CREATING AND SUSTAINING SMALL BUSINESS JOBS

2 0 1 3 E C O N O M I C D E V E L O P M E N T R E P O R T

Sincerely,

James R. Baird, Executive Director & CEO

This report highlights what we have been able to accomplish in the last year and since inception and suggests how much more can be done with 504 financing in the coming years. Huge progress has been achieved through the essential collaborative work with you, our partners, who are a critical element in each and every project we finance. We thank all of you for your work with us, including:

THE SMALL BUSINESSES we are so fortunate to work with, who are incredibly diverse and ingenious in developing strategies and a unique blend of products, services and market niches in order to survive and thrive in these challenging and evolving times. Their work truly inspires us.

OUR LENDING PARTNERS – Our CDC and the vitality of 504 financing depends on the lenders who actively participate in our program through thick and thin. A huge debt of gratitude goes to all of the lenders who have continued to work so hard to help their clients get the best possible loan terms in every economic environment by working with us in the 504 program.

THE SMALL BUSINESS ADMINISTRATION, whose employees continue year after year to epitomize commitment, hard work and dedication to small business success. The SBA’s guaranty enables access to critically needed well-structured capital so that many thousands of companies each year can become more sustainable, grow and create jobs.

A TREMENDOUS THANK YOU goes to all of our partners who continue to work with us throughout these unprecedented times. We invite you to review our 2013 Annual Economic Development Report and to examine the big-picture impacts of our partnership. By working together, we have all been part of the solution and we thank you so much for this.

TO OUR PARTNERS

BAY AREA DEVE LOPMENT COMPANY 3

Helping small and mid-sized companies buy the space they need to grow their businesses with the best possible financing terms and allowing them to preserve maximum working capital helps our clients create more jobs, which is the core mission of 504 lending.

This has not wavered throughout the great recession or the recovery. 504 financing works best for these entrepreneurs because it:

• Specializes only in small business, owner-occupied commercial real estate

• Leverages the SBA guaranty with private lender financing and expertise

• Is delivered by CDCs—the lowest cost service providers in the marketplace

• Provides a ‘Window to Wall Street’ for America’s small businesses

• Provides capital to America’s small businesses at the lowest possible cost

The great terms obtained through 504 financing provide the fuel small business entrepreneurs need to expand and create more jobs-but there is much more that 504 could accomplish.

The other essential ingredient to the recovery is to help the successful small companies that survived the great recession optimize their existing debt structure so they can sustain the jobs they have and implement future growth.

504 refinancing was enacted by the Small Business Jobs Act of 2010 in order to address the needs of good companies that already own their own properties and are current on their existing loans, but are saddled with poorly structured debt or have equity trapped in their real estate. The tremendously improved terms provided by 504 refinancing help these companies become more sustainable businesses and to grow and create jobs.

Unfortunately, the 504 refinancing program sunset in 2012 but efforts are underway to re-enact the program. Doing so would provide a very smart tool to both sustain and create small business jobs, which are of paramount importance to our country’s recovery and long term economic success.

ACCOMPLISHING AND MAXIMIZING THE 504 MISSION

JOBS CREATED & RETAINED WITH 504 PROJECTS

504 loans provide our clients with access to expansion capital at optimal fixed rates

and terms. As a result, 504 financing has helped our clients create over 18,400 jobs.

13,000

15,000

17,000

19,000

11,000

JOB

S C

RE

ATE

D A

ND

RE

TAIN

ED

F I SCAL YEARS ENDING 9/30

2007 2009 2011 2013

BAY AREA DEVE LOPMENT COMPANY 5

BUILDING COMMUNITIES WITH 504 FINANCING

504 financing works throughout our economy and every sector of our diverse communities. In addition to helping companies create and retain jobs, 504 is also

active in revitalizing communities, in assisting businesses owned by women, veterans and minorities, and

in helping companies advance technologies.

MAXIMIZING PRIVATE CAPITAL WITH 504 LOANS

All 504 projects include a conventional first mortgage, which makes up approximately 50%

of the total financing. As a result, our 504 activity to date has leveraged total direct

capital investments of $3.5 billion.

*Manufacturing, Veteran Owned Companies, Renewable Energy, Enhanced Technology,

Product Exports or Rural Businesses.

