* This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting. I WOULD LIKE TO CALL [00:00:01] THE ECONOMIC DEVELOPMENT COMMISSION REVOLVING LOAN SUBCOMMITTEE MEETING TO ORDER FOR JULY, EXCUSE ME, FOR JUNE 5TH, 2024. UM, AND IT IS TWO O'CLOCK. UM, MADAM CLERK, PLEASE CALL ROLL. COMMISSIONER COHEN. HERE. COMMISSIONER LARKINS. HERE. COMMISSIONER MATOYER. COMMISSIONER TOYER. MATOYER IS EXCUSED FROM THE MEETING. WE HAVE QUORUM. ALRIGHT, SO WE'LL GO TO THE REGULAR AGENDA ITEM. SO THE FIRST ITEM IS TO REC THE RECOMMENDATION TO APPROVE THE MINUTES FOR THE ECONOMIC DEVELOPMENT COMMISSION REVOLVING LOAN. SO SUBCOMMITTEE MEETING OF WEDNESDAY, MAY 1ST, 2024. MAY I HAVE A MOTION TO HEAR THIS ITEM? SO MOVED. IT HAS BEEN MOVED. SECOND AND SECONDED. MOVED BY MR. LARKIN AND SECONDED BY COMMISSION CALL. THANKS, JENNIFER. ARE THERE ANY QUESTIONS ON THE MOVE? I'M HERE. NO. UM, WE WILL NOT TAKE ANY PUBLIC COMMENT. ANYONE WHO WOULD LIKE TO SPEAK ON THE MINUTES, PLEASE STAND. OKAY. WE HAVE NO COMMENT PUBLIC HERE IN THIS MEETING. UM, AND THEN MADAM CLERK, PLEASE CALL FOR THE VOTE. COMMISSIONER COHEN. YES. AND COMMISSION FOR RECORDS? YES. QUESTION CARRIES. THANK YOU. IS THE NEXT ITEM, ITEM NUMBER TWO, RECOMMENDATION TO APPROVE THE REVOLVING LOAN APPLICATION AND THE AMOUNT OF 99,000 FOR THE MERCHANT LLC LOCATED AT 41 21 LONG BEACH BOULEVARD. LONG BEACH, CALIFORNIA MANUAL. 8 0 7. MAY I HAVE A MOTION TO HEAR THIS ITEM? SO MOVED. SECOND. IT'S MOVED BY COMMISSIONER COHEN AND SECONDED BY COMMISSIONER LARKIN. AND I'D LIKE TO INTRODUCE OUR PRESENTER AND THAT IS ANDREA MARTINEZ FROM RURAL AMERICA. HI THERE. SORRY. CAN'T BE THERE IN PERSON. UM, HAD A VERY BUSY WEEK, BUT EXCITED TO PRESENT TO YOU GUYS THE MERCHANT, LLC. IT IS A BAKERY AND COFFEE SHOP, UH, LOCATED IN THE BIXBY KNOLLS AREA. UM, AND THEY ARE GONNA BE EXPANDING AND OPENING A SECOND LOCATION. UH, IT'S A LLC OWNED A HUNDRED PERCENT BY ANDREA GILLESPIE. GOOD NAME, OF COURSE, . UH, WE'RE PROPOSING, UH, 99,000, UH, 10 YEARS FULLY AMORTIZED AT THE 75% PRIME RATE, UH, WHICH IS 6.375 RIGHT NOW. UH, THE PRIME STILL REMAINS 8.5%. UH, AND SO THE MONTHLY PAYMENTS WOULD BE, YOU KNOW, ABOUT 1200. UH, AND THEN, UH, THERE WILL BE A 2% LOAN FEE OF JUST UNDER 2000. AND SO THIS IS PART OF A LARGER PROJECT, UM, IN CONJUNCTION WITH THE GROW AMERICA FUND OF LONG BEACH SBA SEVEN A LOAN. SO AGAIN, YOU'LL SEE, UM, THAT THERE ARE, UH, SOME CUT AND PASTED, UM, YOU KNOW, PORTIONS FROM THE GROW AMERICA FUND LOAN REPORT THAT WAS DONE. AGAIN, WE'RE USING SOME ECONOMIES OF SCALE THERE, UH, SO I DON'T HAVE TO REDO ALL OF THEIR ANALYSIS. THE, UH, THE SBA ANALYSIS, AGAIN, IS MORE STRINGENT THAN THE EDA, UM, ANALYSIS, AND