Rick Destito here. Good things come to those who wait, right?
Well, thank you for waiting because we’ve got great things coming to you – the creative, cool, progressive, inspired and inspiring people of Syracuse. I’ve also got an explanation on why it took so long.
As many people know, a few years ago The Gear Factory applied for a grant in the amount of $680,000 and it was approved by the state for several things: new windows in the exterior of the building, a second stairwell, an updated elevator and to install a fire sprinkler system. Myself (and many others!) were extremely excited about all this!
But there are a few things people don’t realize about state grants. They don’t simply hand you a check and say, “See you later!” (this is a good thing…), but they also don’t allow you loan draws for work as it progresses and they won’t pay a contractor directly after they complete a portion of the work.
This NYS Empire State Development grant, the $680,000 for The Gear Factory and all the other like it, are “reimbursement” grants. Meaning, all the work that you say you’re going to do with the grant has to either be paid for upfront by the receiver of the approved grant or financed by a third party. Once you get the work done and you get the work approved as completed, then you (or whoever you borrowed the money from) gets it back in the form of a reimbursement with the grant money.
Instead, the public’s money is still sitting safely with the government. In my case, if you couldn’t guess, I have to find a third party to finance the project first.
(*Sidenote: This is not meant to be a complaint! I’m extremely happy to have a great problem like this and I expect it to come with a lot of work and effort put in on my part! However, I believe you deserve an explanation of the process.)
In this case, the type of grant is not a 100% grant. They don’t give you a $680,000 grant to do $680,000 worth of work. They awarded the grant, but in order to get that money The Gear Factory actually has to do about $1.1 million worth of work. This is where the rehearsal studios come into play. The plans for the 10,000 square-feet of rehearsal studios were combined with the new windows and other work to be done, making this one big (massive, huge, gigantic) project.
Though the grant was approved in December 2012, it wasn’t actually finalized and under contract until late April 2013. Furthermore – the financing is where it really gets complicated: If this was a straight 100% grant, it would be much easier to get a bridge loan for $680K that gets the $680K paid back upon completion with some extra out of pocket money for the third party lender (for interest and fees). But I actually have to raise a total of about $1.1 million to get that total amount of grant money back because it’s based on percentages of specific improvement costs. In my case, I have to get a construction loan for the total amount of improvements being that approximate $1.1 million, of which the $680K will be paid back to the lender, with a balance of approximately $420,000 to be converted to permanent financing that would be supported by the new income generated by the new rehearsal studios. …OK, makes sense right??
So, it comes down to the rehearsal studios – what they cost to build versus what they will generate in new revenue (and can it support the new loan debt service?). Those numbers work, so this should be simple! But wait, it’s not.
I’ve filled out many, many loan applications, attended lots of meetings and worked directly with about 15 banks and a business development agency who partners with more than 120 banks in the CNY region. Yet, I’ve been denied again and again because The Gear Factory doesn’t conform to a “typical development project”, and I’m not technically considered an actual business either. (Yes, it’s complicated.)
• Banks would only be able to do a loan like this if you didn’t need the money.
• Banks won’t take into consideration future potential rents, they want to know that the business could afford to pay the new monthly loan amount with your existing income.
• “If the project was already done and rented, we would be much more likely to give you a loan.” (Why didn’t I think of that?!)
• Banks wanted to see lease terms ranging from 5 to 10 years. (No, that’s not going to happen. These are rehearsal studios, not Starbucks!)
• Banks are too closely regulated by the government to take a risk on a loan like this.
The most frustrating reason I was denied loans came when I was asked, “what can we compare the project to? What other rehearsal studios are there in the area?” They pretty much don’t exist here. I tried to explain, “It’s not a new idea, it’s just new to Syracuse. Search online, here are examples, it’s a common thing in many of the most vibrant and attractive cities all over the country.”
Think of it like…what would it be like if you were the only person in the city selling coffee and you knew people wanted it? Your business would probably have a good chance at being successful.
Now finally, after trying again and again, The Gear has found a possible way! While looking for private investor references through Home Head Quarters (a local NFP mainly known for its residential and mixed-use housing improvements throughout much of Syracuse), I was talking with Kerry Quaglia, HHQ’s Executive Director, and the conversation changed from who they might know, to, “Maybe we can do the loan?” So after getting some paperwork over to them they’ve said they are very interested in financing this first phase of construction and being part of such an exciting project. I’ve known Kerry for a while and if something can possibly work you move forward. If not, he won’t waste your time. It’s for this reason I’m so excited about this time around with the potential of receiving a loan to do the work!
However, it’s not a done deal yet, a project like this will be a first and unprecedented for HHQ. Their board needs to know that there really is a demand for rehearsal studios in Syracuse. We only have till their next board meeting on the 24th this month (September 2014) to show that demand!
1. Submit the reservation form (here) to indicate interest in renting a rehearsal studio. There is absolutely NO financial commitment or obligation when you do this. This list will be submitted to Home Headquarters Inc. to demonstrate the interest local musicians have in these rehearsal studios. When the time comes to rent out the studios, the list will be used to contact potentially interested parties. (Please note: We will contact interested musicians in the order that their forms were received.) Sign up by clicking here.
2. Post a reply in the comments at the bottom of the rehearsal studio page with a short note, letter, quote, or comment about any of the following (for example): the need for rehearsal studios in Syracuse and the CNY region, positive experiences you’ve had at The Gear Factory to date, what you like about The Gear Factory and/or what you think a project like this can do for the art scene, music scene and for this city. Post your reply by clicking here and posting in the comments at the bottom of that page.
The Gear Factory now has its best chance ever to seriously get the financing it needs to actually get the real physical work done to get more people in here!
All plans, approvals, contractors, and permits are in place for the rehearsal studios, as soon as funds are available, CONSTRUCTION CAN BEGIN IN AS LITTLE AS TWO WEEKS FROM THAT DATE, AND IT CAN BE READY FOR OCCUPANCY IN A FEW SHORT MONTHS FROM THE START DATE OF CONSTRUCTION! Please let your voice be heard!