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HomeMy WebLinkAboutR-91-0374Aft J-91-414 5/9/91 RESOLUTION NO. A RESOLUTION AMENDING RESOLUTION NO. 91-12, ADOPTED JANUARY 10, 1991, WHICH AUTHORIZED THE CITY MANAGER TO EXECUTE AN AGREEMENT, IN A FORM ACCEPTABLE TO THE CITY ATTORNEY, WITH THE PRINCIPALS OF Z-MART DISCOUNT DEPARTMENT STORE, INC., IN AN AMOUNT NOT TO EXCEED $200,000, FOR THE PURPOSE OF REHABILITATING, RENOVATING AND PURCHASING INVENTORY FOR THE Z-MART DISCOUNT DEPARTMENT STORE, INC. LOCATED AT 1100 NORTHWEST 54TH STREET,.MIAMI, FLORIDA; TO PROVIDE BY THE HEREIN AMENDMENT FOR THE ALLOCATION OF ADDITIONAL FUNDS NOT TO EXCEED $125,000 FROM THE SEVENTEENTH (17TH) YEAR COMMUNITY DEVELOPMENT BLOCK GRANT FUND (MINI-UDAG PROGRAM) FOR SAID PROJECT; PROVIDING FOR THE TERMS OF REPAYMENT OF THE TOTAL LOAN AMOUNT OF $325,000; SETTING FORTH THE CITY'S POSITION IN REGARD TO LOAN COLLATERAL; AND AFFIRMING THE LOAN COMMITMENT OF THE CITY FOR A PERIOD OF SIX (6) MONTHS FROM THE DATE HEREOF. WHEREAS, the City Commission is committed to economic development and the expansion of trade and commerce; and WHEREAS, the promotion of economic revitalization in the neighborhoods of the City of Miami is an important part of the City's economic development strategy; and WHEREAS, a major department store, in the Liberty City neighborhood, has closed thereby impacting the availability of goods, services and employment in the target area; and WHEREAS, the Black Economic Development Coalition (a/k/a Tools for Change) has assisted in the preparation of a business package to secure financing for the proposed Z-Mart Discount Department Store, Inc. in Liberty City; and WHEREAS, the proposed location will be 1100 Northwest 54th Street, Miami, Florida, and will occupy 63,000 sq. ft. of space; and WHEREAS, the proposed owners of the Z-Mart Discount Department Store, Inc. are minority entrepreneurs; and and WHEREAS, the total project cost is approximately $1,763,000; CITY COW IIS.SION N EET iG OF MAY 9 1991 RE"W106 �. WHEREAS, the Z-Mart Discount Department Store, Inc. will employ approximately 80 persons and have an annual payroll of i $652,000; and WHEREAS, the City of Miami has provided, in the form of a loan, $200,000 from the Community Development Block Grant-Mini- UDAG Program fund to the principals of Z-Mart Discount Department Store, Inc.; and WHEREAS, the City of Miami, by this Resolution, will provide, in the form of a loan, an additional $125,000 from the Seventeenth (17th) Year Community Development Block Grant-Mini- UDAG Program fund to the principals of Z-Mart Discount Department Store, Inc.; and WHEREAS, the total allocated sum of $325,000 will be made available upon the terms specified herein; and WHEREAS, the City of Miami's loan commitment shall be for a six (6) month period from the date hereof; NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA: Section 1. The recitals and findings contained in the Preamble to this Resolution and hereby adopted by reference thereto and incorporated herein as if fully set for the in this Section. Section 2. Resolution No. 91-12, adopted January 10, 1991, is hereby amended in the following particulars:1 Section 4 The amount of $125,000 is hereby allocated to the Z-Mart Discount Department Store, Inc from the City's Seventeenth (17th) Year Community Develoament____Block Grant-Mini-UDAG Program •lm B_Qction 5. Thetotal 1 Words and/or figures stricken through shall be deleted. Underscored words and/or figures shall be added. The remaining provisions are now in effect and remain unchanged. Asterisks indicate omitted and unchanged material. - 2 - 91 - 374 A^ Section 4f. The City Manager is hereby authorized to obligate and encumber for a :six (6) month period, funding for the Z-Mart Discount Department Store, Inc., subject to conditional requirements and terms stated herein: Organization: Z-Mart Discount Department Store, Inc. Total Cost: $1,763,000 Terms: City's allocated loan amount shall be $200,000 325,000, repayable by being amortized over ten (10) years. The loan shall 1L!02!LAt0ri:t1M On principal Luid interest d-dr* UIL= Year. The interest rate and/or deferment of principal and interest payments shall be based on annual sales, utilizing the formula herein noted. $5.199 or below No payments, principal and interest at three percent (3%) per annum, until year 10 (maturi ,,j S5.2 to S5.599 Principal and interest at three percent (3%) per annum with yearly payments S5.6 to $5.999 Principal and interest at six percent (6%) per annum with yearly payments S6.0 and above Principal and interest at nine percent (9%) per annum with yearly payments. Section 7 The City shall have a second Position on collateral paripassu with Miami Capital Development, Inc. and the Business Center, Inc." Section 3. This Resolution shall become effective { immediately upon its adoption. PASSED AND ADOPTED this 9th day of May , 1991. 52� �XAVV%R . SU REZ YOR ATTE-9V: MAT Y HIRAI CITY CLERK ITY DEVFb1:?MENTREVIEW AND APPROVAL: FRANK ST A/, DIRECTOR DEPPATMENT 0 COMMUNITY DEVELOPMENT n- - 3 - 91-~ 374 FINANCIAL REVIEW AND APPROVAL: ACARLO0�3-C4,ARC �A,DIRECTOR DEPARTMENT OF FINANCE BUDGETARY REVIEW AND APPROVAL: MANOHAR A, DIRECTOR DEPARTMENT BUDGET PREPARED AND APPROVED BY: CARMEN L. LEON ASSISTANT CITY ATTORNEY APPROVED AS TO FORM AND CORRECTNESS: CLL:yv:ebg:gmb:M2210 y1--- 374 4 •I- -- _: .. 1 1 11 11 1 _* .1 CITY OF MIAMI. FLOMDA r 43 INTEROFFICE MEMORANDUM TO: Honorable Mayor and Members DATE: MAY - 2.1991 FILE of the City Commission . SUNECT: Discussion concerning the City Commission to Rescind a Resolution in order to Modify the Allocated Contract Amount FROM: Cesar H. 0 r SUEAENCES! for Z-Mart Discount Department City Menag Store, Inc, ENCLOSURES: DISCUSSION' Discussion of t`►e proposed agreement terms between the City of Miami and Z-Mart Discount Department Store, Inc. is hereby outlined below. ' Pursuant to the Commission directive at its meeting of April 26, 1991, it is requested that the City Commission rescind Resolution No. 91-12 for the purpose of modifying the allocated contract amount and the proposed terms of said agreement. The agreement between the City of Miami and Z-Mart Discount Department Stare, Inc. shall be in a •form acceptable to the City Attorney. Further, all funds allocated shall be used for the purchase of inventory, fixed assets and working capital expenditures, in accordance with the terms and condition as set forth herein. BACKGROUND! The Department of Community Development (DCD) has analyzed the need to obligate funding in the amount of $325,000 for the development and operation of Z-Mart Discount Department Store, Inc., which will be located at 1100 N.W. 54th Street in the Liberty City target area. [BUSINESS] Three (3) minority entrepreneurs who are former Zayre/Ames Store Managers are the principal owners and managers of the proposed Z-Mart Discount Department Store, Inc. With the closing of the Zayre/Ames department store located at 1100 N.W. 54th Street, there is an opportunity to reopen and operate an independently owned store at that location and eerve the, primary trade area bounded by N.W. 32nd Avenue on the West; Miami Avenue on the East; N.W. 20th Street on the South; and N.W. 95th Street on the North. The objective of the_ business is to provide a full --line, self- service; neighborhood discount store targeted to value conscious, lower -to -middle income.families. 91-- 374 i 1 i _t Honorable Mayor and Members -� of the City Commission = Page 2 Z-Mart will be owned and operated by a team of former Zayre/Ames store managers. The Principals of Z-Mart are: Charles 11owze, President and Chief Executive Officer (35X ownership); John F. Kilby, Executive Vice President (35X ownership); and Joan M. Donaldson, Director of Operations (20% ownership). Z-Mart/Ames store at this location produced gross sales of $10.0 million in 1989 which represents $153.00 in sales per square loot. The market share represented by the $10.0 million sales level is approximately 7.4% of the primary trade area's estimated general merchandise and apparel expenditures of $134.5 million. The proposed new operation projects the achievement of a 3.4% market share by the end of its first years operations. Z-Mart has developed an operational plan which includes the latest technologies in computerization, optical scanning, inventory control, and accounting systems. Z--Mart is seeking to borrow a total of $1,733.00 start-up operation of the discount department store at 1100 N.W. 54th Street. These funds, including an equity injection of $125,000 will be used to remodel and operate the former Zayre/Ames Store. In addition, funds will be used to purchase equipment; opening inventory; working capital; and other start-up costs. A portion of the funds will also be used to purchase the existing lease including fixtures and equipment from Zayre/Ames. [MANAGEMENT/PERSONAL] The critical factors for the short term success of Z-Mart include "Inheriting" the customer base from the previous owner; creative and effective marketing and promotional program; and efficient cost and inventory controls which allow variable coats to match increases and decreases in case loads. The critical factors for the long term success of E-Mart are a strong management team, with an average of over eighteen (18) years each in both discount and department store retailing. The Chief Executive Officer of this management team had direct executive control of the entire Zayre/Ames South Florida region which generated $256 million in annual sales, and was the leading region for the company in both Saxes and Profits. All of the majority principals have collectively managed this location successfully for eleven (11) yearse Z 91_. 374 t_i ; 11onorable Mayor and Members of the Citq Commission Page 3 Mr. Charles nowre President 8 Chips Executive officer has Reventeen 17 years of diversified discount and department store retail management experience. His most recent experience Includes directing and overseeing twenty-four (24) Store Managers and a Metro area staff of six (6) in planning and implementing programs for an annual sales volume of $256 million within the Zayre/Ames Corporation. Mr. Howae's personal credit report Indicates a generally very good payment history with the exception of two (2) R-9 rating's relative to a single account. Mr. John F. Kill, Executive vice President has over twenty (20) years of diversified retail management and operations experience. His most recent experience include6 managing all aspects of retail operations, staffing, training, merchandising, and purchasing for a discount department store with annual sales of $12 million within the Zayre/Ames Corporation. Mr. Kilby's personal credit report indicates a very good payment history. Miss Joan M. Donaldson, Director or Operatious has over twenty- six E� years of diverse management and operations experience in retail stores. Her experience includes serving as a Store Manager for the past eight (8) years for the Zayre/Ames Corporation. Miss Donaldson's personal credit report indicates a very good payment history. [FINANCIAL. ANALYSIS) Miami Capital Development, Inc. (MCDi) and the City of Miami were provided with the personal tax returns of the three (3) principal$ for 1987, 1988, and 1989, as well a their personal financial statements. Z^Mart provided a Business Plan including a five (5) year Cash Flow Projection with clearly stated assumptions, and a Pro -forma balance Sheet for the first (15t) year of operations. First (1st' year (1991/1992) sales are projected at $5,375,000 with a Gross Profit of $1,870,000, and Net income Before Taxes of $188,910. Sales are projected to increase to $5,912,500 in 1992/1993 and up to $7,869,538 in 1995/1996. for an average annual increase of 9.0% over the first five (5) years . Met Income before Taxes is projected to increase to $283,440 in 1991/1993 and up to $633,313 in 1995/1996. `3 9� 3"74 4. -r 4 ! Honorable Mayor and Members of the City Commission Page 4 r. _ 0 Z-Mare`s first (list) year projections of $5,375,000 can be compared to the $10,000,000 in sales generated by the Zayre/Ames store at this same location in 1989. Cash Flow projections for the next five (5) years indicate that Z-Mart will be able to service its debt without incurring any pre-tax losses. [SOURCES OF FUNDS] City of Miami S 325,000 Miami Capital Development, Inc. 300,000 Business Assistance Center, Inc. 2001000 Barnett bank of South Florida, N.A. 208,000 North Carolina National Bank 150,000 Popular Bank 501000 Other Sources (including Trade Credit) 315,000 Owners Equity 125,000 TOTAL $1,733,000 [USKS OF FUNDS] Lease Acquisition $ 200,000 Building Remodeling 112,000 New Fixtures/Equipment 63,000 Working Capital 473,000 Purchase Opening Inventory 7801000 Marketing 12,000 Legal 17,000 Utilities 17,000 Contingency 59,000 TOTAL USES $1,733,000 iCOLLATBRALi Lease Acquisition (Est. Mkt. Value) $ 400,000 New Inventory (@ cost) 780,000 New Fixtures/Equipment (@ cost) 63,000 SUBTOTAL - Corporate Assets $1,243,000 91- 374 11 F-' . II •. Honorable Mayor and Members of the City Commission Page 5 2nd Mortgage un RuaidenLial Real Estate located at 199 N.W. 91st Way Coral &prima, riorida (Estimated Value: $199,000 less $136,000) 2nd Mortgage on Residential Real Estate located at 14035 S.W. 130th Terrace, Miami, Florida (Estimated Value: $130,000 leas $74,150) 2nd Mortgage on Residential Real Lstate located at 2600 N.W. 42nd Avenue, Lauderhill, Florida (Estimated value: $95,800 less $29,884) TOTAL COLLATERAL 63,000 55,850 65,916 $1,4271766 The City of Miami will have a second Collateral position paripassu with Miami Capital Development, Inc. and the Business Assistance Center, Inc. further, terms of City of Miami's loan will be based on the following: $325,000 amortized over a ten (10) yea4.period. In addition, repayment will be based on Gross Sales, utilizing the following formula: ANNUAL GROSS SALES (in =1111ons) 05.2 or below No payments, principal and interest at three percent (39) per annum, until year 10 (maturity) $5.2 to $5.6 Principal and interest at three Percent (3Z) per annum with yearly payments $5.6 to $5.9 Principal and interest at six p'ereent (6Z) per annum with yearly payments $6.0 and above Principal and interest at nine percent (9%) per annum with yearly payments Please note that at maturity of the loan, the City reserves the right to renegotiate outstanding account. /Sid N 91-- 374