The new owners of the Roundhouse in Aurora are finalizing their purchase of an Aurora home for their beer distribution warehouse -- and an agreement the city council approved Tuesday should help in the process.
The agreement between the city and the bank giving a mortgage for the warehouse should clear Two Brothers Brewing Company to close on the $7.5 million purchase of a warehouse at 1103 Butterfield Road to house Windy City Distribution, said David Dorgan, development consultant for Seize the Future, a long-term plan started in 2000 to revitalize downtown Aurora.
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MB Financial required the document, called an inter-creditor agreement, because the city placed a lien, or junior mortgage, on the warehouse property worth $3.96 million -- the same amount the company can receive under a development agreement with the city.
The lien will expire, allowing the company to keep the money, once Two Brothers owns and operates Windy City Distribution in Aurora for 10 years and meets standards of employment numbers, liquor license requirements and tax obligations, according to the development agreement. If these standards are not met, the business then would owe the city $3.96 million.
However, under the newly approved inter-creditor agreement, if Windy City Distribution closes in less than 10 years or doesn't meet the city's standards, the city likely won't be able to recover all of the $3.96 million it is giving the company, said Tom Burney, an attorney the city hired to work out the inter-creditor agreement.
Much of that money likely would go to MB Financial, instead, to cover the $3.56 million mortgage the bank is giving Windy City Distribution and other "reasonable" costs incurred by the bank, according to the agreement.
"It's an inter-creditor agreement that we would have preferred not to have done," Dorgan said to the city council. "But are you any less protected than you are under a second mortgage? The answer is no."
Alderman Lynda Elmore, one of eight who voted for agreement, said it does little to change the city's status as a secondary lender on the property. Two aldermen, Rick Lawrence and Alderman-At-Large Richard Irvin, voted against the agreement, while Alderman-at-Large Bob O'Connor was absent.
Dorgan said the city negotiated a few clauses into the agreement to protect its interests, including a "right of first refusal" clause that prevents the bank from selling the property at too steep of a discount if it goes into foreclosure.
But as far as the city is concerned, the inter-creditor agreement only will become a factor if Windy City Development folds or moves in less than 10 years, Burney said.
Co-owner Jim Ebel said the details of the move to Aurora have been complicated, but Two Brothers Roundhouse is doing well, and the company is ready to close on the warehouse and begin the estimated $5 million in necessary renovations on the property.