Lentz, White tough on CFCDC CEO over payment of loan

Filed under DAYTONA BEACH

BY JAMES HARPER
DAYTONA TIMES

Two Daytona Beach commissioners recently verbally attacked Central Florida Community Development Corporation CEO Gerald Chester and threatened to default on a loan he received from the Community Redevelopment Agency (CRA), which he used to construct and open a restaurant, ice cream shop and renovate an apartment complex in Midtown.

130627_dt_front04But a majority of the members of the local CRA board supported Chester’s efforts to make a difference in the predominantly Black area of Daytona Beach and eventually all voted to give him until their next meeting on July 3 to come up with a business plan so they can vote up or down on an extension on a loan payment until October.

Daytona Beach Zone 1 Commissioner Carl Lentz and Zone 3 Commissioner Kelly White were the most vocal opponents of Chester and his project. The CRA board is made up of all six Daytona Beach commissioners and the mayor.

Chided by Lentz, White
Zone 2 Commissioner Pam Woods apologized to Chester for she assumed he was notified two weeks prior to the meeting that they wanted a business plan from him before delaying a loan payment to the CRA.

“When we continued this, I thought we were continuing so we could have this information. I don’t know why this wasn’t conveyed to you sooner. We asked for it two weeks ago.  If you got the request Friday, I’m sorry,” Woods said.

Lentz and White were not as sympathetic.

“We are refinancing a non-performing loan. I asked for an updated business plan with strategies,’’ Lentz said to Chester at the CRA meeting at City Hall on June 19.
White said she sees the board in the role of a bank representing the taxpayers.

“We made the loan. Are you willing to put up collateral? You don’t have financial information on the entity you want to restructure the loan,” piped in White.

Financial difficulties
Chester tried to explain to White an Lentz that the Central Florida Community Development Corporation and the city began work on the project together.

“We are a nonprofit that came to the table to do a partnership with the city in a depressed area where the market wasn’t doing anything. We have already put up more than anyone else,” he explained.

According to a memo written by Redevelopment Director Reed Berger to City Manager Jim Chisholm, the initial loan to CFCDC was $301,100. The city also contributed a $250,000 forgivable loan to finance the Liberty Plaza project located at 458 S. Martin Luther King Blvd.

“The CFCDC has experienced financial difficulties which have resulted in non-payment of their loan over the past several months and is requesting a deferral of monthly payments for 18 months from the date of their last payment (March 2012) at which time payments would resume (October 2013),” according to a memo from Reed.

“We are a creditor. We haven’t been paid for a year. What’s going to change for six months? You have no financial projections,” White said.

No time to prepare
Chester said he wasn’t notified until five days before the meeting that they wanted a business plan from him, which he said wasn’t enough time to present something credible to them.

“I was not prepared at the last minute to put something that would hit the public and be scrutinized and have errors,” Chester explained.

White responded that they are being asked to restructure a loan that is very significant.

“This is $550,000 of cash from the CRA that we are responsible. I’m disappointed you did not have basic financials put together. You are still a business – (you) have to run things to sustain yourself,” White declared.

Chester again said he was more than willing to put in writing what they wanted.

“Give me a timeframe (to put together a) detailed report. I am committed to making that happen, make this work,” he responded.

October extension sought
Chester said an extension on the loan until October would allow the CFCDC to improve its cash flow and meet financial obligations to repay the loan.

If the CRA does not approve the modification, staff will proceed to issue a notice of default,” wrote Berger in a memo to City Manager James Chisholm.

Lentz said he could not support an extension unless Chester gave them an idea “of actual income from property to see if you are capable of paying back $300,000 owed to us.”

“We got into this project a few years ago to improve a dilapidated property in Midtown to renovate, erect a restaurant and ice cream shop – do something above the standards,” Chester said last week to the CRA board.

Only restaurant open
Chester said it was never the intent to operate the restaurant and ice cream shop full time but to lease out or sell the businesses after they opened. Currently, only the restaurant is operating he said, because of a number of issues.

In a business plan he submitted to the city, Chester said it stated that the businesses would operate the first three years at a loss.

Part of the business plan included renovating and opening up apartments behind the restaurant, an income source to help pay back the loan.

Faced code issues
Chester said he came up against code issues renovating the apartments, which has delayed them from opening.

He said some of the problems that had to be corrected he thought had been grandfathered in when he signed the contract with city for the loan he obtained to purchase the property on the corner of Loomis Street and Martin Luther King Jr. Boulevard, which is now called Liberty Plaza.

“We haven’t really made any money. Money was supposed to come out of restaurant and apartments to pay down the loan. For two years, we’ve had to carry building,” Chester explained.

“The nonprofit (CFCDC) paid as much as it could,” he continued.

Lien on property
Within the next three months, Chester hopes to have apartments up and running and a new tenant operating the ice cream shop, which is now closed.

His next loan payment of $2,083.33 is due October of this year.

“We are a nonprofit development company. Recently we entered in preliminary talks to lease one of the facilities to create revenue stream to work ourselves out of the restaurant businesses,” Chester explained.

Currently, there is a lien on the property and the city could foreclose upon default.

Chisholm said the city would turn around and put the property back on the market if the board votes to default on the loan.

Mayor Derrick Henry offered Chester solace.

Reed: ‘Let it ride’
“The reality is … we realize the challenges you are faced with. I don’t want the building back at this time and I want to see it work. If they want to see a business plan, it is reasonable to give them satisfaction. I believe in what the project stands for,” he said.

Zone 6 City Commissioner Paula Reed also offered support to Chester. The property is located in her zone.

She said, “We are already in the 18 months. There is only so much time left. Give him an opportunity to see if he can make it work. Let it ride. That is my perspective. It is time for Midtown to turn around.’’ Then asked, “Did we drop the ball?’’

More concerns
Lentz added that he was still not confident, even with a restructuring of the loan, that the CFCDC would be able to make a payment. “I’m concerned about your organization’s ability to pay the debt.

He questioned Chester: “In October, there will be an amount due. You’ll be able to meet those obligations?’’

Chester said if renovation of the apartments is finished and he finds a tenant for the ice cream shop, a payment in October is likely.

He noted that he already has spent $20,000 from his nonprofit – never to have that returned.

“I can’t do that anymore. Whether we do it or the city recaptures the property, the  (project) has to stand on its own,” he said.

Commissioner Kelly White, still not content, asked Chester: “Would you be willing for tenants to pay us directly so we know we are going to get paid? It’s a common practice.”
Chester responded, “I have a board. I don’t make those kinds of decisions on my own.”

Chester goes before the CRA board again at 6 p.m. July 3 at City Commission chambers at Daytona Beach City Hall.

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