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Home My WebLink AboutNB1- Development Department DEVELOPMENT DEPARTMENT OF THE CITY OF SAN BERNARDINO ECONOMIC DEVELOPMENT AGENCY RE UEST FOR COMMISSION/COUNCIL ACTION FROM: BARBARA J.LINDSHM SUBJECT: FARAH DEVELOPMENT Acting Director INTERNATIONAL-ARCO AM/PM DATE: January 12, 1995 ------------------------------------------------------------------------------------------------------------------------------------------- Synopsis of Previous Commission/Council/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 informatio regarding current outstanding loans. A inistrator BARBARA J.LINDSETH Acting Director ------------------------------------------------------------------------------------------------------------------------------------------- Contact Person(s): Barbara J.Lindseth/Emi1 Wong Phone: 5081 Project Area(s): Northwest(NW) Ward(s): One (1) Supporting Data Attached: Staff Report FUNDING REQUIREMENTS: Amount: $320.000 Source: Tax Increment Budget Authority: Requested ------------------------------------------------------------------------------------------------------------------------------------------- Commission/Council Notes: ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/12/1995 Agenda Item Number: _J0 DEVELOPMENT DEPARTMENT ECONOMIC DEVELOPMENT AGENCY 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$71,000 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* Repay existing debt with FDIC $130,000* Reduce stockholder advances $ 54.000* Working capital/financing costs $320,000 * Mr.Farah is currently compiling documentation to verify the actual amounts of the outstanding notes which will be provided to staff 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. ANALYSES Staffs 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. The project has a strong working capital position of$98,222 as well as an equity position of$688,715. 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 ARCO AM/PM Mini-Mart Guarantors: Ghassan Farah and the Redevelopment Agency of the City of San Bernardino. ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/12/1995 Agenda Item Number: DEVELOPMENT DEPARTMENT/EDA STAFF REPORT RE:FARAH DEVELOPMENT INTERNATIONAL-ARCO AM/PM January 12,1995 Page 2 The terms of the proposed Agency loan guarantee are provided below: Guarantee Amount: $320,000 Term of Guarantee: 10 years Collateral: Third Deed of Trust on real estate located at 1933 West Highland Avenue Guarantors: Ghassan Farah 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 Development Department ------------------------------------------------------------------------------------------------------------------ BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA MEETING DATE: 1/12/1995 Agenda Item Number: