A loan of $100,000 the city of Crosslake made to a local resort, restaurant and hotel business may never be fully repaid, so the Crosslake City Council voted Monday to accept a third-party buyout of the loan for just $32,000.
The $100,000 loan was originally made to Manhattan Beach, LLC, known locally as Manhattan Beach Lodge, on County Road 66 in the municipality of Manhattan Beach.
The city sold its interest to a company called H2 Enterprises, LLC of Lakeville.
To date, Manhattan Beach had paid $22,882 on the principal of its loan with the city, and $30,204 in interest. It still owed the city about $77,000.
H2 Enterprises initially offered $23,000 to the city, which made a counter offer of $34,500. After some haggling, the $32,000 figure was settled upon, and both city administrator Tom Swenson and city attorney Michael Couri suggested the city accept this amount.
The city council vote was unanimous to sell its interest in the Manhattan Beach loan to H2 Enterprises.
According to a memo to the city council from the city's economic development association, Manhattan Beach has a mortgage with Northern National Bank of about $1,400,000 and a Small Business Administration (SBA) loan of $830,000.
Both of the above creditors are in "first, second and third positions" to receive repayments of their loans, with the city of Crosslake being in fourth position.
In the event of a bankruptcy, Crosslake would not be in line to get back its money until Northern National Bank and the SBA received their payments.
According to the Crow Wing County Auditor's database, the estimated total value of the land and building of Manhattan Beach, LLC is $2,278,400.
In recent years, the business has been struggling with lagging revenue due to a slower economy and other economic trends affecting the resort industry.
