Questions of loan compliance loom for Morehead Foundry owners

Just six months after Morehead Foundry in Greensboro closed indefinitely amidst allegations of racism, questions of whether the owners have complied with their loan agreements remain unanswered.

Six months after Morehead Foundry, Lee Comer’s multi-venue restaurant complex on Spring Garden Street, closed its doors, the city of Greensboro is reviewing loans obtained by the owners to determine whether they are in compliance. 

The complex opened in November 2016 with assistance through two loans from the city and then closed after just 18 months in business. Both loans came with conditions that, if not met, could result in default or repayment of the loans.

The foundry, which began as a unique concept that combined multiple food businesses in one complex with a shared kitchen, opened after co-owners Lee Comer and Fareed Al-Khori secured two separate loans from the city. One is a forgivable loan for $100,000 and the other, a 10-year loan for $275,000. Both loans, which were approved by city council in March 2015, included conditions requiring the borrowers to invest $3.2 million by Dec. 30, 2016, creating and retaining 90 new jobs — 29 full time and 61 part time — for up to two years after obtaining a certificate of occupancy, and having 10 percent of the total construction earmarked for M/WBE contractor and subcontractor participation.

Comer-Khori LLC also owns the Iron Hen, a popular café that opened in 2010, and a catering business under the Fresh. Local. Good. Food Group. During the March 2015 city council meeting in which the loans were passed, several council members praised the food at Iron Hen and said they voted for the project because it would activate the area and bring new jobs.

“It takes a building that’s been sitting empty and doing nothing for seven years and turns it into something with energy and life and beauty and usefulness,” said councilwoman Nancy Hoffmann. Councilman Mike Barber backed the project by saying, “It is to enhance and help people who are willing to invest and bet on Greensboro, North Carolina.”

Mayor Nancy Vaughan continued to support the council’s passage of the loans during an interview in July 2018. She argued that Morehead Foundry’s financial troubles didn’t call into question city officials’ judgment and that Comer “had a great concept.”

The Morehead Foundry complex closed indefinitely in July 2018 after an employee walkout and allegations of racism against Comer.

Mayor Pro Tem Yvonne Johnson says she’s concerned about the status of the loans, and that she plans to find out from the city attorney what the city’s next move should be.

“I would think those loans are still due,” Johnson said. “I need to find out any arrangements she’s made. I think it’s up to a vote of the council whether we forgive the loan or not.”

Looking back, Johnson says it’s hard to tell whether business deals like this will pay off or not.

“Her plan seemed solid to me,” Johnson said. “The different businesses were wonderful, and that area really needed something. I’m disappointed that it didn’t work out.”

Now, six months after Morehead Foundry closed its doors, the city staff is working on an updated compliance review. The most recent review, dated July 11, 2018, indicated that staff did not have proper documentation to show that Comer and her partner had invested the promised $3.2 million in the project. The report noted, “Client has requested additional time to organize information.”

The report comes almost a year and a half after the investment was due on Dec. 30, 2016.

When asked about the delayed response from Comer regarding the investment, Kathi Dubel, the city’s economic development and business support manager, said that no two contracts are the same and that they are currently looking into it.

As of March 2018, Comer had exceeded the amount of jobs required by the loan agreement with 45 full-time and 161 part-time employees, as stated in the city’s July 11 compliance overview. Reported minority and women participation on contracting for the project also also exceeded requirements. Yet to be determined is whether Comer met the employment requirements for the last six months before the compliance period ended on Dec. 30, 2018

Multiple calls and emails to Comer for this story went unreturned.

As of July 2018, Comer and her partner were current on payments for the $275,000 loan, which was to be paid on the first of every month. The loan had a balance of $271,316 as of July 1. The city and Comer-Khori LLC agreed in 2017 to modify the loan in 2017 to allow an interest-only payment of $577 per month. Beginning on Aug. 1, the monthly payment was set to balloon to $2,961 per month. Dubel says Comer-Khori LLC is still responsible for the loan and if they go into default, the city may take action based on the company’s performance review. However, the contract for the loan states that one of the possible outcomes if the company goes into default is to require the company to immediately repay all of the outstanding loan provided.

The contract for the $100,000 forgivable loan states that if Comer-Khori LLC doesn’t meet the requirements, the partners will have to repay the city’s loan at $1,351 per full-time equivalent job that isn’t created or retained. The contract also states that the loan will accrue interest at the rate of 10 percent each year from the date of notification by the city.

Dubel said she is working on an updated compliance overview that includes information since the facility closed in July. She said she doesn’t know when it will be complete but that if the conditions of the loans haven’t been met, then a separate office will take action.