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Washington County backs $5 million loan to 84 Lumber Co.

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Friday, Oct. 8, 2010
 

The 84 Lumber Co.'s application for a $5 million low-interest loan from the federal government won the Washington County commissioners' support Thursday, putting the homebuilding chain one step closer to refinancing a $55 million high-interest loan.

The prospective loan from the Department of Housing and Urban Development will be backed by $10 million of real estate owned by 84 Lumber, including the company's headquarters and office buildings in Eighty Four, as well as all of the chain's retail stores in Washington County, said Commissioner Bracken Burns, who voted to sponsor the loan.

"They've been a stalwart of the business community for over 50 years. For us to walk away from them in their moment of need would have been unworthy," said Burns, a Democrat.

Commissioner Diana Irey, a Republican, joined Burns in supporting the loan. Democrat Larry Maggi voted against it, saying he was not opposed to 84 Lumber but to providing the financial support to a business.

Washington County is backing the loan with its annual allocation of about $4.6 million in Community Development Block Grants that it receives from HUD. The county still will be able to distribute its annual allocation for projects in communities in the county, the commissioners said.

If 84 Lumber were to default on the 17-year-loan, the county would owe any unpaid balance and could seize the real estate pledged as collateral and sell it to recoup any lost money, Irey said. Annual payments for the loan will range from $220,000 to $550,000.

Irey said she is philosophically opposed to government subsidizing businesses, but the county supports businesses through various tax abatement programs, and infrastructure support for projects such as Southpointe in Cecil.

"It's doesn't affect our allocation, and we have a safety net," Irey said of the collateral.

Washington County's sponsorship of the loan was necessary for 84 Lumber Co. to close on $20 million in financing through Wells Fargo, which it expects to receive by the end of the month, 84 Lumber spokesman Jeff Nobers said. 84 Lumber has applied to HUD for the $5 million, and has applied for a $15 million loan for money from the same source, with Fayette County as the sponsor.

The Fayette County commissioners voted in August to sponsor the $15 million loan application through its Community Development Block Grant program, with 84 Lumber pledging real estate worth $30 million as collateral.

If the $20 million in government funding is approved, plus the $20 million from Wells Fargo of unencumbered real estate, then the company can refinance $45 million it has remaining of a high interest loan from Cerebus Management, Nobers said.

The $5 million shortfall would come from 84 Lumber President Maggie Hardy Magerko, Nobers said. 84 Lumber had tried unsuccessfully to get Cerebus to refinance the loan and lower the 18 percent interest rate, but it refused, he said.

The Meadows Racetrack and Casino at the Meadowlands had opposed Washington County sponsoring the loan because it said that the subsidy would allow Magerko to channel more of her own money toward a possible casino at Nemacolin Woodlands Resort in Farmington, which she owns.

Sean Sullivan, general manager of the Meadows Racetrack and Casino, could not be reached for comment.

Nobers said, however, that the financing for the prospective casino is being handled by the Isle of Capri Casinos, and Nemacolin is basically providing the location for that firm's casino at the resort's Wildside building that houses an arcade and bowling alley.

Washington County's agreement with 84 Lumber prevents the company from using money sponsored by the county for a casino in Fayette County, Burns said.

 

 
 


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