BORROWER CONTRIBUTION($507 MILLION)

13.7%

504 FINANCING($1.2 BILLION)

34.9%

BANK FINANCING($1.8 BILLION)

51.4%

LOW/MODERATEINCOME AREAS

34.3%

MINORITY OWNEDCOMPANIES

26.3%

WOMEN OWNEDCOMPANIES

14.3%

OTHER SBAGOALS*25.9%

BUSINESS DISTRICTREVITALIZATION

18.7%

Ken Lindberg co-founded Power Engineering Construction Company in 1986 and focuses on complex marine engineering and construction projects. The company is made up of a highly regarded and skilled team of engineers and craftsmen who uphold the company’s core values; loyalty, responsibility, dependability, empathy, enthusiasm and quality.

Specialized projects require specialized equipment and a major client convinced Power Engineering’s management that it was time to make a big investment; literally and figuratively. Working with Joe Lampe of Bay Area Development Company and California Bank of Commerce, the company secured the financing to purchase and, with Lindberg serving as Project Manager, completely overhaul a Derrick Barge and crane

POWER ENGINEERING CONSTRUCTION

Alameda

The Power of Thinking Big

“It took a lot of great minds a lot of time to build this barge so

watching it work is a huge

point of pride.”

BAY AREA DEVE LOPMENT COMPANY 7

capable of handling extremely large, complex marine construction projects. Lindberg, who worked with Bay Area Development in 2004 to purchase a building for Power Engineering, says this latest acquisition opens the doors for significant new contracts, as there are only four such barges in Northern California. Being part of such an elite group has also allowed the Power Engineering team, with over 100 employees, to grow and expand their individual skill sets for the benefit of their clients; proof that big thinking can make a big impact.

Anette Madsen-Yazidi has always had a heart for desserts and for her hometown of Napa. In 1991 she opened Anette’s Chocolates with her brother, Brent Madsen. Their location choice was a big step as downtown Napa was just beginning a major redevelopment. The first goal was to establish the retail aspect of the shop and then focus on wholesale. Brent’s wife, Mary Stornetta Madsen, joined the team very soon as the Marketing and Wholesale Department and is instrumental in their continued growth in sales. Brent is the Master Chocolatier with a keen eye and taste for the best in creative Artisan Chocolates. They have made a name for themselves with their line of the highest quality gourmet chocolates, beer brittles and dessert sauces. Anette focuses on the retail side of the business and her husband, Maj Yazidi, assists with several retail shows and events.

ANETTE’S CHOCOLATES

Napa

A Story of Sweet Success

“We are proud that we get to

do something welove and that we can sustain

ourselves and our current and new

employees.”

BAY AREA DEVE LOPMENT COMPANY 9

Together they have big ideas when it comes to innovative flavor combinations and product lines, but bringing those ideas to life required more kitchen space. Working with Bob Thompson of Bay Area Development Company and JP Morgan Chase Bank, they purchased a new building in Napa that tripled their production and warehousing capacity. The move also means they can expand their workforce and seamlessly serve clients including Dean & Deluca and Williams Sonoma. Combined with two thriving Napa-based retail locations, Anette’s Chocolates enjoys national success while celebrating its hometown roots.

At an early age, Michele Van Ornum set her eyes on a career working with children, and after earning a degree in early child education she spent the next several years serving as the director of various preschools in the Fresno area. But her true desire was to open a daycare and school of her own; a place where young children could learn and be nurtured and where their families could come together and find a sense of community.

CREATIVE MINDS LEARNING CENTERFresno

The Importance of a Great Start

In 2011, Van Ornum and her business partner, Jeff Johnston, worked with Cal Cain of Bay Area Development Company and Citizens Business Bank to purchase a building that would become Creative Minds Learning Center. Johnston, a construction contractor, renovated the space to make Van Ornum’s dream a reality. Solar panels maximize the building’s efficiency, bright classrooms engage young minds and a garden behind the school nourishes students and provides food for thought as they study the growing plants. When Creative Minds Learning Center opened in the fall of 2011, 70 students and their families were welcomed into the new space and 22 new jobs were created in the process. Today, the school is not only at capacity, but has a waiting list, reinforcing Van Ornum’s belief that she was building more than a place to learn; she was building a community.

“This bright, beautiful new school is

a source of pride for our staff, our community and

our students and their families.”

