1. How is the dock project being financed?

 

The project is being largely financed by a loan from The Loan Company (lender) by an 8% fixed rate $2,300,000 construction loan with 2% inception and administrative charges (points) for an initial 12-month period.

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After construction is completed, the docks will be refinanced with a longer term “Take Out” commercial type loan.  That loan is expected to be for a fixed rate for 3-5 years, possibly up to 10 years, and then probably goes to a variable rate tied to a recognized index past the fixed rate period.  The amortization period though should exceed 20 years.  The loan will allow for prepayment earlier as the Board expects BVD will be able to do. See below.

 

2.  Why a two-step process? Why can't we just take out a mortgage like we would with buying a house?

 

Work on the docks cannot be financed with a housing mortgage loan. Banks and loan companies demand different terms for loans that support businesses and projects like ours because they are not supported by the structure of government guarantees that hold up personal housing loans. Unlike a home loan, the construction and business loan process does   not attach personal liability to the loan. In other words, BVD Inc. and the docks are the security for the loan, not the individual shareholders, as is a housing loan.

In addition, the atmosphere for business loans today is complicated by banks' uncertainty over the economy in this inflationary period. We will obtain much better terms when we have an intact dock system to offer as security for the loan and we expect the business loan atmosphere to be vastly improved after the direction of the economy becomes more clear.

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That said, BVD has pursued and continues to keep the doors open to procure an amortized loan through several separate companies and is in detailed conversation with Cal Private Bank here in Coronado who views such a loan favorably.

In addition, the construction loan term, if needed, provides ample time for BVD to create a more robust history of revenue and expense which could lead to other, much more favorable terms.

 

3. Why not just charge members the cost of the reconstruction and not take out a loan?

 

After a great deal of consideration and discussion with members, it was clear that many could not or would not spend the $31,000 plus per share that it would take to finance our dock reconstruction internally.

 

4.  What have you done to obtain these loans?

 

BVD has been in contact with four separate bank, insurance/private and pension plan lenders directly and an additional three through a broker which includes submission of all documents to Cal Private, the lender that has expressed the most and current interest in our project.  Cal Private Bank is also providing a loan for the Coronado Cays Yacht Club’s renovation of part of their docks by Bellingham.

 

5.  Can we support this plan, and what will be the final cost?

 

The plan presented to the membership fully supports both the construction loan and the Take Out amortized loan elements. In addition, a substantial cushion is written into the revenue plan to allow early payment of principal and formation of a reserve fund for contingencies, like the emergency repair undertaken after the January 2021 severe storm/tidal damage.  As of 2022, our  BVD funds/reserves were at about $65,000.

The final cost of the plan is very dependent upon the final terms of the Take Out amortized commercial mortgage and the final participation of the membership. 

 

6.  What does a near term BVD budget look like after the project is completed?

 

Click HERE  to see the attached BVD Projected Annual Cash Basis Profit and Loss Budget form with notes at the bottom.  There is a good deal of detail set forth there. This is a fluid document. More information will be posted after the annual meeting. 

 

7.  How are the project assessment funds in BVD being handled?

All assessments need to be sent to BVD by check.  They are being deposited into a BVD special project only Union Bank account that requires two Board members to authorize any withdrawals for such things as construction contract progress bills, permits, consultants payments, etc.  The construction loan will typically flow through that account also.  The three Board members on the account at Dan S., Ed R., and Bill M.

 

8. How long will the project take?

 

As you know, the BVD board signed the contract with Bellingham Marine on 15 August 2022 with the understanding that work would begin early in 2023. However, work was not started until February 2024. 

 

Two elements affected the start date, both having to do with permitting.

 

1. On 9 September 2022, our permitting consultant, Robert Mooney of Marine Taxonomic Services, LTD informed us that he is uncertain how long the Army Corps of Engineers will take to review and approve regulatory permits for our project. His estimate is now 6-8 months, but the permitting could take longer if there are concerns from other agencies. Mr. Mooney is very experienced and through his efforts was able to gain approval in the fall of 2023 with final approval from Coronado and all agencies let in February 2024. 

2. This delay resulted in other issues. In the summer months, environmental protections are in place for an endangered species, the California Least Tern, and work on piling replacements for docks during their nesting period is restricted. This restriction  halts construction on our docks from mid-April through August.   

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And as is well known, we were not able to start until February 2024. Half the project will be competed by 1 June 2024, with the second half, the north side, slated for work starting 15 August 2024. 

 

We were both surprised and disappointed that the permitting process had nearly ground to a halt, but this is both a dynamic and fluid situation. We will keep you posted on the planning progress as new information is obtained including information on temporary boat movements during construction. 

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We expect all work to be completed by 1 December, 2024. 

 

9.  Did we raise the initial funds required? 

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Yes. As of 15 September 2022, our membership has paid or committed $918,000 to the project. 

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