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Home My WebLink AboutR12- Economic Development ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION ACTION FROM: BARBARA J.LINDSETH SUBJECT: FARAH DEVELOPMENT Acting Director INTERNATIONAL-ARCO AM/PM DATE: January 18, 1995 ------------------------------------------------------------------------------------------------------------------------------------------- Synopsis of Previous Commission/Committee Action(s): On February 17, 1992,the Community Development Commission approved the loan of$64,000 to Farah Development International,Inc.,to complete the ARCO AM/PM project located at California and Highland Avenues. On November 10, 1994,the Redevelopment Committee received and filed a memorandum directing staff to continue its analyses of the project,or in the alternative,give staff specific directions regarding the request for refinancing as deemed appropriate. ------------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion(s): (Community Development Commission) (Recommendation of Councilwoman Valerie Pope-Ludlam) MOTION: That the Community Development Commission approve a loan guarantee in the amount not to exceed a maximum of$320,000 to Farah Development International,Incorporated,subject to verification of information regarding current outstanding loans,and authorize the Acting Director to execute all documents. Administrator BARBARA J.LINDSETH Acting Director ------------------------------------------------------------------------------------------------------------------------------------------- Contact Person(s): Barbara J.Lindseth/Emily Wong_ Phone: 5081 Project Area(s): Northwest(NW) Ward(s): One (1) Supporting Data Attached: Staff Report:Promissory Note:List of Working Capital/Financing Expgns@sWestern Community Bank Letter:Valley Bank Commitment Letter FUNDING REQUIREMENTS: Amount: $320.000 Source: Tax Increment Budget Authority: Requested ------------------------------------------------------------------------------------------------------------------------------------------- Commission Notes: ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/23/1995 Agenda Item Number: 'U h%:ONOMIC DEVELOPMENT AGEN%-Y STAFF REPORT ------------------------------------------------------------------------------------------------------------------ Farah Development International--Arco Am/Pm BACKGROUND On February 17, 1992, the Community Development Commission approved a loan in the amount of$64 ,000 at 9% interest over two years to Farah Development International Incorporated in order to complete the development of the ARCO AM/PM project located at California and Highland Avenue. To date, Farah has paid interest payments, however, payment of the principal balance of$64,000 was due in February of 1994 and is currently in default. In addition, other outstanding loans relative to this project include an approximate $870,000 SBA loan as well as a third loan in the amount of approximately $68,084 (plus $20.27 per diem interest)with Western Community Bank which was recently taken over by the FDIC. Furthermore, $130,000 is needed to reduce stockholder advances made by members of his family and $54,000 is needed for working capital as well. At this time, Mr. Ghassan Farah of Farah Investments International, wishes to refinance and consolidate two (2) loans and reduce stockholder advances under one(1) loan transaction with Valley Bank. Therefore, he has requested a loan guarantee from the Agency to Valley Bank in the amount of$320,000 for the following purposes: $ 65,000(+int) Repay existing Agency loan $ 71,000(+int)* Repay existing debt with FDIC $130,000* Reduce stockholder advances $ 54,000* Working capital/financing costs $320,000 * Documentation verifying the actual amounts of the outstanding notes is attached along with a list of projected working capital needs/expenses. Farah Investment Internationals original request was for a$1.2 million loan for a term of 20 years. At this time, all parties have agreed not to refinance the SBA loan thereby reducing the loan request and Agency exposure to $320,000. ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/23/1995 Agenda Item Number: ECONOMIC DEVELOPMENT AGENCY STAFF REPORT Farah Development International -Arco AM/PM January 18, 1995 Page Number-2- ------------------------------------------------------------------------------------------------------------------ ANALYSES Staff s review of Mr. Farah's financials indicate that the project was profitable as of fiscal year ending January 30, 1993 with a positive gross funds flow of$86,335. Assuming a similar or better cash flow for year ending 1994, Farah Investments appears to be in a strong gross funds flow position. The project has a strong working capital position of$98,222 as well as an equity position of$688,715. However, by repaying and reducing stockholders advances by $130,000, the currently strong equity position of$688,715 would thereby be reduced to $558,715, which reduces the debt to equity ratio from 1.53 : 1.00 down to 1.23 : 1.00. The new loan of$320,000 would effectively consolidate his entire debt service, secure additional working capital funds,repay personal debt to family members, and repay the Agency's loan balance. The terms of the proposed Valley Bank loan are provided below: Loan Amount: $320,000 Interest Rate: Bank of America Prime Rate