BAY AREA DEVE LOPMENT COMPANY 11

Claudia Folzman and David Edgar were enjoying great success in their respective construction jobs during the dot com boom but found something was missing; the personal side of interacting with clients from start to finish. In 2001 they pooled their deep industry experience and their desire to be more involved in every aspect of every project and opened the doors of Iron Construction. From the beginning, the company focused on exceptional

IRON CONSTRUCTIONSunnyvale

Building Relationships and Innovation

BAY AREA DEVE LOPMENT COMPANY 13

quality, on-time delivery and great employee benefits and teamwork. Folzman and Edgar also built a specialized team that could deliver on a wide range of projects, including commercial interiors, data centers, clean rooms and labs.

As demand for Iron Construction’s services increased, Folzman and Edgar knew it was time to stop renting and build a permanent home for their company. Partnering with Spencer Stratton of Bay Area Development Company and Wells Fargo Bank, they purchased a 27,000 square foot space in 2013 and began extensive renovations that include utilizing geothermal energy and making the space LEED Gold Certified. In addition to being extremely energy efficient, the new location gives Folzman and Edgar the room they need to double their workforce of over 25 employees.

“Our new space is very flexible so we can add

staff and not have to worry about

where we are going to put them.”

When Robert Shibata took the helm at Mt. Eden Floral Company in 1994, it had already been in business for nearly 90 years. Founded by his grandfather in 1906, the company has seen its share of triumphs and hard times. Mt. Eden nearly ended during the Great Depression and again when Shibata’s parents and grandparents were sent to Japanese internment camps during World War II. After the war, the company grew to become the largest rose producer in the nation. They moved into wholesaling domestic and offshore fresh flowers and floral supplies as their own flower production declined. As Mt. Eden’s third generation owner, Shibata explains that the company has stayed competitive by retaining good people, capitalizing on industry trends, adapting to change and working hard.

MT. EDEN FLORAL COMPANYSan Jose

Over a Century of Persistence and Success

“Owning our building secures the long term future of our

company and employees, and is

an asset for the next generation.”

BAY AREA DEVE LOPMENT COMPANY 15

As Shibata looked to the future, he knew exercising the purchase option to buy Mt. Eden’s San Jose location would help secure the future of the company and create jobs. In 2011 he partnered with Joe Lampe of Bay Area Development Company and City National Bank to purchase the 62,000 square foot space, thus streamlining operations and establishing a permanent home for the company and its 30 employees, with room for more. Shibata says one of his proudest moments was watching his 95 year old father cut the ribbon for the grand opening ceremony of the new facility, making way for Mt. Eden Floral Company’s fourth generation.

“Owning my buildings gives

my company and employees

security and lets us enjoy making our business better every day.”

Steve Kahn has had a lifelong love for cars. As a child he built model cars and go carts, then moved on to fixing the family car as a teen. Once out of school, Kahn worked for a small repair shop and then for a car dealership, making his way through the ranks and learning everything he could about machining, sales, service, management, even interpersonal development. Armed with a wealth of knowledge and with a focus on delivering value and integrity, he opened his own repair shop in Albany in 1997 and quickly established a large, loyal customer base.

Kahn first worked with Bay Area Development Company in 2005 when he opened a second shop to meet growing demand. His business continued to thrive and in 2012 he expanded for a

STEVE’S AUTO CAREEl Cerrito

Following Their Passion and Creating Jobs

BAY AREA DEVE LOPMENT COMPANY 17

third time, again teaming with Joe Lampe of Bay Area Development Company and Bank of America to buy a 56,000 square foot building; ten times the size of his Albany location. As a result, Kahn was able to hire 22 new employees and his client list has swelled to more than 4,000. The loyalty of those clients is evident in that he was named Best Mechanic of 2013 by Bay Area News Group readers; a great compliment to a car lover who started out with one small shop, three employees and the hope that he would be able to keep them busy.

When Richard Alvarado moved to Fresno from Chicago twenty years ago, his first goal was to get a job. He did just that, putting his engineering background to work for a company that manufactured pheromones and traps. When the company relocated, Alvarado was left with its customer list and equipment, along with a working knowledge of pest control devices, and A Better Trap was formed. Alvarado and his wife, Janie, initially contracted out the production of their traps

A BETTER TRAPFresno

Building a Better...Trap

BAY AREA DEVE LOPMENT COMPANY 19

and, in true start-up fashion, did the manual work themselves in the living room of their apartment.

