Agenda - Council - 03/08/2011 - Special B&C Interviews

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CC Regular Session Date: 03/08/2011 By: Aaron Backman Administrative Services Item #: 7. 1. Information Title: Consideration of Final Approval of Ramsey RLF Loan to Wells Catering, Inc., and SAC/WAC Fee Assistance to Ramsey Retail Rental, LLC Background: In July of 2010 the EDA preliminarily approved assistance for The Falls Cafe / Wells Catering project to be located in The Ramsey Office Plaza building The EDA preliminarily approved a $68,000 RLF loan for 10 years at 4.25% interest to George Wells; and to provide a zero interest, forgivable loan (currently estimated to be $55,000) to the developer to offset projected SAC/WAC fees associated with the new restaurant. On 2/7/11 the Econ. Dev./Marketing Mgr received the executed copy of the lease agreement between George Wells, Wells Catering Service, Inc., and Matt Kuker, Ramsey Retail Rental, LLC (whose parent company is PSD Development) for the project. Mr. Kuker would undertake the extensive building modifications, estimated to be about $850,000, that will be necessary for this new restaurant in The COR. Following plan review, it is estimated that construction would take approximately 2 and one half months to complete. The Falls Cafe / Wells Catering Project was presented to the City Council at the 2/15/11 Work Session, with Mr. Wells and Mr. Kuker present. The project has evolved from a coffee shop/deli to a full -service restaurant. The sit-down restaurant will now have 104 seats and a room for private events, and will now have 10 full time employees and 10 part time employees. Mike Mulrooney, the EDA's consultant, has undertaken a credit write-up of the project that was based upon historical performance of the business. The borrower, Wells Catering, Inc., appears to generate sufficient cash flow to service current and proposed debt. While there would be additional overhead and management costs, the borrower would be reducing his lease costs. The credit write-up recommended approving the the $68,000 RLF loan. The EDA will have a first position on $165,000 of equipment and the owner will be injecting $35,000 cash into the project. At a special meeting of the EDA on 2/24/11 the EDA members approved the staff recommendation for the $68,000 RLF loan to Wells Catering at the terms recommended, and the zero interest, forgivable loan for $55,000 to Ramsey Retail Rental to offset projected SAC/WAC fees associated with the new restaurant. The pro forma for the rental side of the deal for Ramsey Retail Rental was provided in December 2010. This pro forma indicates that the developer will incur losses in the initial years of the restaurant's operation. The pro forma was distributed to the EDA members at the EDA special meeting on February 24, 2011. The EDA also had discussion regarding a potential restaurant that may be located in The COR that would be located in the Flaherty & Collins project. There were views expressed as to whether The COR could support two restaurants in close proximity. Some comments were that if the restaurants had similar formats that they would potentially undercut each other. Other comments were that given The COR projects coming on line that there was sufficient market demand to support two restaurants in this area. Following discussion the members did approve a motion that the EDA suggests that the HRA considering releasing Flaherty & Collins from their obligation to add a restaurant/retail site under the current development agreement that was approved in December 2010. Finally, approval of this financial assistance does not mean the issue of the 60 foot strip of land north of the Ramsey Office Plaza has been resolved between the City and PSD. There is currently a 60 foot strip of land on the northeast portion of the Plaza parcel that has been developed as parking for Jim Deal's property but is currently owned by the HRA. The HRA proposes to retain ownership of the parcel, but to include it in a PUMA (Parking Use and Maintenance Agreement) that Mr. Deal would be a party to, allocating his parcel the equivalent number of stalls that would be accommodated on the parcel and allowing for additional stalls in a future parking structure at that location.