5.1 EDSR 10-20-2014 - Laserfiche WebLink

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City of Elk River,Minnesota Stonesthrow Properties,LLC.request for Tax Abatement October 10,2014 Page 2 Background Stonesthrow Properties, LLC (the developer) and Coin-Tainer Co. LLC are owned equally by David M. Walters and Barbara J. Walters. Stonesthrow Properties, LLC is a real estate development company. Coin-Tainer Co., LLC is a coin, currency, and raffle ticket roll manufacturer and wholesale/retail distributor. The developer has proposed to purchase the commercial property located at 17834 Industrial Circle NW, which is currently occupied by Coin-Tainer Co., LLC and four other manufacturing firms. According to the developer, Coin-Tainer Co., LLC currently occupies 50%of the approximately 50,585 square feet of the net rentable area within the building. Developer Request for Tax Abatement Assistance The developer submitted a request for tax abatement assistance from the City of Elk River and Sherburne County to assist with financing the proposed $2.6 Million acquisition of the commercial property currently being leased by Coin- Tainer Co. LLC and four other firms. The developer has requested approximately $359,580 (according to the provided supplements to the application) in abatement assistance over 10 years or the maximum available amount (under the City's abatement policy), whichever is greater, to aid in acquisition of the property. We have assumed (based upon the application materials)that the developer will fund approximately 92%($2,400,000)of the acquisition upfront through a Contract for Deed.A Contract for Deed is an alternative financing method in which the purchase of property is financed by the seller instead of a third party lender.These types of instruments are typically utilized when a buyer would not otherwise qualify for conventional financing. Based on the provided information in the application and additional back-up information from the applicant, it appears the financial assistance requested from the City would be provided in annual installments to reduce the debt service impact created by the Contract for Deed and SBA financing at the conclusion of the Contract for Deed. Sources of Funds The Developer's submittal includes a preliminary total project budget of $2,600,000, with approximately 92% ($2,400,000) of that amount proposed to be from a Contract for Deed and approximately 8% as a down payment ($200,000)which we have assumed will be comprised of some type of private equity. Please see the table below. Project Costs Total Cost Sources of Funds Total Sources Property Acquisition $2,600,000 Private Equity(assumed) $200,000 —Down payment Contract For Deed $2,400,000 Total Costs $2,600,000 Total Sources $2,600,000 The Contract for Deed terms,as illustrated in the supplements to the developer's application,will be for a term of five years(amortized over 25)at an interest rate of 5.5%. The agreement is contingent upon the receipt of tax abatement from the City of Elk River and Sherburne County and the receipt of a microloan from the City of Elk River.