Today, A Better Trap specializes in designing, manufacturing and selling insect pest traps that are used throughout the world. The traps are pesticide-free so they are better for the environment. And because they are patented, demand for A Better Trap products specifically has grown considerably. In 2013 the Alvarados partnered with Cal Cain of Bay Area Development Company and California Bank & Trust to purchase a 53,000 square foot building; quadruple the size of their previous location. The additional space allowed Alvarado to immediately add five new employees to the team as well as bring in new, specialized equipment that will improve efficiencies and greatly expand the company’s capabilities. It also gives Alvarado room to do what he truly loves; talking with customers and innovating on their behalf.

“It is a blessing to see this

business grow and to know

we have a part in making a better world.”

Some people aspire to create a better mousetrap. Pat Coash set out to grow a better strawberry plant. Coash’s uncle started Koppes Plants in 1949 and Coash purchased it in 1999 when his uncle passed away. Early on, Koppes Plants found success growing and distributing strawberry plants to nurseries and farmers throughout the nation. In the 1980s, Coash and his uncle developed a very compact plant that could produce the same amount

KOPPES PLANTS Watsonville

Growing Success Since 1949

BAY AREA DEVE LOPMENT COMPANY 21

of fruit as a conventional plant. The new hybrid meant home gardeners could use strawberries as bedding plants and successfully grow the fruit very economically. This opened up a tremendous new revenue stream for Koppes Plants and today nearly 95% of its sales is to garden centers, including Home Depot, Lowes and Walmart.

In 2012, working with Spencer Stratton of Bay Area Development Company and Santa Cruz County Bank, the company received a 504 loan and purchased a 6,000 square foot building specifically suited to strawberry plant storage and distribution, and to growing Koppes Plants as a company. Coash, who runs the company with his wife Melissa, estimates that he will now be able to add as many as a dozen new jobs to meet the demand for his product. All because of an idea for a little plant that took root and took off in a big way.

“We have plenty of space in

this new building, which means

we can add new customers and new employees.”

www.acsbdc.org

www.sfsbn.org www.breadproject.org

www.smallbusinesscalifornia.orgThe Alameda County SBDC provides classes, technical assistance and personalized training to budding entrepreneurs and to existing business owners interested in accelerating the success of their ventures. We have sponsored classes and workshops for the SBDC and our staff participates in many Access to Capital events each year.

The San Francisco Small Business Network serves as a strong, clear, unified voice of the small business community in San Francisco. BDC is a member of this important association and helps to sponsor their annual small business awards event.

The Bread Project helps individuals with limited resources achieve self-sufficiency through skills instruction, on-the-job training and career placement in the food industry. BDC has provided donations to assist in furthering this important work.

Small Business California is a proactive, non-partisan small business advocate whose only agenda is the well-being of California’s 3.2 million small businesses. BDC is a member of Small Business California and sponsors many of their important business outreach and advocacy activities.

OTHER ECONOMIC DEVELOPMENT ACTIVITIES

In addition to all of the jobs created and other economic development

brought on through our SBA 504 financing activities, Bay Area Development

is committed to the communities we serve by supporting many other small business

economic development activities. Here are just a few of the excellent

programs and organizations that we assisted over the last year:

OUR MISSION:At Bay Area Development Company great customer service is what we live by. Since 1981 we’ve offered

common sense explanations and creative solutions for the most complex small business situations. And while we’re proud to be among the top

twenty of over 300 SBA 504 lenders nationwide, the success of each of our clients

is what motivates us every day and is the true

measure of our impact.

B A Y A R E AD E V E L O P M E N T

C O M P A N Y

www.bayarea504.com

H E A D Q U A R T E R S1801 Oakland Blvd., Suite 100 • Walnut Creek, CA 94596

Phone: (925) 926-1020 • (888) 504-0504

C E N T R A L VA L L E Y L O S A N G E L E S C O U N T Y 114 E. Shaw Ave., Suite 207 • Fresno, CA 93710 50 E Foothill Blvd. #203 • Arcadia, CA 91006

Phone: (559) 226-3700 Phone: (626) 926-5634