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Resolution No. 12-41
RESOLUTION
AUTHORIZING EXECUTION OF A DOWNTOWN BUSINESS LOAN
INTEREST SUBSIDY PROGRAM AGREEMENT
WITH THKFL, INC.
(216 Prairie Street)
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS,that
Sean R. Stegall,City Manager,and Kimberly A.Dewis,City Clerk,be and are hereby authorized and
directed to execute a Downtown Business Loan Interest Subsidy Program Agreement on behalf of
the City of Elgin with THKFL,Inc. for the property located at 216 Prairie Street,a copy of which is
attached hereto and made a part hereof by reference.
s/David J. Kaptain
David J. Kaptain, Mayor
Presented: February 22, 2012
Adopted: February 22, 2012
Vote: Yeas: 5 Nays: 1
Attest:
s/Kimberly Dewis
Kimberly Dewis, City Clerk
CITY OF ELGIN DOWNTOWN BUSINESS LOAN INTEREST SUBSIDY PROGRAM
THIS AGREEMENT is hereby made and entered into this 22nd day of February,
2012, by and between the City of Elgin, Illinois, a municipal corporation (hereafter referred
to as the "City"), and THKFL, Inc., an Illinois corporation, (hereinafter referred to as the
"Developer").
WHEREAS, the City has established a Downtown Business Loan Interest Subsidy
Program for building improvements in the Center City in an effort to stimulate expansion,
reinvestment and business retention, a copy of such Downtown Business Loan Interest
Subsidy Program for building improvements being attached hereto and made a part hereof
as Exhibit "A" (hereinafter referred to as the "Program"); and
WHEREAS, the Program contemplates the City paying a portion of financing costs
for eligible building improvements; and
WHEREAS, Developer is the property owner of the real property commonly known
as 216 Prairie Street Avenue, Elgin, Illinois, (hereinafter referred to as the "Subject Proper-
ty"), which is located in the Center City area as described in Program hereto; and
WHEREAS, Developer has completed an application for participation in the subject
Program which identifies the proposed improvements to the Subject Property, a copy of
Developer's application for participation in the Subject Program being attached hereto and
made a part hereof as Exhibit "B"; and
WHEREAS, Developer has been approved for a conventional commercial loan with
Associated Bank (Elgin) in the amount of $242,500 with an interest rate of 5.49 percent to
finance the cost of the proposed building improvements on the Subject Property, a copy
of such loan's attendant amortization schedule being attached hereto and made a part
hereof as Exhibit "C" (hereinafter referred to as "Subject Loan").
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and undertakings contained herein, and other good and valuable consideration, the suffi-
ciency of which is hereby mutually acknowledged, the parties hereto hereby agree as fol-
lows:
1. The foregoing recitals are hereby incorporated into and made a part of this agree-
ment in their entirety.
2. The Developer's application for participation in the Program is hereby approved.
3. So long as the Developer continues to make regularly scheduled loan payments on
the Subject Loan and otherwise complies with the terms of this agreement, City
shall pay an interest subsidy consisting of quarterly reimbursement payments to
Developer in an amount equal to 90 percent of the first year's interest, 80 percent
of the second year's interest, 70 percent of the third year's interest, 60 percent of
the fourth year's interest, and 50 percent of the fifth year's interest, said interest
payments commencing as of May 1, 2012. The City shall make payment to Devel-
oper upon receipt of verification of payment from the lender and pursuant to the
amortization and payment schedules attached hereto and made a part hereof as
Exhibit "C."
4. In no event shall the interest rate of any Subject Loan Agreement provided for here-
in exceed ten percent (10%). In no event shall the total amount of the Subject Loan
exceed $200,000. In no event shall the total interest payments provided for herein
from City to Developer exceed $36,443.07. The Developer shall make all other
principal and interest payments and all other payments on the Subject Loan. The
City is not and shall not be deemed to be a party to the Subject Loan or an obligor
or obligee thereunder. This agreement in general, and the City's agreement to make
interest payments hereunder in particular, shall not be construed, and shall not be
relied upon by any party, including, but not limited to, the lender in the subject loan
agreement or any successor or assign thereof, to require the repayment of any
principal loan amounts, the execution of any mortgage loan documents, or to oth-
erwise act as a guarantor on any loan agreements under any circumstances. Addi-
tionally, the provisions of this agreement shall not be construed so as to create any
obligations as to City based on any theory of equitable or promissory estoppel.
5. In the event the Developer conveys any of its respective interests in Subject Proper-
ty prior to April 30, 2017, Developer shall refund all payments made by City pursu-
ant to this agreement not later than 30 days after such conveyance.
