HomeMy WebLinkAboutR13-Economic Development Agency
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DEVELOPIIEII'T DEPARTIIEII'T
OF TIlE CIn OF SAIl B'RIIWlVnllro
BODEST FOR COIMISSIOII'/COOIICIL ACTIOII'
From:
KENNETH J. HENDERSON
Executive Director
Subject: BAllIIOII' ADrO ~J:JIiI'
RErEB'lIOII'
Date:
April 29, 1992
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SvnoDsis of Previous Commission/Conncil/Committee Action(s):
None
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RecommPnded IIotion(s):
(COIIIIIUIlitv Develollment r---fssion)
!lOTIOII'
That the Community Development Commission approve a
business retention loan to Harmon Auto Center and
authorize the Chairman and the Executive Director to
execute all documentation necessary for the
implementation thereof; also that the Development
Department budget be increased by $144,000.00.
Adm~rator
~RSOII'
Executive Director
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Contact Person(s): Kenneth J. Henderson/John Wood
Phone:
5081
Project Area(s): SEIP
Ward(s):
3
Supporting Data Attached: Staff ReDort: CODV of Tokai Bank Credit CorD Ltr: MaD
FUNDING REQUIREMENTS:
Amount: $
Tax Inc.
$144.000
Source:
Budget Authority:
Bein2 Sou2ht
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Commission/Council Botes:
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KJH:JMW:lmp:2201B
COIMISSIOII' IlEETIBG AGElIDA
lIeeting Date: 05/04/1992
Agenda It_ lI1aber:
/3
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D~VBLOPMB.T DBPAR~B.T
OF THE CITY OF SO BBRIWlDlRO
Sun' REPORT
Bal'llOll Auto Center Retention
The City of Colton ("Colton") has been attempting to persuade Harmon
Auto Center ("Harmon") owner Mr. Robert Stallsmith to relocate to a
site adjacent to 1-2lS, northeast of the new Walmart store. Colton has
offered a very serious and attractive relocation incentive package
which has been under consideration by Harmon for some time now.
Several years ago, when Roger Harmon decided to relocate to the Auto
Plaza, he arranged construction financing with TOkai Bank ("Toka1").
Subsequent to the construction of the new dealership, additional funds
were borrowed from Tokai and secured by the dealership real estate.
Today~ the total amount of the Tokai loan is approximately $S.4
million, despite the fact that the property recently appraised at only
$4.S million. Mr. Stallsmith, who currently leases the property from
Roger Harmon for $46,SOO per month, is desirous of owning his facility
(either here or in Colton) and has an option to purchase the subject
facility from Roger Harmon for $S.4 million.
Since the property was appraised for only $4.S million, Mr. Stallsmith
was understandably reluctant to try to exercise his option to purchase
at $S.S million, and became increasingly interested in Colton's offer.
Though he has approximately five (S) years left on his lease with
Harmon, with a constantly escalating rent factor, staff became
concerned that at the end of the lease he would relocate to Colton. To
make matters worse, Mr. Stallsmith has recently purchased the Royal
Chrysler/Plymouth/Suzuki ("Royal") franchise and would, if he were to
relocate to Colton, take it with him. Needless to say, such an action
would have dire consequences on the continued success of the San
Bernardino Auto Plaza.
