Request for Committee Action
A briefing memo explaining the purpose, background, and impact of the requested action.
Commercial Property Development Fund (CPDF) loan to SAWA Properties LLC: 2743 Lyndale Ave S (RCA-2022-01121)
ORIGINATING DEPARTMENT
To Committee(s)
| # | Committee Name | Meeting Date |
|---|---|---|
| 1 | Business, Inspections, Housing & Zoning Committee | November 29, 2022 |
Action Item(s)
| # | File Type | Subcategory | Item Description |
|---|---|---|---|
| 1 | Action | Loan | Authorizing a $200,000 Commercial Property Development Fund Loan to SAWA Properties LLC or its assigns to assist in the acquisition of the property at 2743 Lyndale Ave S. |
Ward / Neighborhood / Address
| # | Ward | Neighborhood | Address |
|---|---|---|---|
| 1. | Ward 10 | Whittier | 2743 Lyndale Ave S, Minneapolis, MN |
Background Analysis
This report seeks City Council approval of a $200,000 Commercial Property Development Fund (CPDF) loan to SAWA Properties LLC to assist in the acquisition of the commercial property located at 2743 Lyndale Ave S.
SAWA Properties LLC is owned by Sameh and Saed Wadi. The Wadi brothers have been in the restaurant business since 2007 when they opened their first restaurant, Saffron, in the Warehouse District. In 2010 Chef Sameh Wadi appeared on Iron Chef America as the first contestant to ever hail from Minneapolis. In that same year the Wadi brothers started the “World Street Kitchen” food truck in the streets of downtown Minneapolis. The food truck was successful serving street food from around the world.
By 2012 the brothers opened their brick and mortar version of World Street Kitchen at 2743 Lyndale Ave S and have since become a staple of the neighborhood. On the coldest day of February 2016, the brothers opened Milkjam Creamery next to World Street Kitchen. The synergy of the restaurant with the ice cream shop has brought commercial activity to 28th & Lyndale. The two businesses employ seventy-five workers earning livable wages during peak season with plans to add an additional 5-10 employees with the expansion of their ice cream production in the building when space becomes available to grow ice cream sales to local grocery stores and other restaurants. Despite their successes in the restaurant and food industries, the Wadi brothers have not owned the commercial real estate in which they have operated.
The CPDF funds will be used for the acquisition of the property that will continue to house the two businesses owned by the applicants, expansion of their ice cream production sometime in the future as well as additional commercial space for other small businesses. The project cost is estimated to be approximately $1.92 million which consists of acquisition and soft costs with details summarized in the sources and uses chart below. Sunrise Banks will provide the senior debt financing. The Wadis will contribute $203,750 of owner’s equity to the project. SAWA Properties LLC would receive City financial support in the form of a $200,000 loan from the Commercial Property Development Fund, the subject of this report, and are seeking a $75,000 2% Loan to assist in financing the property acquisition.
|
SOURCES |
||
|
Sunrise Banks |
$ 1,436,250 |
75.0% |
|
City of Minneapolis CPDF Loan |
$ 200,000 |
10.5% |
|
City of Minneapolis 2% Loan |
$ 75,000 |
3.9% |
|
Borrower Equity |
$ 203,750 |
10.6% |
|
Total Sources of Funds |
$1,915,000 |
|
|
USES |
||
|
Property Acquisition |
$1,900,000 |
99.2% |
|
Soft Costs |
$ 15,000 |
0.8% |
|
Total Uses of Funds |
$1,915,000 |
|
The terms of the CPDF loan will align with the approved guidelines for the CPDF program, including:
- 40-year term
- 0% interest
- Repayment of full principal balance due if one of the following events occurs:
- Changes in property ownership without City consent to a non-qualified heir or successor owner(s); or
- Material changes in use of the property without City consent.
- No debt forgiveness during term. At the end of the term principal balance forgiven if the borrower meets the following conditions:
- there are no material changes in use of property;
- there are no issues with delinquent taxes;
- there are no unresolved City zoning and property maintenance violations;
- there are no other defaults on the loan.
- The CPDF loan will be documented by a separate loan agreement, evidenced by a promissory note and secured by a recorded subordinate mortgage on the property.