Broward County Commission Regular Meeting
Director's Name: Leonard Vialpando
Department: Resilient Environment Division: Housing Finance Division
Information
Requested Action
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MOTION TO APPROVE Subordination Agreement related to the multi-family affordable housing project by Oasis of Hope Community Development Corporation, Inc. (“Nonprofit”) in substantially the form of Exhibit 1; authorize the County Administrator to approve and execute the Subordination Agreement and make any required modifications to the Subordination Agreement, provided such modifications do not impose any additional material financial risk on the County, and are subject to review and approval as to the legal sufficiency by the Office of the County Attorney; and to authorize the County Administrator or such other person designated by the County Administrator to execute customary required closing documents for such refinancing, and take the necessary administrative and budgetary actions. (Commission District 4)
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Why Action is Necessary
Board action is required to approve subordination agreements where the senior mortgage is a balloon mortgage.
What Action Accomplishes
Provides Broward County (“County”) consent to a subordination agreement that will allow Nonprofit to refinance the first mortgage on the subject property.
Goal Related Icon(s)
☒County Commission
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Previous Action Taken
None taken.
Summary Explanation/Background
THE RESILIENT ENVIRONMENT DEPARTMENT AND HOUSING FINANCE DIVISION RECOMMEND APPROVAL OF THE ABOVE MOTION.
This item supports the Board’s value of “Customer Focus: delivering customer-centric solutions” and the Board’s goal of “Accountable Government: consistently delivering responsive, efficient, inclusive, and equitable quality services.”
Broward County supplied HOME Investment Partnerships (“HOME”) funding for the affordable housing project (Exhibit 3-location map) by providing four rental units to youths who have aged out of the foster care system. The funding is secured by a HOME Program Mortgage dated March 13, 2015, in the amount of $335,000, recorded in Instrument No. 112865186 of the Official Records of Broward County, Florida.
The existing first mortgage loan on the affordable multi-family rental property has reached the end of its term, and the lender is unwilling to extend the loan term. The Nonprofit has secured a loan commitment from a new lender at current market rates with a seven year balloon. Along with the payoff of the existing first mortgage, the proposed new loan also provides funds of $25,000 to improve the subject property with new HVAC (heating, ventilation, air conditioning) systems. The new lender will control disbursement of the improvement funds as detailed in Exhibit 2. The proposed new loan meets the requirements under Broward County Administrative Code 27.209, which allows the County Administrator to execute subordination agreements pertaining to multi-family-housing projects with the exception that the proposed new loan is a balloon mortgage.
The County’s consent to the Subordination Agreement is required for the Nonprofit to refinance the first mortgage on the subject property that has reached the end of its term. Failure to take this action and approve a subordination to a balloon mortgage leaves the Nonprofit with two possible alternatives: 1). Refinance of the combined first mortgage loan and the County second mortgage. This option is fiscally not feasible because half of the units are rent and income restricted, and property operations would not generate sufficient cash flow to service the combined mortgage debt; or 2). Sell the property, which would pay off the two loans and provide an equity return to the Nonprofit, however, a sale would result in a loss of four affordable rental units.
Source of Additional Information
Ralph Stone, Director, Housing Finance Division, 954-357-5320.
Fiscal Impact
Fiscal Impact/Cost Summary
No fiscal impact.