2. EDSR 08-21-2006MEMORANDUM
TO: Economic Development Authority
CC: Lori Stich, Accountant
FROM: Catherine Mehelich, Director of Economic Development,/
DATE: August 21, 2006
SUBJECT: Consider Micro Loan Application - Olde Main Eatery
Attachments
• Staff report to EDA Finance Committee, August 11, 2006
• Finance Committee Meeting Minutes, August 17, 2006
Issue
Staff recently received a Micro Loan application from Karen and Nagy Attia, doing business
as Olde Main Eatery. The EDA Finance Committee reviewed the loan request as sutmnarized
in the attached Finance Committee staff report and August 17, 2005 meeting minutes. The
Finance Committee approved a recommendation for the EDA's approval of the loan request.
Action Requested
Staff requests the EDA consider approval of the Olde Main Eatery loan request, per the
Finance Committee's recommendation, with the following terms and conditions:
• Micro Loan Amount: $50,000
• Interest Rate and Texm: 2% fixed, 15-year amortization with 5-year balloon
• Security: 2"`' position on real estate mortgage
• Completion of the following proposed improvements: replace rear sidewalk, replace
storefront door and windows, sandblast and patch rear exterior wall (estimated at
$18,463)
MEMORANDUM
TO: EDA Finance Committee
CC: Lori Johnson, City Administrator/Interim Finance Director
FROM: Catherine Mehelich, Director of Economic Development~jJ/J
DATE: August I I , 2006 ~~ ~~ cc
SUBJECT: Micro Loan Application - Olde Main Eatery
Attachments
City of Elk River Micro Loan Fund Policy
Application and related attachments - Olde Main Eatery
Issue
Staff has received a request by Karen and Nagy Attia, of Olde Main Eatery fox a Downtown
Rehabilitation Financing Program Micro Loan in the amount of $50,000 to be used for a portion of
the financing necessary to purchase the building located at 313 Main Street. The loan is proposed to
be structured as a participation loan with First National Bank of Elk River.
Background
Olde Main Eatery was established in 1997 as afamily-oriented cafe serving breakfast and lunch in
downtown Elk River. The original owners of the business, and current property owner, were
awarded an EDA micro loan in the amount of $50,000. The loan has since been paid in full. The
applicant acquired the business in 2001 and has leased the restaurant space from the building owner
since that time.
The Attia's have an opportunity to exercise a purchase option of the building by the end of August
2006. The applicant has been working with First National Bank of Elk River to secure the
conventional financing necessary fox the purchase of the building and improvements. The applicant
proposes to use the micro loan fund for the portion of financing not covered by the bank loan and
equity. The sources and uses of the project are as follows:
First National Bank of Elk River $150,000 15-year @ 8.5%; 5-year balloon
Secured by 1" position on mortgage
EDA Micro Loan $ 50,000 15-year, @ 2%; 5-year balloon
Secured by 2"`' position on mortgage
Owner Equity Contribution $100 000
Total Project $300,000
Consider Micro Loan Application: Olde Main Eatery
August 17, 2006 Finance Committee Meeting
Page 2 of 2
In addition to the financial criteria that must be considered the committee must also consider to
what degree the applicant satisfies the criteria set forth in the attached Micro Loan Fund Policy.
Micro Loan Criteria
* Max. Loan Amount: $75,000
* Interest Rate: 2% filed
* No job creation goals required
* Facade improvements: 20% micro loan funds
01de Main Eatery
* Amount requested: $50,000
* Rate requested: 2% fixed
* No job creation goals established
* Proposes rear sidewalk and
storefront door and window
improvements fox $9,963
As in past Finance Committee meetings, the applicant will be given an opportunity to present the
project and application. Following the presentation the Finance Committee may ask questions of
the applicant. The applicant will then be excused from the meeting, allowing the committee to
discuss the application and determine a recommendation fox EDA Board consideration.
At its August 14`h meeting the EDA will consider calling a special meeting for August 21, 2006 at 6
pm for the purpose of considering the Olde Main Eatery application and the Finance Committee's
recommendation in order to meet the applicant's deadline on the purchase option.
s:\EDA\MICRO LOAN FUND\LOANS\Olde Main Ea[ery 2006\8.17.06 Finance Comm memo.doc
MEETING OF THE EDA FINANCE COMMITTEE
HELD AT THE ELK RIVER CITY HALL
THURSDAY, AUGUST 17, 2006
Members Present: Cliff Lundberg, Tom McNair, Paul Motin, Dave Rymanowski and Dan Tveite
Staff Pxesenc Director of Economic Development Catherine Mehelich
1. Consider Micro Loan Application: Olde Main Eaterv
Director of Economic Development Catherine Mehelich provided a summary of the loan
application from Karen and Nagy Attia doing business as Olde Main Eatery. The applicant is
requesting an EDA Micro Loan in the amount of $50,000 at 2% to be used toward the property
acquisition and to fmance extexiox improvements to the building. The applicant proposes to
undertake the following exterior improvements (of which contractor estimates were submitted):
replace xeax sidewalk, replace storefront door and windows, and sandblast and patch the xeax wall
of the building. The proposed improvements axe estimated to cost $18,463, which exceeds the
Micro Loan policy requirement that a minimum of 20% of the requested Micro Loan funds must
be used fox extexiox building improvements. The Micro Loan is proposed to be provided on a 15-
year amortization and a 5-year balloon to match the bank terms, and at a fixed rate of 2%. The
Micro Loan would be secured by a second mortgage on the property. A special meeting of the
EDA has been called for August 21" to consider the Finance Committee's recommendation and
fox fmal action on the loan request in order to meet the applicant's deadline to exercise the
purchase option.
Committee member Paul Motin stated by way of disclosure that he does not cuxxendy have a
working relationship with Olde Main Eatery as indicated on the application. Therefore he felt he
has no conflict of interest with the application.
The consensus of the Committee was that it is good to see the applicant's interest in making a
commitment to staying and doing business in downtown Elk River. The Committee also
acknowledged the significant investment the applicant has akeady made in building improvements
such as new awnings and code improvements. Committee member Dan Tviete inquired about if
the applicant has indicated an interest in expanding their hours to include dinners and Sundays.
Ms. Mehelich stated they have not.
MOVED BY CLIFF LUNDBERG, SECOND BY TOM MCNAIR THAT THE
FINANCE COMMITTEE RECOMMENDS THE EDA'S APPROVAL OF THE OLDE
MAIN EATERY MICRO LOAN REQUEST. THE MOTION CARRIED 4-0-1,
COMMITTEE MEMBER DAVE RYMANOWSHI ABSTAINED.
The EDA Finance Committee meeting ended at 7:20 a.m.
Re/spectfully subymitted,~by/
(ti«-/,~r-~k-,~7
Catherine Mehelich
Director of Economic Development