Agenda -11-06-2008 - 4m - Laserfiche WebLink

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ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: November 6, 2008 Action Agenda Item No. ~` ~ SUBJECT: Loan Subordination Request -Chrysalis Foundation DEPARTMENT: Housing/Community Dev ATTACHMENT(S): Spreadsheet Subordination Agreement PUBLIC HEARING: (Y/N) No INFORMATION CONTACT: Tara L. Fikes, 919-245-2490 PURPOSE: To consider approval of a request from the Chrysalis Foundation for Mental Health, Inc. to subordinate four County Deeds of Trust totaling $222,878 to a permanent loan with Roxboro Savings Bank. BACKGROUND: Since 2002, Orange County has provided both HOME and Affordable Housing Bond funding to the Chrysalis Foundation for Mental Health, Inc. to assist in the acquisition of property in Carrboro and Chapel Hill for the purpose of leasing to low-income families. In all of these transactions, the County has required Chrysalis to execute a County Deed of Trust and Promissory Note to secure the County's investment. Additionally, in acquisitions, Chrysalis has obtained private financing from SunTrust which holds the primary lien position on these properties. Currently, the Chrysalis Foundation for Mental Health, Inc. is seeking to refinance all of its debt in order to provide improved cash flow to its business operations. (Chrysalis has determined that refinancing at a lower rate and/or with an extended mortgage of 15-20 years will increase the working capital available to maintain the properties as they age.) Chrysalis is working with the Roxboro Savings Bank to accomplish this task. Specifically, as a part of this refinancing plan, Chrysalis proposes to obtain a bank loan of $222,842 that will allow it to pay off the current SunTrust mortgages. In order to accomplish this, the current Orange County Deeds of Trust must be subordinate to one securing the new Roxboro Savings Bank loan. The proposed scenario is detailed in the attached spreadsheet. Chrysalis, therefore, is asking the County to execute a Subordination Agreement that will allow the Roxboro Savings Bank loan to be superior to County liens on four properties. FINANCIAL IMPACT: The County currently has a secondary lien position on these properties. Therefore, allowing this subordination request does not increase the financial risk to the County in the event of a default. RECOMMENDATION (S): The Manager recommends the Board approve the subordination request and authorize the Chair to sign the Subordination Agreement on behalf of the Board upon the review and approval of the County Attorney.