Staff and consultant Mr. Gene Wood of E.B. Wood & Associates met ^
recently with Mr. Stallsmith and representatives of Tokai Bank, in an
effort to craft some mutually-beneficial arrangement that would allow
Harmon Auto Center to remain in San Bernardino. Despite the fact that
the dealership real estate is overencumbered, Tokai was unwilling to
entertain a partial debt writeoff which could have resulted in a
palatable purchase price for Mr. Stallsmith. After considerable
negotiation, however, Tokai ultimately agreed to provide $4.9 million
in financing for Stallsmith'S purchase of the property from Roger
Harmon. The very reasonable loan terms include an interest rate of
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KJH:JMW:lmp:220lB
COMMISSIOlI MBBTIRG ACDDA
Meeting Date: OS/04/1992
Agenda Itell R1aber: 13
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DBVBLOPMar DBPAltIM1!l.l STAFF UPORT
IIAJIMOlf AUTO WilUJU( bxu-.rIOlf
April 28, 1992
Page lf1Eer -3-
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prime plus one-half, floating, a thirty (30) year amortization period
and no charge for points. The monthly payment on the loan would be
approximately $33,000.00, as opposed to Stallsmith's curren~,monthly
rent of $46,500.00. Mr. Stallsmith was very pleased with this result
and is much more sanguine now about the prospect of remaining in San
Bernardino.
The purchase of the Royal Chrysler/Plymouth/Suzuki dealership, however,
will cost Stallsmith an additional $15,000.00 per month. He has
requested a Development Department loan of $144,000.00 to provide some
relief during his first two (2) years of consolidated operation. Staff
feels that such a loan can be justified since it will help retain Royal
in the Auto Plaza until next October, when the exciting, new generation
of Chrysler automobiles is scheduled to be unveiled. Another
consideration is that, were it not for Mr. Stallsmith's interest in it,
the Royal dealership would probably have gone out of business,
hampering the economic turnaround taking place in the plaza.
The proposed deal points are as follows:
- Loan of $144,000, to be disbursed $6,000 per month over twenty-four
(24) months.
- Interest rate of 9X (1.5X better than prime plus one).
- Loan origination fee of 1.5X.
- If sales tax generated does not exceed base year (1991) by lOX at the
end of two (2) years, principle plus accrued interest all due and
payable.
- If sales tax generated at the end of two (2) years exceeds base year
by lOX, loan is forgiven.
- Stallsmith agrees to stay in San Bernardino a minimum of 10 years.
(If Stallsmith moves in year ten (10) or earlier, he will pay to
Agency $500,000.
- If Stallsmith moves in year 11, he only repays original loan amount
or $144,000, assuming he has not done so earlier.
Upon Community Development Commission approval, staff will instruct
Agency Counsel to prepare all necessary loan documentation. In
addition, because the Royal dealership technically lies outside the
boundaries of the Southeast Industrial Park Redevelopment Project Area,
mutual benefit resolutions will be required. This documentation will be
attached and brought back for review by the Community Development
Commission.
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KJH:JMW:lmp:2201B
COIMISSIOlf MBB'lIlIG AGElIDA
lIeetiDg Date: 05/04/1992
Agenda Itea lfuIIber:
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DEVELOPIIDr DBPn-m2 StiFF UPOR'l
1IARM01f AII'lO IOJ5IUU KnI5lUI01f
April 28, 1992
Page lflaber -4-
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In summary, the retention of Harmon Auto Center and Royal
Chrysler/Plymouth/Suzuki is crucial to the ongoing viability of the San
Bernardino Auto Plaza. During 1991, which was an off year for
automobile dealers, Harmon Auto Center generated"$188,OOl.00 in sales
tax revenue to the City, while for Royal the number was $77,092.00. The
total sales tax revenue, then, generated by these two dealerships
during 1991 was $265,093.00. This project will also result in the
retention of approximately 140 jobs and the creation of 25 new ones,
for a total of 165 jobs. Tokai Credit Corporation has been very
reasonable in working out an acceptable loan restructuring and it would
seem appropriate for the Development Department to provide a relatively
small and short-term loan to assist with Mr. Stallsmith's initial
efforts with the consolidated dealership operation.
Attached for your reference is a copy of the Tokai Credit Corporation
deal point letter to Mr. Stallsmith and an Auto Plaza site map showing
the locations of the subject automobile dealerships.
Staff recommends adoption of the form motion.
