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The Elk River Vision <br />A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community <br />engagement that encourages and inspires prosperity <br /> <br /> <br />Request for Action <br /> <br />To <br />Economic Development Authority <br />Item Number <br />7.2 <br /> <br />Meeting Date <br />October 21, 2024 <br />Prepared By <br />Brent O'Neil, Economic Development Director <br /> <br />Item Description <br />Loan Request - Modern Construction of MN <br />Reviewed by <br />Cal Portner <br /> <br />Action Requested <br />Approve, by motion, a resolution approving a business microloan to Modern Construction of Minnesota in <br />the amount of $51,499. <br /> <br />Background/Discussion <br />Modern Construction of Minnesota, owned principally by Jesse Hartung, has purchased the former Daddy-O's <br />building at 709 Main Street. Modern intends to renovate the building and relocate Tipsy Chicken, an affiliated <br />business, to the space this fall. The company has applied for a loan through the EDA's Downtown Microloan <br />Program to assist with renovation costs. Modern is the applicant, and Tipsy Chicken will be the tenant. <br /> <br />Modern purchased the building for $540,000 and will spend an additional $145,000 to prepare the building for <br />Tipsy Chicken for a total investment of $685,000. Rent from Tipsy Chicken would be sufficient to cover the <br />debt on the property. <br /> <br />Upon staff review and consultation with the Joint Finance Committee, it is recommended the loan be <br />approved for $51,499. This is an amount lower than the application and is based on the program's <br />requirement that 10% owner equity be put into the project; equity was increased to 10%, lowering the loan <br />amount correspondingly. Terms are in accordance with program policy: 3% interest rate amortized over 20 <br />years with a final balloon payment due at five years. In addition, the Committee also requested additional <br />security guarantees on the project, which are included. <br /> <br />Staff informed the Committee regarding a program provision requiring projects not to commence before <br />approval. Modern has started work, and in the review, the acquisition in August was included as a project <br />cost. The Committee felt that a reasonable linkage between project start and loan approval would be <br />acceptable even if some project components started earlier. <br /> <br />Financial Impact <br />An outlay of $51,499 from the Microloan Fund to be repaid to the fund by December 2023. <br /> <br />Mission/Policy/Goal <br />Support the growth and development of the community <br /> <br />Page 28 of 124