8.0. EDSR 01-11-1993 ITEM 8
tY14
TO: ECONOMIC DEVELOPMENT AUTHORITY
iver FROM: WILLIAM RUBIN ED COORDINATOR
IN
DATE: JANUARY 8, 1993
SUBJECT: LOAN REQUEST FROM ALLEGIANCE
REALTY
INTRODUCTION
On Thursday, January 7, 1993, the EDA Finance Committee met to
review a request from Allegiance Realty, 823 Main Street, Elk
River, Minnesota. The following Committee members were in
attendance: Jim Simpson, Bill Birrenkott, Lloyd Brutlag, Tom
McNair, and Bud Houlton.
Following a presentation by the principals of Allegiance Realty
(Carol Luukkonen, Donna Grover, and Marilyn VanPatten) the
Committee recommended approval of this loan to the EDA
Commissioners.
BACKGROUND
• Enclosed is a copy of a December 28, 1992 memo on the
Allegiance Realty loan request that was sent to the Finance
Committee. As indicated in the memo, the EDA loan will be used
by Allegiance to supplement primary financing for the
acquisition of an office condominium at 305 Main Street and for
the purchase of a telephone system. The real estate portion of
the loan, comprised of $21,500, will be amortized over a
fifteen year period with the initial interest rate tied to
prime, but adjusted every six months . The equipment portion of
the loan, comprised of $6,000, will be amortized over a five
year period with the initial interest rate tied to prime, but
adjusted every six months . A mortgage will be filed against
the real estate, and, there will be a U.C.C. filing for the
equipment as well. In addition, personal guarantees from
owners and spouses, plus a corporate promissory note, will be
required.
ACTION REQUESTED
The EDA is asked to approve a $27,500 revolving loan to
Allegiance Realty. The loan will be comprised of a real estate
loan covering a fifteen year repayment schedule and an
equipment loan which covers a five year repayment schedule.
The initial interest rate on both loans will be six percent
(the current local low prime rate) and this rate will be
411 adjusted semi-annually (at six month intervals) .
720 Dodge Avenue N.W., Elk River, Minnesota 55330 (612) 441-7420
INFORMATIONAL ITEM
The Finance Committee also agreed to conduct its own workshop
on the EDA revolving loan fund. Items for discussion will
likely include:
- Diversity of loan portfolio (real estate loans versus M &
E loans etc. )
- Gap loans versus loans of last resort
- Priority of end users (industrial users versus service
versus retail, etc. )
- Loan criteria (employment, impact on tax base, etc. )
S
•
uyof TO: EDA FINANCE COMMITTEE
cif River
FROM: WILLIAM RUBIN, ED COORDINATOR VL,
DATE: DECEMBER 28, 1993 II ��►►
SUBJECT: LOAN REQUEST FROM ALLEGIANCE
REALTY (DBA COLDWELL BANKER
ALLEGIANCE)
INTRODUCTION
Staff is in receipt of a request for a loan from the EDA
Revolving Loan Fund in the amount of $30,250. The loan is
requested from Allegiance Realty, a Minnesota Corporation that
is owned by Carol Luukkonen, Donna Grover, and Marilyn
VanPatten. If approved, the loan will be used by Allegiance
Realty to supplement primary financing for the acquisition of
an office condominium at 305 Main Street, Elk River, Minnesota
and for the purchase of a telephone system.
While an EDA loan of $30,250 is requested, staff is
recommending a loan of $27,500 and the balance of this memo
reflects that amount.
• BACKGROUND
Allegiance Realty (dba Coldwell Banker Allegiance) , 823 Main
Street, Elk River, Minnesota, was incorporated in late 1990.
The principals have over sixteen years experience in real
estate sales. The existing office space at 823 Main Street is
leased to Allegiance Realty and provides limited opportunities
for recruiting new agents. As a result, the company seeks a
larger, more permanent office.
The attached map indicates the location of Allegiance Realty's
new office space. It is located in the middle suite of the
three unit office condominium at Evans and Main Street.
