HomeMy WebLinkAboutR6- 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: February 1, 1995
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Svnopsis 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.
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Recommended Motion(s):
(Community Development Commission)
(Recommendation of Councilwoman Valerie Pope-Ludlam)
MOTION: That the Community Development Conmiission approve a loan guarantee in the amount not to exceed a
maximum of$320,000 plus interest to Farah Development International,Incorporated,and authorize the
Acting Director to execute all documents.
' /.;•'- �_;��.�c,, i` /,,,.;.tip /�')
Administrator BARBARA J.LINDSETH
I Acting Director
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Contact Person(s): Barbara J.LindsedVEmily Wong Phone: 5081
ProjectArea(s): Northwest(NW) Ward(s): One (1)
Supporting Data Attached: Staff Report, Note and Lender Letter:Translation-,List of Working
Capital/Financing Expenses,Western Community Bank Letter Valley B,nk Letters
FUNDING REQUIREMENTS: Amount: $320.000 Source: Tax Increment
Budget Authority: Requested
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Commission Notes:
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BJI,:EMW:am-pm.edc COMMISSION MEETING AGENDA
MEETING DATE: 2/06/1995
Agenda Item Number:
ECONOMIC DEVELOPMENT AGENCY
STAFF REPORT
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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 only payments; however,payment of the
principal balance of$64,000 was due March 26, 1994 and is currently in default. Farah has made
interest payments of$483 monthly,up through September 1994. No further payments have been
received to date, based upon the understanding that new refinancing was imminent.
Ln 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.
Furthennore, $130,000 is needed to reduce stockholder advances for unforeseen construction
costs and$54,000 is needed for working capital as well.
Staff has received a letter from Valley Bank indicating and confinning the outstanding balance and
current status of the SBA loan. We have also received confirmation from FDIC on their loan of
$68,084.
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 (+int)
* Docurnentation verifying the actual amounts of the outstanding notes is attached along with a
list of projected working capital needs/expenses. Valley Bank has indicated that it will require
a demand statement from the lender prior to disbursing funds.
Farah Investment Internationals' original request was for a $1.2 million loan for a terns of 20
years. At this tune, all parties have agreed not to refinance the SBA loan thereby reducing the
loan request and Agency exposure to $320,000.
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BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA
MEETING DATE: 2/06/1995
Agenda Item Number: _
ECONOMIC DEVELOPMENT AGENCY STAFF REPORT
Farah Development International -Arco AM/PM
February 1, 1995 Page Number -2-
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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. 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, 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 Prune 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.
The terms of the proposed Agency loan guarantee are provided below:
Guarantee Amount: $320,000 (+interest, contingent upon Valley Bank loan approval)
Term of Guarantee: 10 years
Collateral: Third Deed of Trust on real estate located at 1933 West Highland
Avenue
Guarantors: Ghassan Farah
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BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA
MEETING DATE: 2/06/1995
Agenda Item Number:
ECONOMIC DEVELOPMENT AGENCY STAFF REPORT
Farah Development International -Arco AM/PM
February 1, 1995 Page Number -3-
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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.
.z 1
BARBARA J. LINDSETH, Acting Director
Economic Development Agency
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BJL:EMW:am-pm.cdc COMMISSION MEETING AGENDA
MEETING DATE: 2/06/1995
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Agenda Item Number:
o VALLEY BANK °J SIY Sf
Q�' SINCE ti
VALLEY BANK
MORENO VALLEY OFFICE y 1960
c°MM��
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
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 �j,
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
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Farah Investments International, Inc.
102 E. Grand Blvd, Corona, Ca. 91719 Tel: (909)278-0816
January 26-5th, 1995
Tim Steinhause 2-
RDA
City of San Bernardino i ; it3 cic� F
Re: Loan with Farah Investments International, Inc.
Dear Tim,
At your request I am providing you with an explanation and a reason for our
delinquent loan with your agency. As the maturity of our loan with you came closer,
and the balloon payment came due, we started looking for a lending institution to
consolidate our debts into one business loan.
