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ITEM 5. <br /> ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY <br /> • <br /> MEMORANDUM <br /> TO: Economic Development Authority <br /> p-r- <br /> / FROM: Paul T. Steinman, Director of Economic <br /> Development <br /> DATE: March 5, 1997 <br /> SUBJECT: Approve Business Incubator Financing <br /> and Budget <br /> Issue <br /> It is appropriate at this time for the EDA to approve the business incubator <br /> financing and a business incubator budget prior to approving the final Lease <br /> Agreement and Repayment Agreement with Larry Hickman. Attached to <br /> this memo is the statement of financial activity for the EDA for month ending <br /> up February, 1997, and a business incubator financial analysis. <br /> Background <br /> For the past six months staff has been researching options with regard to <br /> establishing a business incubator project in Elk River. Larry Hickman, <br /> owner of the Furniture and Things building, has been a willing participant as <br /> a partner in this program. The project which has been established to date <br /> includes leasing 13,186 square feet in the former Furniture and Things <br /> building at a rate which is approximately $6.00 per square foot below market <br /> value. This space would allow for the location of approximately five <br /> incubator tenants, with room to expand into an additional area of the <br /> building at some time in the future if determined necessary and appropriate. <br /> Attached to this memo is a financial analysis of the incubator program <br /> including projections, budgetary items, total investment, and a schedule for <br /> repayment of leasehold improvement costs by Larry Hickman. The financial <br /> projections outline revenues, expenses, and annual cash flow up to a <br /> potential eight years of incubator operation. The figure in these projections <br /> which is most variable at this time is the estimated revenue to the EDA in <br /> the form of cash rent. Staff has used an estimate of sub-leasing 5,000 square <br /> IIIfeet in year one and 2,000 additional square feet in year two, at an average <br /> P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425 <br /> Equal Opportunity Housing and Equal Opportunity Employment <br />