The final approval needed to initiate design and construction of a brew pub in downtown's long-vacant Market Arcade complex was granted Wednesday by the Buffalo Enterprise Development Corp. board.
In February, the BEDC board approved a $600,000 loan to the Colorado-based Breckenridge Brew Pub conditioned on personal guarantees from the firm's two principals.
Richard Squire and Edward Cerkovnik Jr. countered the BEDC proposal, saying they would not agree to personal guarantees, primarily because they already are putting $700,000 into the $1.3 million deal through an equity injection and project syndication.
In addition, the owners and BEDC negotiated a deal whereby the city agency will receive 30 percent of remaining project cash flow after a required 50 percent of cash flow is paid to limited investment partners.
"In addition to their regular loan repayment, the cash flow will be used to reduce the loan principal," said Richard Velez, the BEDC's chief lending officer. "They are putting 54 percent equity into the project when normally we get 10 percent to 20 percent."
The final vote was 4-1, with board member and Buffalo Common Councilman Clifford Bell voting against not securing personal guarantees.
Velez said a short five-year loan for the project was based on loan experience with similar businesses, where the potential to make a great deal of money early on must be tempered with a possible sudden, rapid decline due to market conditions.
The term can be lengthened at the discretion of the BEDC president with the advice of the corporation's loan review subcommittee.
As earlier reported, the Breckenridge project will occupy 23,055 square feet of space in the Arcade's Salter Building, including the first and second floors plus the basement.
Facilities at the Main Street site will include a working 10,000-barrel microbrewery, plus adjacent restaurant and bar. The company plans to sell Breckenridge beer to local taverns and restaurants, with Buffalo also serving as the company's East Coast supply source.
The company projects 52 full-time equivalent jobs will be created by the project, slated to open this summer.
In other action, the BEDC board accepted the resignation of long-time board member Richard T. Swist, the executive director of the Niagara Frontier Transportation Authority, and approved the appointment of Patricia Rehak, vice president of the Greater Buffalo Partnership, to the eight-member committee.
With Development Downtown Inc., another city development agency, now primarily concerned with Buffalo waterfront development, Swist said his time would be better spent tackling its problems. Swist, has been a member of both the BEDC and DDI boards since 1982.
Ms. Rehak is well versed in the city's economic development plans, and is the Partnership's point person in its 10-county regional marketing effort.