We received commitment letters from one of the institutions and opened escrow
with them expecting disbursement of the money in February 1994. However the
mortgage company we were working with filed bankruptcy and the deal was
stopped. At that time, it was too late find any money to cover our due loans at their
maturity dates, so we contacted the parties that we had matured loans with and
asked for extensions. The RDA loan was one of them.
Until November of 1994, and the first meeting of the council that we were planning
to<kc on the agenda for, we kept our payments to the RDA. So until today, we are
only three month behind and that is because we believed that this will be handled
through escrow when the loan goes through.
Respectfully,
Kal Fara
02-01-1995 02:2-PM FROM Va l l ey Bank C?.!,C:F! 9556 TO 3845135 P.05
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SINCE VALLEY ANK I
VMUYSMK
ADlv7HV1STRATlOJV 1960
January 2f, 1995
Tim Steinhaus,
Agency Administrator
City of San Bernardino
Economic Redevelopment Agency ll
201 North "E" Street
Saa Bernardino, CA 92401-1507
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Dear Mr. Steinhaus:
Pursuant to our telephone conversation of Jan. .24, 1995,
following is a summary of what we discussed.
Farah Invc-stnent :
You inquired as to the investigation Valley Bank performed on the
personal note to be paid off from the proceeds of the new Loan. ,
As we discussed, Valley Bank will recxsire a demand. statement from
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the ].ender prior to disbursing funds. Valley Bank will. then
payoff the lender directly. In discussing the validity of the l
existing debt I stated that some credence must be given to what
the borrower states he is going to do with the funds_ The
decision to make the loan is, or should be based on character,
.credit, and ability to repay. If you are questioning whether the
borrower is being honest concerning the use of the proceeds, you
are questioning the borrower's character. it is not always
possible to Lie 100 sure 04-.at the borrower is using the lean
proceeds as previously stated. Furthermore, if you find out
later that the borrower was not completely honest with you theta
you have a case of fraud.
Concerning the SBA loan we have contacted the bank that holds the
SBA loan. They have info-rmed us that the loan is current . We
have given this information to Gene Wood. I b+-t�lieve he will be
providing Fms.ly Wong with this and other information requested
within a few days. {j
Valley Bank looks forward to a mutually beneficial relationship,
and is willing to provide assistance whenever possible. If you
have any questions, please do not Hesitate to contact me.
sincerely,
Mark A. Nugent
V.P. /Sr. Lendin fficer
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24010 SUNNYM.FAD BLVD., GA O,-5W • (903}242-7859 + FAX(905")242-1903 *F.D.BOX 180,MORPNO VAUIDI CA
TOTAL F.uT5
02-01-1995 11:5�M FROM Malley Bank h1•asCA 92556 TO 8845135 P.01
VALLEY BANK ��,tvse
SI�iCE �
v�efrs;n�K
Post-ie Fax Note 7871 D� ASR
Tcr
January 25, 19 94 N Go.C1a"` i4 lC�it
ColDept. �
Phone#+ Pixxie
FZ# Fax#
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Gene Wood
E.H. Wood & Associates
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Dear Mr. Wood:
Pursuant to our telephone conversation orz Jan. 24, 1995
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concerning Farah Investment fallowing is the information yov
requested.
On Jan. 24, 1995 we spoke with General Bank, Craig Lee coricern:ing
Lb(zt SSA loan of Farall Investment . Mr. Lee informed us that the
loan is current and that the outstanding balance is $856,741.09.
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I hope that this information will be of benefit to you and I
answers your concerns. If you have any questions, please do not
hesitate to contact me.