6. The terms, requirements and conditions of the Program as set forth in Exhibit "A"
hereto are hereby incorporated into and made a part of this agreement in their en-
tirety. The City's obligations under this agreement, including but not limited to the
City's obligations to make continued interest payments, are subject to Developer's
ongoing compliance with all terms and requirements of the Program and this
agreement.
7. Developer shall complete the improvements identified in Exhibit B not later than
[November 30, 2012:
a. Plumbing
b. Flooring
c. Outdoor lighting
d. Interior wall relocation
e. Painting
f. Floor leveling and concrete work
g. Wood trim
h. Electric modifications
i. HVAC efficiency upgrades
j. Security upgrades
8. Developer shall complete the improvements identified in Exhibit B not later than De-
cember 31 , 2016:
a. Roofing
b. Bathroom and kitchen remodeling
9. Upon completion of the improvements, Developer shall properly maintain the im-
provements in their finished form, without alteration or change thereto, and in com-
pliance with all applicable laws and ordinances.
10. Nothing herein is intended to limit, restrict or prohibit the Developer from undertak-
ing other work in or about the Subject Property which is unrelated to the improve-
ments provided for in this agreement.
11 . This agreement may not be assigned without the prior written consent of the City.
12. Developer hereby agree to hold harmless, defend and indemnify the City from and
against any and all causes of action, suits, claims for damages and any and all oth-
er liability which may arise out of or in connection with the proposed improvements
or other work at the Subject Property, or which may arise out of or in connection
with Developer or Developer's agents, employees', contractors' and assigns' negli-
gent performance of any of the terms of this agreement. In the event the provisions
of this paragraph are invoked, counsel for City shall be of City's choosing. The
terms and provisions of this paragraph shall survive any termination and/or expira-
tion of this agreement.
13. This agreement shall not be construed to create a partnership, joint venture or em-
ployment relationship between the parties hereto.
14. Developer shall also pay when due all other obligations for the Subject Property, in-
cluding but not limited to, payments on any other loans, real estate taxes and insur-
ance.
15. This agreement shall be subject to and governed by the laws of the State of Illinois.
Venue for the resolution of any disputes or the enforcement of any rights arising out
of or in connection with this agreement shall be in the Circuit Court of Kane County,
Illinois.
16. The terms of this agreement shall be severable. In the event that any of the terms or
provisions of this agreement are deemed to be void otherwise unenforceable for
any reason, the remainder of this agreement shall remain in full force and effect.
17. That notices regarding in this agreement shall be sent to the parties at the following
addresses:
To: City of Elgin
150 Dexter Court
Elgin, IL 60120-5555
Attention: City Manager (with a copy to Corporation Counsel)
To: James C. Wagner
Registered Agent
THKFL, Inc.
960 Route 222, Suite 210
Fox River Grove, IL 60021
18. This agreement constitutes the only agreement between the parties hereto regard-
ing the subject matter hereof. There are no other agreements, either oral or implied,
in existence between the parties hereto regarding the subject matter hereof. The
terms and provisions of this agreement shall not be amended unless such amend-
ments are in writing and, are properly executed by the parties hereto.
19. In the event of Developer's breach of any of the terms of this agreement, Developer
shall refund to City the full amount of any payments made by City to Developer or to
any other entity on Developer's behalf, including but not limited to, any lender, upon
thirty (30) days written demand. City shall thereafter be entitled to any and all other
rights and remedies as may be available to it by law.
20. This agreement shall terminate on April 30, 2017. City may terminate this agree-
ment for any or no reason upon fourteen (14) days written notice. In the event city
terminates this agreement, City shall be under no further obligations pursuant to
this agreement, and Developer shall be entitled to no further relief pursuant to this
agreement.
IN WITNESS WHEREOF, the parties hereto have entered into and executed this
agreement the day and year first written above.
CITY OF ELGIN THKFL, Inc.
..(yeeew
Sean Stegall, City Manager Its U til.1//'?/', S,
Attest: Its
„cp
City Clerk
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EPORT TO MAYOR & MEMBERS OF CITY COUNCIL.. E LG I N
THE CITY IN THE SUBURBS-
AGENDA ITEM: G
MEETING DATE: February 8, 2012
ITEM:
Proposed Agreement with THKFL, Inc. for Downtown Business Loan Interest Subsidy Program to
Create Imago Studios at 216 Prairie Street
($37,489 over five years)
OBJECTIVE:
To utilize the city's economic development programs to enhance economic vitality and viability
in the downtown.
RECOMMENDATION:
To enter into a five-year agreement with THKFL, Inc. for Downtown Business Loan Interest
Subsidy Program at the cost of$37,489.