SO IT BEHOOVES US TO, TO USE THAT. UM, AND I DO SEE THAT THERE MIGHT BE ONE SMALL TYPO IN THAT, UM, BEGINNING TABLE. THE SOURCES AND USES OF FUNDS TABLE HAS A TOTAL EQUITY OF 1 51, BUT I BELIEVE THE TRUE EQUITY IS, UM, IS THERE UNDER THE SUBORDINATION PARAGRAPH ON THE TOP OF PAGE TWO, IT TOTALS 2 36, 8 91. SO I THINK I JUST DIDN'T UPDATE THAT NUMBER, UH, FOR YOU. UH, BUT WE CAN FIX THAT. UM, GOOD NEWS IS, IS THEY HAVE MORE EQUITY IN THAN WE, THAN WE ARE SHOWING IN THE INITIAL TABLE. UH, BUT, BUT WE WILL BE GETTING, UH, AN UNLIMITED PERSONAL GUARANTEE FROM ANDREA GILLESPIE. UM, AND THEN A LIMITED PERSONAL GUARANTEE FROM HER HUSBAND, UH, MICHAEL GILLESPIE. AGAIN, THE, THE GUARANTEE, HIS PERSONAL GUARANTEE IS LIMITED TO HIS COMMUNITY PROPERTY INTEREST IN THE BUSINESS AND THE COLLATERAL THAT'S BEING PLEDGED. HE DOESN'T HAVE ANY TECHNICAL OWNERSHIP, BUT HE DOES WORK, UM, IN THE BUSINESS AS WELL. AND SO THAT'S ANOTHER REASON WHY WE DO WANT TO GET, UM, HIS, HIS PERSONAL GUARANTEE. UM, AND IN THIS CASE, THERE WILL BE A LITTLE BIT OF SUBORDINATED LOANS, UH, FROM THE SHAREHOLDER, UM, WHICH IS ADDITIONAL SORT OF EQUITY INTO THE BUSINESS. UM, AND THEY DO HAVE [00:05:01] SOME COMMON STOCK. AND SO THE LARGER PROJECT, UH, AS DESCRIBED, UH, THERE, LET'S SEE, UM, IN THE TOP OF PAGE THREE, SO THEY'RE REQUESTING, YOU KNOW, ABOUT A HUNDRED THOUSAND, 99,000 TO FUND SOME PERMANENT WORKING CAPITAL. AND THIS IS IN CONJUNCTION WITH $175,000 LOAN SBA SEVEN A LOAN, UM, FROM THE GROW AMERICA FUND OF LONG BEACH. SO WE'RE MATCHING THE TERM OF THE 10 YEARS. THE, THE SBA LOAN HAS A HIGHER INTEREST RATE, UM, BUT THE, UM, THE SBA LOAN IS REALLY GONNA BE USED TO RETIRE SOME HIGH INTEREST, UH, DEBT. UM, THERE ARE TWO, UH, DEBT FACILITIES THAT WERE SORT OF SHORTER TERM FINTECH TYPE LOANS THAT ARE REALLY HIGH INTEREST. AND SO THAT WILL PROVIDE QUITE A BIT OF CASHFLOW SAVINGS, UH, TO THE COMPANY. AND SO THAT'S THE POINT. AND SO AGAIN, WE'RE, WE'RE SORT OF FUNDING THE WORKING CAPITAL THAT'S GONNA HELP THEM WITH THEIR EXPANSION. UM, THEY DO HAVE, UM, YOU KNOW, MOST OF THE EQUIPMENT NEEDED AND THERE'S LITTLE TO NO TIS, UM, THAT WILL BE NEEDED FOR THIS, UM, SECOND LOCATION. SO IT'S REALLY JUST WORKING CAPITAL THERE ARE GONNA NEED, YOU KNOW, TO DO SOME INVENTORY INCREASES AND SOME STAFFING INCREASES, THINGS LIKE THAT. UM, AND THE, THE OTHER DEBTS THAT ARE BEING REFINANCED, WERE ALSO USED FOR SOME WORKING CAPITAL EXPENSES AS WELL. UM, AND SO THERE IS A DESCRIPTION THERE OF THEIR PROPERTY. UM, AGAIN, THEIR, THEIR FLAGSHIP, IF YOU WILL, LOCATION, UH, IS AT 41 21 LONG BEACH BOULEVARD IN THAT BIXBY AREA. UM, AND AS PART OF THEIR, UM, EXPANSION, THEY