TO: Mayor and City Council
THROUGH: Steve Powers, City Manager
FROM: Kristin Retherford, Urban Development Director
SUBJECT:
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Subordination of Two Community Development Block Grant Loans
Ward(s): Ward 1
Councilor(s): Kaser
Neighborhood(s): CANDO
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ISSUE:
Shall the City Council authorize the subordination of two Community Development Block Grant acquisition/rehabilitation deferred payment forgivable loans for the Center for Hope and Safety, owner of a property located at 605 Center Street NE?
RECOMMENDATION:
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Authorize the subordination of two Community Development Block Grant acquisition/rehabilitation deferred payment forgivable loans for the Center for Hope and Safety, owner of a property located at 605 Center Street NE.
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SUMMARY AND BACKGROUND:
In December 2012 the Center for Hope and Safety (CHS) submitted an application for a Community Development Block grant to acquire property located at 605 Center Street NE. The application request was funded on July 23, 2013, in the amount of $300,000 as a deferred payment forgivable loan in order for CHS to acquire the property.
In November 2013 CHS submitted an application for upgrades to the property’s HVAC system and replacement of the roof and carpet. The application request was funded on January 8, 2014, in the amount of $143,000 as a deferred payment forgivable loan in order to complete the requested upgrades.
FACTS AND FINDINGS:
Since CHS began occupying the 605 Center Street NE property, the number of individuals served has doubled. CHS purchased the adjacent property (the old Grey Hound station) in 2015 with plans to expand services to victims and survivors of domestic violence, sexual assault, stalking, and human trafficking in Marion County. Plans for the site include first floor space for businesses providing job training or other services to CHS clients; the second and third floors will provide transitional and permanent housing. The project is called Hope Plaza.
CHS is now requesting a $500,000 loan from Willamette Community Bank for costs associated with demolition of the old Grey Hound station to ready the site for redevelopment. CHS is requesting the City subordinate its current lien position to Willamette Community Bank in order to use the property located at 605 Center Street NE as collateral.
By subordinating the City’s security interest, CHS is able to secure funding to allow the expansion of services provided.
Below is staff analysis as it relates to both CDBG deferred payment forgivable loans:
1. New primary loan amount : $500,000
2. Rate/Term: 5.15% 78 months
3. Loan to value: 41%
4. Fee simple appraisal: $2,295,000
5. Closing will occur at title, and all fees will be paid prior to recording of the City subordination.
6. Real estate taxes and insurance are current.
Community Development Block Grant allows for the funding of public facilities providing services to low-moderate individuals and families, including those facing homelessness. The current deferred payment forgivable loans do not require repayment and will be converted to a grant in 2024, providing CHS maintains the current use of the property. Further, the appraised value of the property ($2.2 million) exceeds the combined total amount of the primary loan ($500,000 million) and the City’s loans ($443,000); there is sufficient equity to pay off the City and Willamette Community Bank in the event of foreclosure.
Therefore, staff recommends the City Council authorize the subordination of both $300,000 and $143,000 CDBG deferred payment forgivable loans.
Renee K. Frazier
Financial Services Manager
Attachments:
1. None