By Ivan Raconteur
HOWARD LAKE, MN Developers remain optimistic about the future of The Lodge in Howard Lake, but initial expectations have not yet been met.
“Lease-up has been slower than expected. Cash flow has been difficult. They are asking for assistance from the city to get through the rest of this year,” financial consultant Shannon Sweeney of David Drown Associates told the city council during its May 19 meeting.
A letter from David Pokorney of Community Asset Group to Sweeney provided some additional details.
“As you are aware, the Lodge was unable to make the initial loan payment to the City of Howard Lake as set forth in the loan agreement,” Pokorney noted in the letter.
He noted the obligation to the city is a subordinated debt, and the Lodge was only able to make a payment to the first mortgage.
“The cash flow issue with the Lodge occurred primarily because of extremely low initial occupancy,” Pokorney continued, adding that the original projection was that the facility would open with a minimum of eight residents, but opened with only one.
Pokorney stated over the past seven months, the staff has been working diligently with the Good Samaritan marketing staff to fill the facility.
He noted at the time of the meeting, the Lodge was up to 10 residence, with another expected before the end of May.
“Based on the level of interest, we expect that by August, the facility will have 14 of the 18 units occupied.
Pokorney stated that he is confident the Lodge will be able to make its March 2016 payment to the city.
He added that the Community Asset Foundation has provided an additional $100,000 to help the Lodge meet its financial obligations.
“It’s probably in the city’s best interest to protect your investment,” Sweeney said during the meeting, adding there are “very positive indications the project is moving in the right direction.”
After discussion, the council directed staff to prepare an interfund loan in the amount of $46,453, and a modification to the existing development/loan agreement for the Lodge of Howard Lake project, with all legal fees to be paid by the developer.
Odds and ends
In other business, the council:
• heard from liquor store manager Myra Laway that the revenues for April were $52,970 and the expenses were $58,903.
• approved the purchase of a module from Banyan Systems to allow the city to process payroll with direct deposit
• approved replacement of a pump system for a city well at a cost of $9,684 from McCarthy Well.
• directed staff to submit a request to Wright County to re-assess the tax forfeited lots in Dutch Lake Preserve to $10,000 per lot. Council Member Tom Kutz recused himself from the discussion and the vote.