ARE GONNA BE OPENING, UM, UH, SECOND LOCATION AT 33 99 AT ATLANTIC AVENUE. UM, IT WAS A, PREVIOUSLY, IT WAS A DONUT SHOP. UM, AND SO BECAUSE IT WAS, YOU KNOW, SORT OF LIKE IN THE BAKERY SECTOR, UM, THERE'S VERY LITTLE BUILD OUT THAT NEEDS TO BE DONE. IT, IT'S RELATIVELY TURNKEY. UM, THEY JUST NEED TO SET UP THEIR EXISTING, YOU KNOW, EQUIPMENT, UM, AND GET SOME INSPECTIONS, BUT THE NEW SITE IS GOING TO BE THERE, YOU KNOW, FOR THEIR BAKING OPERATIONS. UM, AND THEN THEY'LL HAVE A LITTLE BIT MORE SPACE AT THE CURRENT CAFE, UM, YOU KNOW, TO HANDLE CUSTOMERS AND, AND SORT OF SEATING. THEY'LL BE ABLE TO SORT OF STREAMLINE THEIR, UH, PRODUCTION WITH THE BAKERY, UH, WITH THE NEW LOCATION. UM, THEY HAVE BEEN IN BUSINESS SINCE 2015. HAVE A GOOD, UM, YOU KNOW, FOLLOWING, I THINK, UM, THE PRINCIPAL, ANDREA HAS A PRETTY INTERESTING BACKGROUND THERE. THERE'S A BUNCH OF INFORMATION, UM, YOU KNOW, ON HER PERSONALLY AND HER BACKGROUND. UM, BUT SHE'S BEEN DOING THIS, YOU KNOW, FOR QUITE SOME TIME, ALMOST A DECADE, YOU KNOW, AN EXPERIENCED OPERATOR. UM, WE WERE ABLE TO TRY HER WONDERFUL PRODUCT JUST RECENTLY, I THINK LIKE ABOUT TWO WEEKS AGO, WE HAD A MEETING, UM, WHERE SOME OF MY OTHER COLLEAGUES, UH, FROM GROW AMERICA WERE IN TOWN AND WE DID A, A TRAINING SESSION FOR THE STAFF THERE AND WE BROUGHT IN SOME COFFEE AND SOME PASTRIES AND, UM, GOT TO MEET HER, YOU KNOW, FACE TO FACE. I KNOW, UM, CARLA HAS MET HER MANY TIMES. UM, BUT THE GAF TEAM WAS REALLY HAPPY TO MEET HER FACE TO FACE AND SEE HER OPERATIONS. SO IT'S PART OF, UH, OUR DUE DILIGENCE IS LIKE GOING OUT DOING ACTUAL SITE VISITS. UM, A BAKERY IS A GOOD ONE TO, TO TEST THE, TEST THE PRODUCTS OUT, A FUN ONE, AT LEAST A TASTY ONE, UH, TO TEST THOSE PRODUCTS. UM, BUT I DID INCLUDE A LITTLE BIT OF THE CON COLLATERAL ANALYSIS THERE, UM, SO THAT YOU CAN SEE, UH, WHAT IS SUPPORTING, UM, HER PERSONAL GUARANTEE. I DID LEAVE IN THE RESIDENTIAL, UM, ANALYSIS. WE ARE NOT GONNA BE TAKING A LIEN ON THE RESIDENTS, UM, BECAUSE SHE DOES HAVE A GOOD AMOUNT OF ASSETS, YOU KNOW, FIXED ASSETS IN HER BAKERY EQUIPMENT TO, TO COLLATERALIZE THE LOAN, UM, A LOAN WITH THE ASSETS, UH, OF THE BUSINESS. PLUS FOR THE SMALL AMOUNT, IT JUST MAKES IT A LITTLE EASIER, A LITTLE CLEANER. BUT THE GROW MAKER FUND IS, UH, GONNA BE LEANING THE PERSONAL RESIDENCE, UM, AT 39 35 CEDAR AVENUE, AS WELL AS, UM, YOU KNOW, BLANKET LIEN ON THE BUSINESS ASSETS. UM, BUT YOU CAN SEE THERE IS SOME GOOD EQUITY IN HER IN THE HOME THAT THEY OWN. UM, AND AGAIN, THAT THAT EQUITY THEN SUPPORTS [00:10:01] HER PERSONAL GUARANTEE IF THEY WERE TO DEFAULT. THERE IS, UM, YOU KNOW, SOME COLLATERAL BACKING THERE. UM, SO OVERALL