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Home My WebLink About7/28/1999 - STAFF REPORTS (3) n 1 DATE: July 28, 1999 TO: City of Palm Springs Redevelopment Agency FROM: Dr. George Wyatt, Director Economic Development VIP MOTORS RECOMMENDATION: It is recommended that the City of Palm Springs Redevelopment Agency ("Agency") approve the attached Resolution agreeing in concept to the proposed arrangement between the City of Palm Springs Redevelopment Agency and VIP Motors. BACKGROUND: The City of Palm Springs Economic Development Department has been working with Blair Dahl and Jerry Johnson of VIP Motors over the past several months in order to assist VIP Motors move forward on an expansion of their auto dealership. Based upon our negotiations, we have been able to conclude that VIP Motors could qualify for a HUD 108 loan that would range between $840,000 to $1 million. You should know, Blair Dahl and VIP Motors are of a certainty that the amount of new jobs that they will create will qualify them for the full $1 million HUD 108 loan. Attached, you will find a series of pro formas provided by VIP Motors, upon which we have concluded that a sales tax return to the Agency would be far greater than the amount required to service the $1 million HUD 108 loan at 6% interest. VIP Motors is in the process of negotiating, with the Agency, all of the required loan documents that would permit the establishment of the HUD 108 loan. Because of the August recess, however, they are desiring an expression of the Agency's support for the proposed agreement. In essence, the agreement will provide for the $1 million HUD Section 108 loan,amortized over ten (10) years,bearing interest at the lowest possible rate available under the program. This loan represents approximately 50% loan-to-value of the proposed improvements and 121/2% of the dealership. The loan is proposed to be repaid through new incremental sales tax receipts received by the City. In addition, VIP Motors is requesting the Agency to pay all development impact fees imposed on the project up to $100,000. Based upon the projected increased sales tax that should be produced by this expanded dealership, we are recommending that the City of Palm Springs Redevelopment Agency approve the attached Resolution agreeing in concept to the proposed arrangement between the City of Palm Springs Redevelopment A enc and VIP Motors. 11 r. George yart, Director of n 'c Development O APPROVED Execu ive irector ATTACHMENTS: 1. Resolution 2, Pro formas �/ MERCEDES BENZ OF PALM SPRINGS tmv 1 BMW OF PALM SPRINGS PALM SPRINGS INFINITI Project Narrative: The VIP Motor Cars, Ltd. ("VIP") operations are located on three parcels of land on East Palm Canyon Drive in Palm Springs, California. The company is comprised of three separate automobile franchises, Mercedes Benz, BMW and Inflnti. VIP was acquired by new owners in October of 1998, The new owners see great potential to grow the business, and this project is the initial step in their plan Mercedes Benz and BMW products, in particular are very popular at this time and the challenge for the dealership is get as many of these No demand" vehicles from the manufacturers as possible Each manufacturer has given the dealer specific criteria that once met will enable the dealership to achieve a greater allocation of these desirable vehicles. Therefore there is a direct relationship between completion of this project and greater sales volume. The expanded business, accordingly, will require the addition of personnel in operations and management. This project adds a total of approximately 6,500 new square feet of building area. The Mercedes project involves expansion