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Very Truly Yours, `
Mare A. Nugent
V.P. /Sr_ Lending offIcer
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24010 6UNIVYf,#EAD BLVD,,CA 92556 . y,Yk9/242-1959 + rAx(3Q9)242-1993 °P0.Srr_?,z. 1&%R OMEN VAL 1_F-Y, (,-A 4y55€Tt7 iFE�
TOTAL F'.01
OX X FDIC
Federal Deposit Insurance Corporation
Western Service Center
Mail Stop J-71 OA-70, PO Box 7649 Newport Beach, CA 92868 (7141263.7868 ♦ FAX(714)283-7879
Via Fax (909) 734-4808
January 11, 1995
Mr. Ghassan S. Farah
Subject: Western Community Bank, 4615
Corona, CA - In Receivership
LAMIS Number: 501272941
Asset Name: G. Wayne Wickstrom
Dear Mr. Farah:
Per your request, the following is the amount 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 $20.27
Should you have any questions, please call me at (714) 263-7859.
Very truly yours,
Vincent Fiawone
Account Officer
Real Estate Loans
l�
From CHOCOFA_TEL09944394 PHONE No. 09944048 Jan. 12 1995 6:19PM P01
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ierne-c 1:4-14--,J Suhavl Farah Beirut i"._ 5/1/95
Only 180000. 00 U. S. Dollars
On the date 1 2/?7/q1 and by t h:1 not e we tiav i n Beirut to
Buildina and Construction Inc.
the amount, abovF of one hundred and eighty thousand U. S. Dollars
with interest yearly 3n 1h4-? islmc.unt c,f 22. 00% in thf {c:jlir:wjncl
orris„
P ZIVM$-r-,± monthly Jr) thr, „^nuunt. c,i three thousand three hundred
U. S. Dollars
1aE't (�z1Vf11,-f t Ir, l.tle Z Piiuirrst o7 one hundred and eiqhty thousand
U. S. Dollars at tht, d tit- t'.i m,
�::uhavl Farah
H « !n
Noi r
Suhavl Farah '7it--'7 Beirut i .- 5/1/95
Only 180000. 00 U. S. Dollars
On the date 12/?7/y] ar:d tiv th.3 note we nay in Beirut 1,_,
Building and Construction. Inc.
the amount above of one hundred and eighty thousand U. S. Dollars
with interest yearly i -: t he ,.:rnount of 22. 00% in t};F• of loWi ncl
o1'dt-?
Pavmeni monthly in t Y,c- :_^;count. ai three thousand three hundred
U. S. Dollars
iast (,avlff'z-nt i„ 1.ne ar;;ount. o7 one hundred and eighty thousand
U. S. Dollars at tho dut, is i mo=.
Suhavl Farah
I, Hani W. Gabriel, hereby certify that I have translated
the attached writing, that I am competent to translate such
document and that to the best of my knowledge and belief, the above
translation is true and correct.
Dated: . {
Hani W. Gabriel
From CHICICIDFA-TEL09944394 PHOHE Hc). 09944048 Jan. 26 1995 11:31AM F'Cll
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BUILDING & SUPPLIES , Co. J J A ox
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FT-cm CHOCOFH_TEL09944394 FHOHE Pdo. : O '344046 26 1995 11:47AH P1
BUILDING & SUPPLIES , Co. . J. f- O'N' 4 t
January 26, 1995
Fax No.: 001-909-7366862
To Whom It May Concern;
This lottor has been faxed et the request of Mr. Souhail Farah.
We ArO A i'AMPAtly f:11l1(tAIt7.Pf{itl lending innn1PF to the building indurtry and itr,Runpllek Mr, Souhail
Farah borrowed u total of US$ 180,000.00 from our company for a project in the USA
Mohammad Kame1
President
JAN-31-1995 14:15 SABO SAN BERNAR P.01
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Building and upplies Company j
The signer o the Contract Suheil Farah, the City Beirut, Due May 1, 1995.
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Only 180,000 U.S. Dollars.
In the date of December 27, 1991 and in accordance with this document!we pay in
Beirut to BuOing and Supplies Company
The amount Pown above in the amount of one hundred and eighty thousand U.S.
dollars with annual interest in the amount of 22% in the following manna r
A monthly payment in the amount of three thousand and three hundred Q-S. dollars
A final payment in the amount of one hundred and eighty thousand U.S. dollars at°the
due date.
Suheil Farah .
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TOTAL P.01