Auto are also both now current. The State Theatre is 2 months
behind, although some payments may have been misapplied. (There has been a dispute
between the local M&T Bank branch and the Buffalo, NY branch.) The State Theatre
believes it is current.
The Argos Inn is delinquent. While it had been current in March 2014, it has since failed
to make any payments. A default letter was mailed, giving it formal notice it has a
certain number of days to resolve the situation.
The Neighborhood Pride loan has been paid in full. Ithaca Neighborhood Housing
Services (INHS) plans to hire a design firm to generate the site plan for that property for
a mixed‐use, mixed‐income for‐sale and rental housing project. INHS will likely return to
the IURA with a funding assistance request for a portion of the project.
C. Loan Delinquency Policy
Bohn noted that a recent monthly financials report with five delinquencies prompted a
discussion of whether IURA’s current loan management process could be improved.
Bohn subsequently drafted the “IURA Protocol on Past Due Loan Balances” document,
in which he lays out the steps of the policy. He noted that many delinquencies are
simply resolved through loan modifications or deferments; and some are simply bank
errors.
Bohn indicated there are two groups of borrowers: those who are responsive and those
who are not. One suggested mechanism for responding to delinquent accounts is to
strongly encourage or require borrowers to meet with the EDC.
Bohn stressed it is important to maintain the right balance between requiring borrowers
to be current and making sure they remain financially viable. As long as a delinquent
borrower works in good faith with IURA staff, the situation can usually be worked out.
That kind of flexible approach is something that differentiates the IURA from
conventional lenders. It has generally worked very well. Bohn noted the “IURA Protocol
on Past Due Loan Balances” document also enumerates several potential incentives and
penalties. Identifying a reasonable financial incentive to encourage delinquent
borrowers to make payments would likely help improve the situation.
Dylla noted he likes the policy, especially the incentives.
IURA EDC Minutes
August 12, 2014
Page 6 of 8
Tegan asked if the M&T Bank penalty charges are paid to the IURA. Bohn replied, yes.
Tegan responded that should probably be referred to in the protocol. Bohn indicated
the IURA’s standard promissory note does already states this, and he will include it in
the protocol. He added there are legal restrictions for what interest rate can be
imposed on penalties. Tegan asked how many borrowers are enrolled in the automated
payment plan. Bohn replied: the State Theatre, Ithaca Coffee Company, and Cayuga
Green, LLC.
Dylla asked for more information about the restrictions on applying interest to
penalties. Bohn replied he has not yet fully researched that, although that may
complicate the IURA collection agency’s processes. If the IURA chooses to adopt that
approach, it would also need to make sure it is uniformally applied. It may be that a flat
administrative fee would be the best option. Bohn indicated he would be happy to
further research the issue.
Tegan remarked it would be better if there were a delay before the 0.25% interest‐rate
penalty kicks in.
Dylla asked if the IURA should be considering using a different loan‐servicing company.
Bohn replied that possibility has been explored before; however, there has not been
much interest by local lenders and M&T Bank does provide the service for free.
Filiberto asked if any banks would provide the service as community lending, under the
Community Reinvestment Act (CRA). Bohn replied that IURA loans do not fit into
conventional loan models for repayment terms, which complicates the issue somewhat.
Filiberto noted that many banks routinely service similar kinds of loans (e.g., for
restaurants, seasonal businesses, etc.).
Bohn emphasized that the problems with M&T Bank are episodic (often coinciding with
staff turn‐over at the bank). Most borrowers have not reported any problems with it.
By‐and‐large, M&T Bank works well for a small portfolio like the IURA’s.
Bohn indicated he will edit the document further, considering the comments he has
heard today, and complete a draft that can be given to the IURA’s underwriting
consultant for analysis.
Tegan suggested adding more flexibility to the loan repayment timeline, given the
occasional banking/accounting discrepancies and disjunctures in reporting periods.
Perhaps the first e‐mail notice does not need to be a part of the protocol. Bohn replied
he believes that particular e‐mail is important, since it seems to be working. Tegan
suggested the timeline could still be adjusted in some manner. Bohn agreed that is a
good idea.
IURA EDC Minutes
August 12, 2014
Page 7 of 8
VI. Other/News Business
A. 2014 Election of EDC Vice‐Chairperson
Dylla declared that nominations from the floor for the office of Chair would be accepted
at this time. Bohn noted that while the EDC is authorized to elect its own Vice‐Chair the
IURA needs to formally approve any recommendation for Chair. Furthermore, since one
of the two offices has to be an IURA Board member, Proulx would need to serve in one
of the two roles (and he has not expressed an interest in serving as Chair.)
Moved by Tegan, seconded by Filiberto:
2014 Appointment of IURA Economic Development Committee Chairperson
WHEREAS, IURA By‐laws provide that the committee membership shall elect its own
committee Vice‐Chairperson and nominate a candidate for committee Chairperson
for consideration by the Agency, and
WHEREAS, per the Bylaws, an Agency member shall fill either the committee
Chairperson or committee Vice‐Chairperson position, and
WHEREAS, officers of each committee serve a one‐year term, but continue to hold
office until their successor is selected or appointed, and
WHEREAS, the current Committee Chairperson and Vice‐Chairpersons are Doug
Dylla and Chris Proulx, respectively, and
WHEREAS, at their August 12, 2014 meeting, the IURA Economic Development
Committee elected C HRIS P ROULX as Committee Vice‐Chairperson and nominated
D OUG D YLLA as Committee Chairperson; now, therefore, be it
RESOLVED, that the IURA hereby appoints D OUG D YLLA as Chairperson of the IURA
Economic Development Committee.
Unanimous 5‐0
VII. Staff Report
A. Report on HUD Monitoring Visit ― July 22‐24, 2014
Bohn announced that HUD performed its periodic monitoring visits, July 22‐24, 2014.
For every visit, HUD identifies a different segment of IURA operations to monitor. This
time it examined IURA economic development loans: comparing IURA records to a
IURA EDC Minutes
August 12, 2014
Page 8 of 8
checklist to of standard CDBG requirements. The HUD monitor believed everything
looked very good. He actually indicated that he thought it was one of the best loan
document portfolio records he has seen. The IURA will receive the formal report at
some point soon.
B. Project Updates
Bohn noted he recently asked for an update on the status of e2e Materials, Inc., which
indicated it would have financial reports prepared shortly. The company is working on
developing a partnership and license agreements. Its investors continue to support it
and progress has been made, but the process has been taking longer than anticipated.
Bohn noted the company is current on its IURA loan.
Bohn reported that EDC members may have seen some mention of the Stone Quarry
Apartments project in the media recently. It was recently discovered there are some
previously unidentified environmental concerns regarding the site, so IURA staff re‐
examined the Environmental Assessment for the project. Although the Environmental
Assessment process is separate and distinct from the local City Environmental Quality
Review (CEQR) process, the IURA has relied on it in the past. In this case, however, the
CEQR process did not focus on the site’s sub‐surface conditions, so those needed to be
evaluated. As a result of this turn‐of‐events, INHS revised its environmental
remediation plan, which was subsequently reviewed and approved by NYS DEC. IURA
staff also consulted HUD environmental review personnel to make sure the standard for
the remediation process is appropriate.
VIII. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, September 16, 2014)
The meeting was adjourned by consensus at 4:33 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.
j:\community development\admin files\minutes\edc\2014\edc minutes 06‐10‐14 ‐ draft.doc