6.0. EDSR 11-13-2000 Item 1 6,.
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
1111
MEMORANDUM
TO: Economic Development Authority
F Cathy Mehelich, Director of
Economic Development
DATE: November 13, 2000
SUBJECT: Sportech Micro Loan
Issue
Chris and Debra Carlson(Sportech, Inc.) are planning to double the size
of their commercial building to 20,000 square feet in order to
accommodate business growth. The Bank of Elk River has requested
that the EDA consider subordinating its second position mortgage to the
expansion financing mortgage.
Background
• In_November of 1998 a $45,000 Micro Loan at 8.5%interest and a three-
year balloon payment was awarded to Chris and Debra Carlson
(Sportech, Inc.). The loan has a current balance of approximately
$43,000 and is fully due and payable January of 2002.
Attached is correspondence from The Bank of Elk River regarding their
current mortgage and new mortgage for the expansion project.
y mortgage The EDA currently has areal estate most a e as security. A condition of
the micro loan approval in 1998 was to obtain personal guarantees.
Since the property is owned personally by the Carlsons and leased to the
company, a personal guaranty was not completed.
Action Requested
Staff has reviewed the project with legal counsel. Staff recommends the
EDA subordinate its current second real estate mortgage to the new
mortgage issued to the Carlsons from The Bank of Elk River to allow for
the company's expansion, with the condition that a guaranty from
Sportech, Inc. is executed.
Attachment
• Letter from The Bank of Elk River dated 10/25/00
13065 Orono Parkway • P. 0. Box 490 • Elk River, MN 55330-1743 • (612)441-7420 • Fax (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
ME BANK
OF ELK RIVER
411 Member FDIC
VI
October 25, 2000
Cathy Mehelich
Director of Economic Development
Elk River Economic Development Authority
13065 Orono Parkway
P.O. Box 490
Elk River, Minnesota 55330-1743
Re : Chirstopher Carlson / Sportech, Inc.
Mortgage Subordination
Dear Ms . Mehelich:
On June 15, 1998, The Bank of Elk River granted Christopher and Debra
Carlson a $300, 000 first real estate mortgage on their commercial
property located at 15703 Jarvis Street in Elk River. That loan now
has a balance of about $281, 000 . The Economic Development Authority
subsequently granted a second real estate mortgage in the amount of
$45, 000 on November 8, 1998 . That loan now has a balance of about
• $43 , 000 .
The Carlsons are now planning to double the size of their commercial
building to 20, 000 square feet . The Bank intends on granting a
$225, 000 additional loan to fund the expansion. However, we are
requesting that the Economic Development Authority subordinate its
current second real estate mortgage to our new mortgage to the
Carlsons .
We have obtained a new appraisal of the expanded building from Terry
Nagorski of Nagorski/Knaeble Appraisals, which shows a new value of
$752 , 000 . A copy of that appraisal is enclosed for your review.
Thus, the total loan to value ratio, including the EDA loan, stands
at 73% . Hence, the EDA would remain in a collateral position that
is acceptable.
Please call me with any questions or comments . We look forward to
your response .
Sncer y,
, t
,James H. Gessert .
Vice President
MAIN STREET OFFICE SCHOOL STREET OFFICE OTSEGO OFFICE
630 Main Street 846 Freeport Avenue 15800 88th Street NE
Elk River, MN 55330 Elk River, MN 55330 Otsego,MN 55330
(763)441-1000 (763)441-9000 (763)441-7700
Fax (763)441-0847 Fax (763)441-0791 Fax (763)441-7755