ACTION REQUESTED:
Title
Communication from the City Manager with a Request to APPROVE a Loan from the City’s REVOLVING LOAN FUND to POP-A-SHOT LLC & FOLDAN VENTURES LLC, in the Amount of $250,000.00, and to Authorize the City Manager to Execute the Necessary Documents.
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BACKGROUND: Pop-A-Shot LLC (PAS) is seeking to relocate their business to Peoria and plan to lease 7,700 sf (two floors) from Foldan Ventures LLC (Foldan). Foldan has purchased 918-926 SW Adams which consist of four buildings on a half-acre (26,780 sf) lot. A view of the property and parcels are attached (see RLF Application) The buildings altogether contain nearly 18,500 sf of leasable space of which 14,000 sf, or 76% would be occupied by a total of five tenants after a new lease is signed by PAS, and other leases are renewed.
A total investment of $1.65 million is planned by PAS and Foldan. The building was purchased in April for $450,000, and demolishing of storage building 4 is underway. However improvements of $1.2 million remain to Building 3.
Renovation of Building #3 (921 May Street) is to be leased by PAS will include: a) a complete gutting, b) a new roof, c) new mechanicals, d) elevator, and e) the replacement of stairs, new entry way, and windows. Renovation of building is planned for obtaining historic tax credits, which would provide income tax credits up to investor Foldan Ventures LLC.
Company Background
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 became synonymous with arcade basketball games.
In July 2016 Anthony Stucker bought the company, and since then its revenue has dramatically increased due to Mr. Stucker's expertise in sales and marketing. He has over 30 years of experience in media, advertising, publishing, sales, and social media. In addition, Kelly Stucker his wife, with extensive expertise in marketing, will be assuming a marketing/sales position with Pop-A-Shot.
Pop-A-Shot currently produces four products with majority of its revenues associated with the Home Dual Shot basketball arcade game. Other product lines include Home Single Shot, PRO Dual Shot, and Premier Games.
Financing Structure and Terms
PAS & Foldan’s $1.65 million in capital investment include $450,000 property acquisition and $1.2 million in building improvements.
The loan was reviewed by the Loan Review Panel and recommended for approval, with the following parameters:
• Loan Terms - A loan amount of $250,000 at an interest rate of 4% for a term of 10 years, amortized over 20 years. The loan will be disbursed with 50% at the start of construction, and 50% upon certificate of occupancy. A closing fee of 1% or $2,500 may be added to the principal amount or paid upfront at closing.
• Collateral Requirements - The loan will be secured with a: a) second mortgage two properties-918-926 SW Adams and 1630 Ascension in San Mateo, CA b) a corporate guarantee from PAS & Foldan, and personal guarantee from Mr. Stucker. The City will be named additional insured on all assets financed.
• Conditions - It was noted and understood that the City loan is conditional upon a $960,000 loan from a private lender, and an equity of $440,000 from Mr. Stucker.
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 December 2018 the capital base has grown to $1.26 million through net income from interest/other ($928,215) minus losses/expenses ($436,313). In total the program has loaned over $4.2 million to 45 different projects in the industrial, commercial, and service industries and has assisted with the creation/attraction of 2,057 jobs. City loans of $4.2 million were leveraged with $54 million of other funds and has resulted in an overall investment of $58.2 million. On average, RLF projects represent an investment of $1.17 million, 45.7 jobs, and a City loan of $92,954. For every $1.00 of RLF proceeds loaned by the City an additional $12.9 was leveraged.
FINANCIAL IMPACT: If approved, the City would disburse $250,000 from the RLF Fund which had a balance available for lending of $711,436.15 as of December 31, 2018.
NEIGHBORHOOD CONCERNS: Not applicable
IMPACT IF APPROVED: The City would support the creation of at least 10 jobs and the renovation of a downtown building in the Warehouse District.
IMPACT IF DENIED: A financial gap of $250,000 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