IT IS, IT'S A PRETTY STRONG, UM, UH, REQUEST, RIGHT? ONE OF THE STRONGER THAT WE'VE SEEN. SHE, UH, ALSO HAS, UH, GOOD PERSONAL CREDIT. UM, I THINK I SKIPPED THAT PORTION, BUT SHE HAS, UH, 7 36, UH, SCORES, UH, YOU KNOW, WHICH IS GOOD. THAT'S SOLIDLY IN, YOU KNOW, THE GOOD RANGE, UM, AND LITTLE, VERY LITTLE REVOLVING DEBT. UM, AND JUST THE MORTGAGE DEBT. UM, SO SHE'S STRONG PERSONALLY. UM, AND THEN THE BUSINESS ANALYSIS IS ALSO, UM, LOOKING, UH, VERY STRONG. UH, LET'S SEE, LET ME GO TO THE PER, I'M ON PAGE SEVEN NOW, LOOKING AT THE FINANCIAL ANALYSIS. UM, SO YEAH, THEY'VE HAD SOME GOOD GROWTH, YOU KNOW, OVER TIME LOOKING JUST IN THE MOST RECENT PERIODS THE LAST THREE YEARS. YOU KNOW, THEY WENT FROM 400 K IN REVENUE, YOU KNOW, IN THE PANDEMIC TIMES AND, YOU KNOW, 2023, THEY'RE JUST AT 1.1 MILLION. UM, THEY'RE REALLY PUSHING TO GET TOWARD THE 1.3, THAT'S HER GOAL IS TO PUSH THOSE REVENUES TO, TO 1.3. UM, SO, SO STUDY REVENUE GROWTH, UM, AND GOOD MANAGEMENT OF THEIR COSTS, COST OF GOODS SOLD, AND THEIR SGA. SO IT'S QUITE AN EXTENSIVE ANALYSIS THERE WHERE WE GO INTO EACH YEAR, UH, THE MARGINS AND THE COSTS, UM, AS WELL AS, UH, WHAT WE PROJECTED OUT. UM, AND SO SHE IS A SINGLE MEMBER, LLC, AND SO SHE HAS BEEN FILING ON HER SCHEDULE C. SO THERE WASN'T A TON OF HISTORICAL BALANCE SHEET INFORMATION. THAT'S WHY THOSE BALANCE SHEETS YOU SEE ARE EMPTY FOR 20, UH, 2020 TO 2022. BUT WE DID GET ONE FOR 23 AS WELL AS PROJECTED. UM, AND SO THAT'S WHERE YOU CAN SEE WHERE THOSE ASSETS ARE COMING FROM. UM, THOSE FIXED ASSETS, NUMBERS, UM, AS WELL AS HER OTHER CURRENT ASSET NUMBERS. UM, AND YEAH. AND SO SHE, SHE, THE DEBT, A LOT OF THE DEBT THAT SHE HAS EXISTING IS GONNA BE, AGAIN, REFINANCED WITH A MUCH BETTER LONGER RATE, UH, SORRY, LOWER INTEREST RATE, LONGER TERM. UM, SO SHE'S NOT REALLY INCREASING HER DEBT ALL, ALL THAT MUCH WITH THIS EXPANSION PROGRAM. WE'RE JUST PUTTING HER IN A BETTER POSITION BY REFINANCING THOSE DEBTS AND PROVIDING A LITTLE BIT OF WORKING CAPITAL, UM, FOR THIS EXPANSION. SO, YOU KNOW, STRENGTHS AND WEAKNESSES, SHE'S A, SHE'S A SEASONED OPERATOR, YOU KNOW, DECADE OF EXPERIENCE RUNNING THIS BUSINESS. SHE HAS, UH, GOOD PERSONAL CREDIT. UH, THE LOAN IS WELL COLLATERALIZED AND THE, THE BUSINESS IS ABLE TO PRO, UH, TO, TO CASH FLOW THE DEBT SERVICE, UM, ON, UH, THE 2023 BASIS AND THE 20 AND GOING FORWARD, RIGHT? SO FOR 23 YEAR END AND PROJECTIONS, SHE'S SHOWING, UH, POSITIVE CASH FLOW, DEBT COVERAGE RATIO. UM, THERE'S SOME MODERATE, YOU KNOW, RISK, UM, ASSOCIATED WITH, UM, YOU KNOW, BAKERIES AND FOOD SERVICE, OBVIOUSLY SUPPLY CHAIN AND LIKE PRICE VOLATILITY, UH, TYPE OF STUFF. UM, THERE IS, UM, A LITTLE BIT