01f, Executive Director
blent
KJH:JMW:lmp:2201B
CO!RISSI01f IIBBTIlIG AGBBDA
Meeting Date: 05/04/1992
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Agenda Itelll lfUIIber:
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Mr. Robert L. S1aI1.uuth
President
HanDon Auto CeaIIr
,77~fsIiOWCUe DdN'~ .
Siil'~ CA.'924oa
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Dear ~.:StaJ1am1th:
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Thiof..~~~~;;~~~~l2'L~~"~n~~,wJi1~~~.~~:~~~to!.~ ~~~~!il..~tz,j~...
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,\. ;!.'~'1141.251-68
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~-'?::_,:.~_ total of $SOO,(XX) (FIVe HundtedThousand.
\.~.:- .. ~DQJJa,n) including tbePurchase DcposiL'., .'
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:'A - deposit oL$2.:S,OOO (I'W:enty~~~'I'bo!1sand';'
,.nonars) sba11be' IaCCd Withlnthiei:'da ~-aner ~;;
'lianlng of this dumOnt with commOO~t1l UIld"
" .~"Title,.. 888 Wat. Sixth Street,'. Loi AftpIea',
" California 90011. Contact:. Gloria ~'-". .,c;,."
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Down, "-Yment:
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Pt.ft"hll_
Harmon Auto Center, . Delaware CoIporalIon.
(7S" owned by Moton HolcIIlll DMsiOll of
GcncraI Motors Corporation md 25" owned by
Mr. Robert Stallsmith, Individually>
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.. Mr. Roger P. Hannon (96"> and Mr. 'Jbor!w J.
Harmon-(4">
Se1iet:
Conditions of ~!I.'
(I)
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Good and marketable titIc and satlsfagory
surYC)', subject only.' to" .Permltted
Encumbranc:ea., a term to be detinc:d hUIIe
contract of sale. Purchaser a1uiII 9btaIn. .
~t1ec:ommltment and ~11Cy .~the Sen.-.
ex~8C which costa shall " dCductecl from .
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,'" Prlnelp81due In~:iQ;'yem1p8.%iMti bUedoil 3<C' ..,c
,year amortization. " " ,
, Sixty day. from the de of this letter.
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~~Mnmental Iuues!
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Purelwet to conduct III lndcpcIlClcnl InvCltilltion
IIId to, provIde re1eue to Seller and Pinancln.
Source.
Purchuer commits that It or . Jellied entity will
occupy the premises for the period of the Tobi
Credit Corporation loan.
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'~~tatlQn;, , ,',. Tobi will dm\ thO documents.
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}{othlniCOl!tAl"u.IH.ei,,~~),..l1l be blndlnaupontlle parties \Iillea and undl the IUIIC ,arc
. ':~~tJi~~".~~ffiS~'~,""" ,t,,;~ctt~~ecuted,~.delivered by bot!l,'-':;;i'--:,
, ,roo....",..... 0 cera or..Jeprcsenta'ncs; '. , ',' ,',
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. ~..shall haVeun.tll~)' IS, 1992 to conduct hisjnv~dptlon and ~&n a Purchase ~d'
" $ale ~ "'If .'~ and SI1f;Aareement,lsnotdped by tJlat datc,ScDcr WID
O' ,':::r:~~~~':f\ MtJi.~,ep~y~~~~:~. depoak ~ be ~
~~.s1.~~fy,~'~t'by ex~~~Ji!ld rcium~.~~y # lhillet,., .~ to our ~ by",
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Tom Credit CorporatIon ^
Eric A. MartIn
B1lecutIve VIce PmidCDt
Roger P. Harmon
Se1lcr
Thomas J. Harmon
Seller
Tom Credit CoIpoIIdon
Clark 10[. lo1m1on, ' .~~
Senior Vice PJaideaI.t CPO
AGRBBD AND AC\:&ll~D:
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By:
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Rabat, ~SllDsmitb,
PNSIdent ': " '
HarmOiaAIIoCel!la' ",
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