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Foreclosure not imminent on QC Apparel site, EDC officials say
By Derek Hodges and Lynn Hotaling
Jackson County officials spent part of their Monday (May 2) session discussing what appears to be a tempest in a teapot.
Though foreclosure papers were served last week on Jackson Development Corp., Economic Development Commission Chairman Tom McClure said Wednesday morning that a loan Triple S made to Jackson Development has already been refinanced.
County officials debated the matter Monday before postponing a decision until next week.
County leaders first discussed the possibility of foreclosure on the former Tuckaseigee Mills property that now houses QC Apparel on Jan. 25. Jackson Development bought the property from Triple S several years ago, primarily with cash supplied by the EDC.
“Back in January we were alerted to the possibility that Triple S was going to foreclose on the Jackson Development Corporation,” said Commissioners’ Chairman Brian McMahan.
Foreclosure proceedings were begun April 25, and, according to documents on file in the Jackson County Clerk of Court’s Office, the property is scheduled to be auctioned Tuesday, May 17, he said.
(Triple S’ lawyer, Kim Lay of Sylva, is on vacation and was not available for comment.) “The question is: Do we want to pursue bidding on that? We’ve got a lot invested in this piece of property,” McMahan said.
That investment is a $565,000 second mortgage held by the EDC, said county attorney Paul Holt. Triple S has the first mortgage, with more than $177,000 in the property, he said.
The EDC loaned Jackson Development more than $500,000 to purchase the former textile mill.
Several commissioners questioned Holt on why the lesser amount was considered the first mortgage.
“I don’t know the answer to that; this is my first dealing with the Economic Development Commission,” Holt said. “The county has two choices – you can bid it or you can attempt to buy the mortgage.”
Inaction on the county’s part would mean the loss of the money it has in the venture, according to Holt.
“If you don’t do anything, your $565,000 is essentially gone. It’s down the drain,” Holt said.
“And that’s taxpayer dollars?” Commissioner Eddie Madden asked.
“I assume so,” Holt said.
The only tenant in the building is QC Apparel, which is in default on the revolving loan the company received from Jackson County, Holt said.
Board members postponed a decision on the foreclosure until a called 3 p.m. session on Tuesday, May 10.
However, McClure, who also serves as president of Jackson Development, said foreclosure is not eminent.
According to McClure, Triple S always planned to sell the note when it was paid down to about $175,000, and an investor is ready to move forward to do so. McClure said Wednesday that most of the paperwork had been done Tuesday and that everything should be completed by the end of the week.
Attorney Jay Coward, a member of the EDC who also serves on the board of Jackson Development, confirmed that the note is being refinanced.
Triple S holds the first mortgage because Jackson Development purchased the building from the partnership, which agreed to finance a portion of the purchase price with the EDC providing the rest of the money, he said.
“It’s under control,” he said. “We’re just finishing up the paperwork.”
Jackson Development is a non-profit corporation created by the EDC to hold title to real property, something state statutes do not allow an economic development commission to do.
McClure told The Herald in January that Triple S initially held a note for about $250,000 and that Jackson Development had paid it down to about $175,000.
“Triple S always intended to sell the note when it was paid down to about $175,000,” he said then.
The refinancing would already have taken place except that lawyers involved have been “dragging their feet” on the paperwork, McClure said.
Commissioners’ discussion included the fate of a Smoky Mountain Propane and Gas representative who has also invested money in the property. He was promised a lease, which has not yet been granted, Holt said.
Commissioners said they are worried about the “hardship” that business might be placed under if the county does not act to purchase the property.
A final EDC-related topic Monday was a discussion of the county’s revolving loan fund, which ended with a directive for county Manager Ken Westmoreland and finance officer Darlene Fox to study the outstanding loans.
“As you remember, we decided to dissolve the revolving loan board,” McMahan said. That decision was made during the Jan. 12 special meeting when McClure was removed from his appointed positions. (McClure remained chairman of the EDC because he is a Western Carolina University appointee rather that a county one.)
“We need to bring all loan agreements into compliance by some action of this board,” said Westmoreland.
Two of the loans still outstanding are in default, while two are “severely in arrears,” he said.
Commissioners asked Westmoreland and Fox to meet with the holders of the defaulted loans and then recommend a plan to bring those loans up to date.
Westmoreland is expected to report on the loans’ status during the May 10 session.
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