Earlier this year, Jerry Nyberg, D.D.S. , purchased a suite in
the condominium and the final suite is being prepared for
occupancy by a physical therapy group.
The Allegiance condominium project is estimated at $139,000,
broken down as follows:
Building $ 75,000
Land 25,000
Interior-lease hold 33,000
Equipment(telephone system) 6,000
• TOTAL $139,000
Financing for this project is proposed as follows :
720 Dodge Avenue N.W., Elk River, Minnesota 55330 (612) 441-7420
Loan Request/Allegiance Realty Page 2
December 28, 1992
• Primary lender $ 99,750 (see attached
letter, re: terms
and conditions)
Elk River EDA 27,500
Equity 11,750
TOTAL $139,000
Allegiance Realty seeks supplemental financing from the EDA for
the purchase of the office suite, and, for the purchase of the
telephone system.
Loan repayments are proposed as follows:
SOURCE TERMS INTEREST RATE
Primary Lender 20 year amortization; 9 . 75%
4ccLi50 5 year balloon
Elk River EDA 15 year amortization 6% (current
(Real Estate Portion) low prime)
adjusted every
4211500 six months
Elk River EDA 5 year amortization 6% (current
(Equipment Portion) low prime)
• adjusted every
ow six months
For the period ending November 30, 1992, Allegiance Realty
report revenues of $331,911 and a net income of $4,579 .
Occupancy expenses at 823 Main Street for November, 1992,
totalled $911; year-to-date occupancy expenses totalled
$8,334 .
Allegiance Realty currently employs 11 persons . As a result of
the move to the condominium, the company projects that the
total number of employees will reach 25 (additional agents,
sales manager, administrative support) .
SUMMARY
As with previous loan requests, the Finance Committee can
expect a short presentation by the applicant. The Finance
Committee' s recommendation on this request will be considered
by the EDA Commissioners at their January 11, 1993, meeting.
Conditions for the approval of this loan will likely include:
- Filing and recording of a $21,500 mortgage for the real
estate
- UCC filing and recording for the equipment (telephone
S system)
Personal Guarantees from owners and spouses
- Corporate Promissory Note
Loan Request/Allegiance Realty Page 3
December 28, 1992
• - Interest Rate on EDA loans initially 6%; adjusted every
six months
- Payment of the mortgage registration fee and other related
recording or filing fees by the the borrowers .
•
111
111 FIRST NATIONAL BANK OF ELK RIVER
• 729 MAIN STREET • ELK RIVER, MINNESOTA 55330 • (612)441-2200
December 10, 1992
Mr. William Rubin
Economic Development Coordinator
City of Elk River
720 Dodge Ave. NW
Elk River, Mn. 55330
Dear Bill:
Allegiance Realty, a corporation owned by Carol Luukkonen, Donna
Grover and Marilyn Van-Patten-Chuba have requested a commercial
real estate mortgage to purchase a condo office space at 307 Main
Street, Elk River, Mn.
They indicate a purchase price including leasehold improvements of
$133, 000.00. The First National Bank of Elk River has issued a
conditional approval to Allegiance Realty for a commercial real
• estate mortgage with the following terms and conditions.
TERMS
1. Principal: $99,750.00 (75% Loan to Value)
2. Rate: 9.75%
3. Term: 5 year Balloon-20 year amortization schedule
CONDITIONS
1. Appraisal of $133,000.00
2. Down payment of $33, 250.00 (Cash or Subordinated debt)
3. Personal Guarantee' s of Corporate Owners and their
spouses.
4. Final approval of the First National Bank of Elk River
Board of Directors.
If you need any clarification on this conditional commitment,
please contact me.
Sincerely,
sly/4.44_4..6
Gc.mac
Duane E. Kropuenske
Executive Vice President
DEK:lcb
111
ZIMMERMAN OFFICE FIRST NATIONAL MORTGAGE FIRST NATIONAL SECURITIES
Mary& Main Street 729 Main Street 729 Main Street
Local: 1612) 856-2266 Elk River, Minnesota Elk River, Minnesota
Metro: (612)421-0463 1612)441-7133 (612)441-2200 ext. 16
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