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ORANGE COUNTY <br />BOARD OF COMMISSIONERS <br />ACTION AGENDA ITEM ABSTRACT <br />Meeting Date: August 19, 2008 <br />Action Agertc(~ <br />Item No. !l.,~~ <br />SUBJECT: HOME Program -Loan Subordination Request <br />DEPARTMENT: Housing/Community Dev. PUBLIC HEARING: (Y/N) No <br />ATTACHMENT(S): <br />Subordination Agreements <br />INFORMATION CONTACT: <br />Tara L. Fikes, 919-245-2490 <br />PURPOSE: To consider approval of a request from Freedom House Recovery Center, Inc. to <br />subordinate a County Deed of Trust in the amount of $337,000 to a construction loan and <br />corporate sewer easement. <br />BACKGROUND: On February 17, 1998, Orange County entered into an Agreement with <br />Freedom House, Inc. for $337,000 in HOME dollars to develop 10 transitional housing units for <br />low income individuals at their facility site on Martin Luther King, Jr. Blvd. in Chapel Hill. <br />Freedom House executed a Deed of Trust and Promissory Note on the same date to the secure <br />the HOME investment for a term of 20 years. <br />Currently, Freedom House has plans to construct two new buildings on its campus in Chapel <br />Hill. One will replace the. Detox building that has been in operation for over 30 years and will <br />provide more square footage for staff and client services. Freedom House will also be able to <br />add seven (7) new bed spaces. The second building will be an outpatient substance abuse <br />treatment clinic that will provide outpatient services for up to 300 individuals each year. <br />In order to implement these expansion plans, Freedom House has secured a construction loan <br />commitment from SunTrust Bank in an amount not to exceed $1,718,000. However, in order to <br />obtain the construction loan, the current Orange County Deed of Trust must be subordinate to <br />one securing the SunTrust loan. Additionally, in order to construct the accompanying sewage <br />system, the Orange Water and Sewer Authority (OWASA) is also requiring that the County <br />Deed of Trust be subordinate to a Corporate Sewer Easement as well. <br />Therefore, in order to begin the expansion project, Freedom House is asking the County to <br />execute Subordination Agreements that will allow the SunTrust Deed of Trust and OWASA <br />Corporate Easement to be superior to the County lien. <br />FINANCIAL IMPACT: A secondary lien position increases the financial risk to the County in the <br />event of a default on the construction loan. <br />