BACKGROUND
THKFL, Inc., a real estate holdings company, intends to purchase 216 Prairie Street to create a
multi-tenant office environment for small, start-up businesses in the visual/digital media and
creative services fields called Imago Studios. Approximately ten independent, yet
complimentary businesses will be housed in the building and will share common amenities such
as a large photo and video studio. One of the tenants, Imago Media, will provide property
management and oversight for the property owner. The concept is similar to that of the Elgin
Technology Center, but with paid management staff versus volunteer management.
The proposed tenanting concept fits well with the Downtown Neighborhood Association's
downtown office recruitment strategy:
• Collaborative environment conducive to fostering start-ups and small businesses to
grow and expand
• Creation of thirteen new professional positions and retention of two existing downtown
positions with salary ranges of$60-$150K
• Arts-oriented businesses a key industry cluster for downtown
• Heavy use of technology to operate businesses —a key industry cluster for downtown
• Community-minded businesses—interested in supporting and participating in the
community
Ali
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The property at 216 Prairie Street has been on the market and vacant for about five years and is
approximately 7,000 square feet. Its current configuration is most amenable for an office use,
as it was adapted from an auto parts store to a loft-style office in 2000. However, the property
needs approximately $65,000 in improvements including roofing, plumbing, flooring and
remodeling. This level of investment combined with the building's size is a major challenge to
selling or leasing the property to a single owner/occupant. The multi-tenant media center
concept helps overcome these challenges. Additionally, the proposed use is compatible with
the residential townhouse development across the street and provides support for the new
Prairie Rock Grill opening down the street.
THKFL, Inc. wishes to utilize the assistance from the Downtown Business Interest Loan Program
to acquire and renovate this property to create Imago Studios.
The Downtown Business Loan Interest Subsidy Program (program) has been providing financial
assistance to downtown businesses and property owners for more than ten years. The program
pays a portion of the interest on certain business loans not exceeding $200,000 for a period of
five years to assist downtown businesses during their first critical years of operation or
expansion or with the acquisition and/or renovation of property.
Depending on the type of loan obtained, the city pays up to 90 percent of the interest on the
loan during the first year; 80 percent in the second year; 70 percent in the third year; 60
percent in the fourth year; and, 50 percent in the final year of program eligibility.
Under current program guidelines, eligible loans must be amortized over a ten-year period,
must be at or above the prime rate of interest and may not exceed 10 percent interest. The
program also caps interest payments paid by the city to any participating business at $70,000.
In November, 2010 the program was amended to authorize 20-year amortizations solely in the
case of SBA 504 loans.
Tongue 'N Chic Dental Boutique, Al's Café, Elgin Public House, and Leath Partners, LLC are all
currently participating in the program.
OPERATIONAL ANALYSIS
THKFL, Inc. has secured a commercial loan for $224,250 at 5.750 percent from Crystal Lake
Bank & Trust Company, N.A. The program allows loan amounts up to $200,000; therefore the
recommended subsidy is based on approximately 89 percent of the total interest paid. THKFL,
Inc. meets all program eligibility requirements as outlined in the program guidelines. The
interest subsidy is paid by the city to the property owner on a quarterly basis upon receipt of
proof of that quarter's payments.
THKFL's ability to secure a commercial loan in the current highly restrictive lending
environment is indicative of a sound financial base. With interest rates at historic lows, the
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Downtown Business Loan Interest Subsidy Program can leverage its programming revenue to
take advantage of the lower interest payments to provide assistance to a greater number of
small businesses seeking to locate or expand within the downtown's commercial space.
INTERESTED PERSONS CONTACTED
DNA executive director Tonya Hudson facilitated this project as part of the city's purchase of
services agreement with the DNA.
FINANCIAL ANALYSIS
Over the five-year period of 2012 through 2016, the annual interest subsidy would be as
follows:
Year Total Interest
2012 $ 9,523.08
2013 $ 8,973.97
2014 $ 7,611.35
2015 $ 6,305.16
2016 $ 5,075.66
TOTAL $ - 37,489.22
BUDGET IMPACT
FUND(S) ACCOUNT(S) PROJECT#(S) AMOUNT AMOUNT
BUDGETED AVAILABLE
Riverboat Lease 276-0000-791.80-27 177119 $329,000 $183,036
LEGAL IMPACT
None.
ALTERNATIVES
The city council may choose to reject staff's proposal to utilize this program to attract this
project to downtown.
NEXT STEPS
Execute business loan interest subsidy program agreement with THKFL, Inc.