of the showroom, customer waiting and convenience areas including a boutique and the addition of new service writer offices and second floor administrative office space The showroom will be remodeled to include new flnishos and furniture. The customer boutique and parts counter areas are being expanded and improved in accordance with Mercedes-Benz's new program called "The Collection". The BMW project involves the expansion of the showroom to include an enclosed new car delivery area. The interior will be renovated to include new finishes and enhanced customer convenience areas. The addition of a covered demo parking area will ensure that"ready-to- drive" demonstrators are protected from the desert sun. New service writer offices will facilitate expanded service business. The exterior of the dealerships will be updated as will the site lighting, landscaping and signage. The site Improvements will give the dealership a more cohesive fresh appearance. VIP Motor Cars Ltd. Pro Forma Balance Sheet Subsequent to Completion of Manufacturer Suggested Improvements Decemtwr 31, Upon Project One Year After 1998 Completion Completion Cash 441,464 500,000 700,000 Contracts in transit 351,503 400,000 6W,000 Receivables 534,574 550,000 550,000 Inventories New cars 3,540,073 4,000,000 4,500,000 Used cars 791,542 1,000,000 1,250,000 Parts and accessories 744,375 760,000 800,000 Sublet repairs 762 1,000 1,000 Work-In-process labor 6,307 7,000 61307 Total inventories 5,083,059 5,758,000 6,557,307 Other current assets 20,301 20,OW 20,000 Prepaid expenses 40,218 40,000 40,000 Fixed assets Equipment 490,319 550,000 550,000 Furniture and fixtures 186,695 250,000 250,000 Leasehold improvements 1,273,446 3,300,000 3,300,000 Computer - - - Reserve for showroom environment Accumulated depreciation (853,336) (WO,000) (960,000) Net fixed assets 1,097,124 3,200,000 3,140,000 Other assets 14,936 42,000 421000 TOTAL ASSETS 7,583,179 10,510,000 11,649,307 �A�111��D F�lu1TY: Accounts payable 374,257 400,000 439,521 Notes payable(floor plan) 4,102,764 4,850,000 5,350,000 Accrued liabilities 525,654 500,000 525,654 Long tern debt (owners) 1,100,000 1,100,000 1,100,000 HUD Section 108 financing 1,000,000 924,132 New debt or equity financing (owners) 1,000,000 950,000 Shareholders' equity Capital stock 160,000 160,000 160,000 Retained earnings (deficit) 1,320,105 1,500,000 2,100,000 Total shareholders' equity 1,480,105 1,660,000 2,260,000 TOTAL LIABILITIES AND EQUITY 7,582,780 10,510,000 11,549,307 1�51ew3 VIP Motor CarsLtd. Aosiqwq Pm Forme Operating Stmem" Sube%L"nt to Ccx"lon of Manufacturer Srggwtad Imprvvwwls ExPected Avwne d 1996 FImt FW Actual Year One Yeerg SALES 51,428,793 58,000,000 61,500,000 GROSS PROFIT 6,390,420 7,125,OW 7,425,DDO COMPENSATION CAR SALESMAN 704,396 795,000 W0,000 DELNERY EXPENSE 34,133 25,OW 30R00 FLOOR PLAN INTEREST 307,669 5001000 emoo0 SALARIES(age Note 1) 1,754,082 1,950,000 2,050,000 13FNEFITS 481,940 525,000 550,000 UNIFORMS 40.438 45.000 45,000 COMPANY CAR A TRUCK EXPENSE 123,203 128,200 128,200 SUPPLIES 153,516 155,000 150,000 ADVERTISING 279.644 320,000 -320,000 DATA PROCESSING 200,773 185,000 185,000 POLICY WORK 88,293 66,000 65,000 OUTSIDE SERVICES 232,740 175,000 17$,000 TRAVEL AND ENTERTAINMENT 43,321 45,000 45,000 SUBSCRIPTION AND DONATIONS 16,126 25,000 25,000 LEGAL.AND AUDIT 29,913 15,000 15,000 POSTAGE 19,151 20,000 20,000 TELEPHONE 46,609 B0000 60,W) FREIGHT 19,430 25,000 25,0W TRAINING 12,773 80,000 75,000 BANK AND CREDIT CARD CHARGES 55,890 50,000 50,000 MISCELLANEOUS 39,356 40,000 40,000 RENT(FDH ENTERPRISES, INC and PALM SPRINGS FORD) 678,446 708,0W 7W,000 AMORTIZATION OF LEASEHOLDS 36,813 40,000 40,000 REPAIRS-REAL