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City approves $250,000 loan to Fergus Hotels LLC and waives $3,750 origination fee
Summary
The Fergus Falls City Council approved a $250,000 IRP loan to Fergus Hotels LLC to complete a second round of renovations at the Fergus (Days Inn by Wyndham) and unanimously waived the standard 1.5% origination fee as a one-time courtesy.
The Fergus Falls City Council approved a $250,000 loan to Fergus Hotels LLC and voted to waive the loan program's standard 1.5% origination fee, a council member said, during a public hearing and subsequent roll-call vote.
City staff presented the Business Development for Fergus Falls (BDFF) committee's recommendation that the city make a $250,000 IRP loan to Fergus Hotels LLC to fund a second phase of renovations for the property being rebranded as a Days Inn by Wyndham. Clara Beck of BDFF described the loan terms as 5.5% interest on a 20-year amortization with a 10-year balloon, a 1.5% origination fee, recording fees, personal and corporate guarantees, and a key-man life insurance policy assigned to the city. Collateral was described as a third position mortgage on the real estate at 610 Western Avenue; a subordination agreement from West Central Initiative was said to be in process.
The loan triggered the public hearing requirement in state subsidy law because it exceeded $150,000; staff noted the newspaper notice had been published at least 10 days before the meeting. After the public hearing closed with no public speakers, a council member moved and another seconded to approve the resolution to make the loan. The council then separately moved and approved a resolution waiving the 1.5% origination fee (equal to $3,750) as a one-time courtesy to the borrowers.
Council members discussed whether waiving the fee set a precedent; council and BDFF members noted that future applicants could request similar relief but that such waivers had consequences for the IRP program's reserve balance. Staff said the origination fee would normally be deposited to the IRP account and used for future loans. The resolution approving the loan passed on roll call with all members voting yes; the separate resolution waiving the origination fee also passed on a roll-call confirmation.
The loan documents and BDFF financial analysis are available for review in the community development office, staff said. The borrowers were not present at the meeting; councilmembers publicly thanked them for reinvesting in two hotels on the city's main corridor.
The council recorded the formal approvals and directed staff to finalize loan documents consistent with BDFF's recommendation and the council's waivers.
