Duluth Economic Development Authority OKs $500,000 loan for Clyde Park projectThe Duluth Economic Development Authority threw a lifeline to developer Alex Giuliani and his partners Wednesday.
By: Peter Passi, Duluth News Tribune
The Duluth Economic Development Authority threw a lifeline to developer Alex Giuliani and his partners Wednesday.
By a 4-2 vote, they agreed to provide a $500,000 bridge loan to help with the redevelopment of the Clyde Industrial Park at 29th Avenue West and Michigan Street. The interim loan is designed to keep the project moving forward until financing is obtained for a new hotel, the next planned piece of the redevelopment.
The interest-only loan will be secured by a first mortgage on the site of the proposed hotel. That property was appraised last September to have a value of about $770,000, according to Community Development Director Keith Hamre.
The loan agreement calls on Clyde Industrial Park Inc. to pay a 1 percent origination fee. Thereafter, the developer will make interest-only payments at a rate of 6.5 percent until such time as he acquires financing for the remainder of his project.
Hamre said the estimated duration of the bridge loan was 90 days.
But under questioning, Giuliani confirmed no loan commitment has yet been made for the hotel. Still, he expressed confidence the project would be able to attract needed financing.
“We’ve done our design work for the hotel, and it’s something we plan on starting this summer or fall,” he said.
Todd Fedora, a banker and one of two DEDA commissioners to vote against the loan to Clyde Industrial Park Inc., suggested financing for the hotel could be difficult to obtain in the midst of a credit crisis.
“The underwriting of hotels and motels has seized,” he said.
Beacon Bank, the primary lender for the project, reported that banking regulations preclude it from increasing its sizeable existing commitments to the development. Yet Hamre said the bank had performed a due diligence analysis and had determined that Clyde Park should have no trouble repaying DEDA. For that reason, it recommended DEDA approve the loan.
Fedora remained unconvinced, asking: “If the bank won’t lend you the money, why should the people of Duluth?”
Giuliani said he had been working to redevelop the Clyde Iron complex for the past seven years and had invested $12 million in the project, as well as contributing the equivalent of $4 million to the Heritage Sports Center.
Commissioner Nancy Norr said she would like to see a formal appraisal of the land DEDA would be offered as collateral for the loan, as well as Giuliani’s feasibility study for the hotel, before approving a loan. She moved to table the loan request, but only Fedora supported her resolution.
Giuliani, who is in the final stages of launching a restaurant/bakery and retail development at Clyde, said he could handle a delay, but “every month I wait, it costs me about another $80,000.”
“I’m ready to open,” he said. “There are just a few more things that need to be done.”
Giuliani said he has been paying some staff for three months in anticipation of his restaurant opening, and has others who are slated to start work shortly.
In light of the cost of delays, four DEDA commissioners voted to approve the bridge loan for Clyde. Commissioner Tony Cuneo left the meeting before the vote because of a family illness.
Afterwards, Giuliani said he expected to be open for business by early May.
“I’m happy the city came up with a solution to keep our project on track,” he said.