plus 3.00%, adjusted daily Fees/Costs: Two Points ($6,400)plus any out-of-pocket costs as incurred Repayment Terms: 120 monthly principal payments in the amount of$2,666.67,plus interest Maturity: Ten(10)years from date of note. Collateral: 1) Second Deed of Trust on real estate located at 1933 West Highland Avenue; 2) First Security Interest in all business assets of the A.RCO AM/PM Mini-Mart Guarantors: Ghassan Farah and the Redevelopment Agency of the City of San Bernardino. The terms of the proposed Agency loan guarantee are provided below: Guarantee Amount: $320,000 Tenn of Guarantee: 10 years Collateral: Third Deed of Trust on real estate located at 1933 West Highland Avenue Guarantors: Ghassan Farah ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/23/1995 Agenda Item Number: ECONOMIC DEVELOPMENT AGENCY STAFF REPORT Farah Development International-Arco AM/PM January 18, 1995 Page Number-3- ------------------------------------------------------------------------------------------------------------------ By providing a loan guarantee for this project, the Agency will be taking steps to assist the continued operation of a viable and beneficial service to the community. In addition, the proposed loan will pay off the Agency's direct loan and free up funds for potential assistance to other projects. Based on the foregoing, Councilwoman Pope-Ludlam recommends adoption of the form motion. BARBARA J. LINDSETH,Acting Director Economic Development Agency ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/23/1995 i Agenda Item Number: t'i .t E, c �'"�'s, J-3 w a 4 rof.�,a va'F'� � ;x • '�'e �` y�4 i From CHOCOFA_TEL09944394 PHONE No. 09944048 Jan. 12 1995 6:19PM P01 ej, 41 p 1 + 1 49_A y.St 4nJ W Wi till . . .1t 114 "L.%Aj,� ti '�'°' �^,�„!!�'SI-- "oyLill � ;�•5--.�'�''��JY-9� c..�ll �,4�t�.d%� �.S,a eJ.1�� e�1 �,l�.r°!1 �{ Vial �l wk- .41. U.9!W 9 2.14 i i Not.�>. Th sionr>r Suhavl Farah Ci tv Beirut Dt;e 5/1/95 Only 180000. 00 U. S. Dollars On the date 12/?7/yl and by this: note we nav in Beirut to Buildina and Construction Inc. the amount above of one hundred and eighty thousand U. S. Dollars with interest yearly in the amount of 22. 00% in the- iollowi.ncf orde l— Pavntent monthly in t hr> amount c,i three thousand three hundred U. S. Dollars last pavff,r-At in the a'TlrJunt Of one hundred and eighty thousand U. S. Dollars at they due ti-mt>. Suhavl Farah 17 r Tim St i�i nh.iu tee; As tier our conversation. I am s•uoplvinn you with a disbursement table for the Loan to be awarded by Valley BAnk Workina Capital/Firiancinq Costs - E. H. Wood S9600. 00 - Vallev Bank Two pt--. S6400. 00 - Bank other costs - RDA - Ga=soline 2 Loads 5-2000. 00 - Frozen Foods-Sub station $10000. 00 Subtotal $54000. 00 Existing Debt: - FDIC 568084. 20 - RDA X66600. 00 - Buildina_ and Construction Inc. 5131000. 00 _ Subtotal $236000. 00 Grand Total 5320000. 00 Note: The note with Buildina and Construction Inc. will be complemented f,v ncrrorial s<avinc7s. Re -_Z'e(:- f u 1 IV, Kai Farah 1 i`7 FDIC Federal Deposit Insurance Corporation Western Service Center M&H Stop J-71 OA-70, PO Box 7649 Newport Beach, CA 92868 (714)2a3.7869 4 PAx(714)283-7879 Via Fax (909) 734-4808 January 11, 1995 Mr. Qhassan S. Farah Subject: Western Community Bank, 4615 Corona, CA - In Receivership LAMIS Number: 501272941 Asset Name: G. Wayne Wickftrom Dear Mr. Farah: Per your request, the following is the arnount owed on the above-referenced loan: Principal Balance $64,348.88 Accrued Interest to January 11, 1995 $3,735.32 Total $68,084,20 Per Diem Interest $20,27 { Should you have any questions, please call me at (714) 263-7859. Very truly yours, A Vincent Fiattarone Account Officer Real Estate Loans Tr)',4 / `7 OJIDL SEaL/ o VALLEY BANK a� SINCE " VALLEY BANK MORENO VALLEY OFFICE y 1960 Fc MM�a January 11, 1995 Mr. Ghassan Farah, President Farah Investments International, Inc . 102 East Grand Blvd. Corona, CA 91719 Dear Mr. Farah: Valley Bank has reviewed your request for the financing needs of the AM/PM Mini-Mart at 1933 West Highland Avenue, San Bernardino, CA and is willing to provide you with a commitment , as follows : BORROWER Farah Investments International , Inc . LOAN AMOUNT $320, 000 INTEREST RATE Bank of America Prime Rate plus 3 . 00%, adjusted daily FEES/COSTS Two Points ($6, 400) plus any out-of- pocket costs as incurred REPAYMENT TERMS : 120 monthly principal payments in the amount of $2 , 666 . 67 , plus interest MATURITY Ten (10) years from date of note PURPOSE $136, 000 - Repay existing debt with FDIC and San Bernardino RDA $130, 000 - Reduce Stockholder Advances $ 54 , 000 - Working Capital/Financing Costs $320, 000 - Total Loan Request COLLATERAL Second Deed of Trust on real estate located r at 1933 West Highland Avenue, along with a UCC Financing on business assets GUARANTORS Ghassan Farah and the Redevelopment Agency of the City of San Bernardino 24010 SUNNYMEAD BLVD., CA 92553 (909)242-1174 • FAX(909)242-1903 •P.O. BOX 188, MORENO VALLEY, CA 92556-0188 This commitment is contingent upon the Bank ' s ability to obtain the appropriate positions in the collateral as outlined above. If you are in need of any further information, please do not hesitate to contact either John Stenz or the undersigned at (909) 242-1174 . E ly, Nugent esident/ for Lending Officer CC : Ms . Emily Wong Redevelopment Agency of the City of San Bernardino r