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Originators: Richard G. Kozal, Assistant City Manager
Final Review: Colleen Lavery, Chief Financial Officer
William A. Cogley, Corporation Counsel/Chief Development Officer
Sean R. Stegall, City Manager
ATTACHMENTS
A. Business Loan Interest Subsidy Program
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Downtown Business Loan - THKFL
Date Interest 90%interest x 0.89186
Feb-12 $ 1,110.35 $ 999.32 $ 891.25
Mar-12 $ 1,036.51 $ 932.86 $ 831.98
Apr-12 $ 1,105.28 $ 994.75 $ 887.18
May-12 $ 1,067.33 $ 960.60 $ 856.72
Jun-12 $ 1,100.34 $ 990.31 $ 883.21
Jul-12 $ 1,062.52 $ 956.27 $ 852.86
Aug-12 $ 1,095.35 $ 985.82 $ 879.21
Sep-12 $ 1,092.93 $ 983.64 $ 877.27
Oct-12 $ 1,055.32 $ 949.79 $ 847.08
Nov-12 $ 1,087.87 $ 979.08 $ 873.20
Dec-12 $ 1,050.39 $ 945.35 $ 843.12
$ . 9,523.08 City's Total 2012 Participation
Date Interest 80% Interest x 0.89186
Jan-13 $ 1,082.76 $ 866.21 $ 772.54
Feb-13 $ 1,080.27 $ 864.22 $ 770.76
Mar-13 $ 973.47 $ 778.78 $ 694.56
Apr-13 $ 1,074.74 $ 859.79 $ 766.81
May-13 $ 1,037.63 $ 830.10 $ 740.34
Jun-13 $ 1,069.51 $ 855.61 $ 763.08
Jul-13 $ 1,032.54 $ 826.03 $ 736.70
Aug-13 $ 1,064.22 $ 851.38 $ 759.31
Sep-13 $ 1,061.64 $ 849.31 $ 757.47
Oct-13 $ 1,024.88 $ 819.90 $ 731.24
Nov-13 $ 1,056.27 $ 845.02 $ 753.64
Dec-13 $ 1,019.67 $ 815.74 $ 727.52
$ 8,973.97 City's Total 2013 Participation
Date Interest 70% Interest x 0.89186
Jan-14 $ 1,050.86 $ 735.60 $ 656.05
Feb-14 $ 1,048.21 $ 733.75 $ 654.40
Mar-14 $ 944.37 $ 661.06 $ 589.57
Apr-14 $ 1,042.38 $ 729.67 $ 650.76
May-14 $ 1,006.15 $ 704.31 $ 628.14
Jun-14 $ 1,036.83 $ 725.78 $ 647.30
Jul-14 $ 1,000.75 $ 700.53 $ 624.77
Aug-14 $ 1,031.22 $ 721.85 $ 643.79
Sep-14 $ 1,028.48 $ 719.94 $ 642.08
Oct-14 $ 992.63 $ 694.84 $ 619.70
Nov-14 $ 1,022.79 $ 715.95 $ 638.53
Dec-14 $ 987.10 $ 690.97 $ 616.25
$ 7,611..35 City's Total 2015 Participation
Date Interest 80% Interest x 0.89186
Jan-15 $ 1,017.04 $ 610.22 $ 544.23
Feb-15 $ 1,014.23 $ 608.54 $ 542.73
Mar-15 $ 913.52 $ 548.11 $ 488.84
Apr-15 $ 1,008.08 $ 604.85 $ 539.44
May-15 $ 972.79 $ 583.67 $ 520.56
Jun-15 $ 1,002.19 $ 601.31 $ 536.29
Jul-15 $ 967.07 $ 580.24 $ 517.49
Aug-15 $ 996.24 $ 597.74 $ 533.10
Sep-15 $ 993.32 $ 595.99 $ 531.54
Oct-15 $ 958.45 $ 575.07 $ 512.88
Nov-15 $ 987.29 $ 592.37 $ 528.31
Dec-15 $ 952.58 $ 571.55 $ 509.74
$ 6,305.16 City's Total 2015 Participation
Date Interest 80% Interest x 0.89186
Jan-16 $ 981.20 $ 490.60 $ 437.55
Feb-16 $ 978.21 $ 489.11 $ 436.21
Mar-16 $ 912.29 $ 456.15 $ 406.82
Apr-16 $ 971.87 $ 485.94 $ 433.39
May-16 $ 937.58 $ 468.79 $ 418.10
Jun-16 $ 965.63 $ 482.82 $ 430.60
Jul-16 $ 931.51 $ 465.76 $ 415.39
Aug-16 $ 959.33 $ 479.67 $ 427.79
Sep-16 $ 956.23 $ 478.12 $ 426.41
Oct-16 $ 922.37 $ 461.19 $ 411.31
Nov-16 $ 949.83 $ 474.92 $ 423.56
Dec-16 $ 916.15 $ 458.08 $ 408.54
$ 5,075.66 City's Total 2016 Participation
Year Total Interest
2012 $ 9,523.08
2013 $ 8,973.97
2014 $ 7,611.35
2015 $ 6,305.16
2016 $ 5,075.66
TOTAL $" 37,489.22