ACTION REQUESTED:
Title
Communication from the City Manager with a Request to APPROVE a Loan from the City’s REVOLVING LOAN FUND to FOLDAN VENTURES LLC, POP A SHOT LLC, AND ANTHONY STUCKER, in the Amount of $100,000.00, and to Authorize the City Manager to Execute the Necessary Documents.
Body
BACKGROUND: Foldan Ventures LLC (Foldan) is seeking to finance a buildout for Prairie Engineering (PE), an existing tenant at 926 SW Adams Street. PE is a civil, structural, mechanical, electrical, and environmental engineering firm based out of Columbia with a total of six offices in IL, IA, and MO. PE plans to relocate from the first floor (Unit 120 consisting of 750 sf) and expand their operations to Unit 220--an unfinished space of 2,950 sf on the second floor. The expansion also includes growing from 5 to 10 employees. Foldan’s buildout cost, estimated at $300,000, will be factored into PE's five-year lease. To make Foldan eligible to receive City financing, PE will be pledging at least four jobs to Foldan which would allow for the covering of one third of the buildout cost, or $100,000.
In addition to leasehold improvements, Foldan plans to invest an additional $350,000 on the building to include a) roof repairs, b) tuckpointing, c) common area, and d) an elevator to 926 SW Adams.
On May 14, 2019 the City approved a $250,000 loan with Foldan for the relocation of Pop-A-Shot to 918 SW Adams. The loan of $100,000 for the relocation of Prairie Engineering is a separate project and will be an additional loan above and beyond current loans.
Company Background
Foldan serves as a real estate holding company owned by Anthony Stucker. On March 15, 2019 Foldan purchased 918 -926 SW Adams. After obtaining construction loan with the City on May 14, 2019 a small garage was demolished, 926 was left "as is", and 918 SW Adams was renovated for $1.5 million for Pop-A-Shot’s headquarters and warehouse. On Sep 11, 2019 Foldan purchased 933 SW Washington across the alley for potential business expansion.
Pop-A-Shot ( https://www.popashot.net ) was founded in 1981 in Salinas, KS where it created the first electronic arcade basketball game. It has since become synonymous with arcade basketball games. Anthony Stucker bought the company in July 2016 and has dramatically increased sales and profitability. The key reason for growth is due to the Tony and Kelly Stucker's expertise in sales and marketing, in which both have over 30 years of experience in media, advertising, publishing, sales, and social media. Pop-A-Shot currently produces four products which include the Home Dual Shot basketball arcade game, Home Single Shot, PRO Dual Shot, and Premier Games. Projections for 2020 and the following years are expected to grow further with the introduction of new product lines to include: a) licensed (NCAA, NBA) products, b) branded hoop games with educational institutions, and c) gaming software and coin operated games.
Financing Structure and Terms
Foldan’s overall investment will be $650,000 of which $300,000 will be made towards leasehold improvements, the balance would be towards general building improvements such as roof upgrade, tuckpointing, common area, and an elevator
The loan was reviewed by the Loan Review Panel and recommended for approval according to the Memo of June 29 (attached). The general terms and conditions of the loans are:
• Loan Terms - A loan amount of $100,000 at an interest rate of 4% for a term of 10 years, amortized over 20 years. The loan will be disbursed at the start of construction. A closing fee of 1% or $1,000 may be added to the principal amount or paid upfront at closing.
• Collateral Requirements - The loan will be secured with a) a third mortgage on 918-926 SW Adams, b) second mortgage on 933 SW Washington, and c) third mortgage on personal home. It was determined the City’s overall collateral position did not change given higher valuation of 926 SW Adams resulting from building improvements, and the additional pledged collateral of 933 SW Washington.
• Conditions - It was noted and understood the City loan is conditioned on raising the other sources of funding shown in the table below.
The following is a breakdown of Sources and Uses of funds for the project:
RLF Program Background
The City’s Revolving Loan (RLF) Fund Program was initially capitalized in 1988 with $769,232 by an EDA grant of $500,000 and matching funds from the City of $269,232. As of Dec 30, 2019, the capital base has grown to $1.28 million through net income ($939,902) minus losses ($436,444). In total, the program has loaned over $4.4 million to 46 different projects in the industrial, commercial, and service industries and has assisted with the creation/attraction of 2,067 jobs. City loans of $4.4 million were leveraged with $55.4 million of other funds and has resulted in an overall investment of nearly $60 million. The average RLF projects represent an investment of $1.2 million, 45 jobs, and a City loan of $95,652. For every $1.00 of RLF proceeds loaned by the City an additional $12.49 was leveraged.
FINANCIAL IMPACT: If approved, the City would disburse $100,000 from the RLF Fund which had a balance available for lending of $545,125.93 as of December 31, 2019.
NEIGHBORHOOD CONCERNS: Not applicable
IMPACT IF APPROVED: The City would support the retention of 5 jobs and the creation of 5 jobs.
IMPACT IF DENIED: A financial gap of $100,000 would continue and the project would either be scaled back; the project would be delayed; and/or additional equity/debt would need to be raised.
ALTERNATIVES: None
EEO CERTIFICATION NUMBER: Not applicable.
DEPARTMENT: City Manager's Office