ESTATE 28,507 75,000 75,000 TAXES-REAL ESTATE 28,D82 85,000 85,000 HEAT,LIGHT,POWER AND WATER 84,117 100,000 100,000 INSURANCE-OTHER 84,066 95,OW 95,000 REPAIRS-EQUIPMENT 15,.i38 25,000 25,000 DEPRECIATION-EQUIPMENT 37,542 40,ODO 40,OW EQUIPMENT RENTAL 23,450 25,000 25,000 BONUSES FROM MANUFACTURERS (1,071,104) (1,000,000) (1,100,000) COMPENSATION OWNERSACQUISITION FINANCING 503,523 500,000 500,000 INTEREST ON HUD FINANCING - 60,000 50,000 INTEREST ON OTHER NEW FINANCING - 80,000 70,000 INTEREST-OTHER 150_7&4 110,000 110,OW 5,$21,088 6,151,200 �8, g,� PRETAX INCOME 1,089,332 973,8W 1,148,800 INCOME TAX PROVISION 427,733 388.520 469,520 NET INCOME 64109 684,280 9976F DEPRECIATION AND AMORTIZATION 74,354 80,000 80,000 PRINCIPAL PAYMENTS ON HUD FINANCING (75,868) (90,000) PRINCIPAL PAYMENTS ON OTHER NEW FINANCING - (80 000) _(70,000) CASH FLOW - 716�64- 628412. ---m6'-' F Nate 1 -TechniUene and eknrler pncluc"personnel coats hase bean dodrx rn cw nmuig grove mrgin and are not shown as separate m¢tenses Legal Descriptions: BMW of Palm Springs Parcel Map 011/005 Parcel 1 Mercedes of Palm Springs Parcel Map 011/005 Parcel 2 Infiniti of Palm Springs Parcel Map 011/005 Parcel 3 S �-s' RESOLUTION NO, 1076 OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA, AGREEING IN CONCEPT TO THE PROPOSED ARRANGEMENT BETWEEN THE CITY OF PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY AND VIP MOTORS. WHEREAS the City of Palm Springs Economic Development Department has been working with Blair Dahl and Jerry Johnson of VIP Motors over the past several months to assist VIP Motors move forward on an expansion of its auto dealership; and WHEREAS the Economic Development Department staff has concluded that VIP Motors could qualify for a HUD 108 loan that would range between $840,000 to $1 million, and VIP Motors is of a certainty that the amount of new jobs that it will create will qualify it for the full $1 million HUD 108 loan; and WHEREAS a series of pro formas provided by VIP Motors, on file in the office of the Agency's Assistant Secretary, provided the basis upon which staff concluded that a sales tax return to the City would be far greater than the amount required to service the$1 million HUD 108 loan at 6%; and WHEREAS VIP Motors is in the process of negotiating with the Agency all of the required loan documents that would permit the establishment of the HUD 108 loan, as well as an agreement between the Agency and VIP Motors; and WHEREAS the agreement would provide for the $1 million HUD Section 108 loan, amortized over ten (10) years, bearing interest at the lowest possible rate available under the program, and this loan represents approximately 50% loan-to-value of the proposed improvements and 121/2% of the dealership; and WHEREAS said Section 108 loan is proposed to be repaid either by new incremental sales tax receipts received by the City or Community Development Block Grant (CDBG) entitlement as desired by the Agency, and VIP Motors is requesting the Agency to pay all development impact fees imposed on the project up to $100,000; and WHEREAS the Agency will be in recess for the month of August and VIP Motors desire an expression of the Agency's support for the proposed agreement. NOW THEREFORE BE IT RESOLVED by the Community Redevelopment Agency of the City of Palm Springs, California, that it agrees in concept to the proposed arrangement between the Agency and VIP Motors. ADOPTED this 28th day of July 1999. AYES: Members Barnes, Hodges, Oden, Reller-Spurgin and Chairman Kleindienst NOES: None ABSENT: None ATTEST: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA By Assistant Secretary Chairman REVIEWED &APPROVED AS TO FORM A��G I'