OF SEASONAL DEMAND AS WELL FOR CERTAIN BAKED GOODS, RIGHT, FOR BAKERIES. UM, BUT REALLY, YOU KNOW, I DON'T, I DON'T SEE A TON OF WEAKNESS HERE BECAUSE SHE'S, SHE'S ABLE TO, UM, SHOW THAT SHE CAN AFFORD IT ON A HISTORICAL BASIS AND HAS BEEN SHOWING, YOU KNOW, INCREASING REVENUES. UM, SHE HAS ALL THE, ALL THE CS OF CREDIT THAT WE'RE LOOKING FOR. UH, SO WITH THAT, I RECOMMEND YOUR APPROVAL AND I'LL OPEN IT UP FOR YOUR QUESTIONS. I'M VERY FAMILIAR WITH THIS, THIS, THIS BEING, AND, AND, UH, COULD SPEAK TO THE CHARACTER OF BOTH, UM, ANDREA AND HUSBAND. UM, MIKE, THIS IS, THIS ONE'S CRYSTAL CLEAR. IT'S EASY, IT'S A SLAM DUNK THAT, I MEAN, THAT'S A GREAT PRESENTATION. IT'S, UH, THEY'RE AMBITIOUS. SHE'S GOT AN EXCELLENT STORY. THE HARDWORKING THEY BUILT IS FROM, FROM SCRATCH, FROM, FROM THE CONCEPT TO, UH, THE EXPANSION THEIR, THEIR LOYAL BASE OF FOLKS ARE. IS THERE, UH, I MEAN, I CAN GO ON AND ON AND ON. I JUST THINK FOR ME, YOU KNOW, I'D MAKE A MOTION NOW JUST TO APPROVE, BUT TO , I AMAZINGLY KNOW DO NOT HAVE ANY QUESTIONS, RIGHT? , YOU DID A GREAT JOB WITH THE PENN. YEAH, NO, I THINK THIS ONE IS LIKE ONE OF THE CLEANEST ONES WE'VE DONE. YEAH. AND I FORGET WHERE IN HERE, BUT, UM, IT'S GONNA SAVE HER A TON OF MONEY. LIKE THIS WHOLE THING, I THINK THE, THE REFI, IT'S LIKE [00:15:01] SAVING HER LIKE TWO GRAND A MONTH. SO SHE'S SAVING LIKE 25 KA YEAR BY JUST REFILING OUT THAT BAD DEBT SHE HAS. AND THEN, YOU KNOW, SO PUTTING HER IN A REALLY GOOD POSITION GOING FORWARD. SO YEAH, THIS IS DEFINITELY ONE OF THE STRONGER ONES. WE'VE, WE'VE, WE'VE HAD AND SEEN. AND AGAIN, THE PRODUCT WAS DELICIOUS. UM, IT LOOKS CUTE IN THERE. SHE'S, SHE'S FABULOUS. . ALRIGHT, THERE'S NOT JACKIE SHOULD MENTION REALLY ANY FURTHER DISCUSSION. NO. OKAY. MADAM CLERK, PLEASE CALL FOR THE VOTE. COMMISSIONER KOCH? YES. COMMISSIONER MARKETS? YES. MOTION CARRIES. THANK YOU. MISSION ACCOMPLISHED. YES, , DO WE HAVE A PUBLIC COMMENT? UH, WELL ABOUT JUST GENERAL STUFF. SO AT THIS TIME WE WILL TAKE NON-AGENT, PUBLIC ITEMS, PUBLIC COMMENTS. WHAT I REALLY NEED, CLERK IS HIS CELL PHONE NUMBER SO I COULD COMMUNICATE BETTER WITH THE DEPARTMENT, DEPARTMENT, . OKAY. PUT THAT ONE RIGHT. I THINK I SEARCHED MY WORK FORM. OKAY, SO NOW IT'S ANY, ARE THERE ANY ANNOUNCEMENTS FROM THE COMMISSION? YES, I DON'T HAVE A CELL PHONE. . OKAY. THAT'S AN ANNOUNCEMENT. OKAY. I'M NOTING THAT IN THE MINUTES RIGHT NOW. SO IN REAL QUICK, THAT'S ALL I GOT. THAT'S ALL YOU GOT? YES. OKAY. ANY, NOPE. NO, NO, NO ANNOUNCEMENTS. ALRIGHT. UM, GOOD JOB EVERYONE. IF THERE IS NO OBJECTION, I DECLARE THE MEETING ADJOURNED. TWO 70. * This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting.