End of business puts into question $300,000 loan of public funds
By Lynda Jensen
WINSTED, MN A large employer in Winsted, Five Star Direct, is closing. “We are shutting down and liquidating,” co-owner Joe Remer said of Five Star. This took effect April 1, he confirmed. “We are not relocating. Five Star Direct is done,” he said.
He, and his partner Dick Borrell, tried diligently to sell the business, but this didn’t work. “We succeeded a little, but not enough,” he added.
At one time, Five Star employed 160 people and was poised to add more.
“We were cruising along quite well,” Remer said.
Then the economy stepped in, hitting Five Star’s accounts.
“It bit us quite soundly,” Remer said. Its second largest account stopped paying. This account is “teetering on the edge themselves,” he said.
In recent years, Five Star has dealt with the car industry; in fact, half of its accounts pertained to that sector.
Last year, the car industry “took a pounding,” he said.
This took its toll on the business.
Luckily, a customer from Louisiana, who built a business in the local area, stepped forward and was willing to hire 30 to 40 people from Five Star, he noted.
Remer roughly estimated that Five Star has pumped $10 million into the local economy in payroll. “Hopefully that will be appreciated,” he said.
“It’s been a long three to four months,” he said.
Five Star approached the bank, not the other way around. It was a voluntary shut-down, he said.
Public funds worth $300,000 are involved
Five Star previously took advantage of a $300,000 low-interest loan.
“The City of Winsted obtained $300,000 from the State of Minnesota through the Small Cities Development Program Grant, which, in turn, was loaned to Five Star Direct through the city’s EDA,” confirmed Administrator Brent Mareck.
So far, Five Star Direct, Inc. is current on its loan payments, Mareck noted.
“I believe Five Star is in the process of closing out its loan to confirm it has met its job creation (30), and pay requirements, with the state of Minnesota,” Mareck said.
The monthly payment for Five Star toward this loan is $1,933, and the balance of the loan is $247,238, Mareck added.
The rate on the loan is 4 percent, which is paid back to the EDA’s revolving loan fund, Mareck said.
Remer said he had no idea what would happen regarding the loan, and plans to meet with the city about this subject.
If it should go into default, the following section is listed in the loan agreement: “In the event of a default, the city shall have the right at its option and without demand or notice, to declare all or any part of the loan immediately due and payable, and in addition to the rights and remedies granted hereby, the city shall have all of the rights and remedies available under the Minnesota statues and any other applicable law.”
The closing of Five Star ends about 10 years of work and tradition for the business.
Remer admitted that the closing is “very painful,” and embarrassing as a lifelong resident of Winsted. “It was very humbling.”
The building, which is between 85,000 and 90,000 square feet, will be listed for sale, Remer said.