TO: Mayor and Members of City Council
THRU: Kelly Strickland, Assistant City Manager
FROM: Christopher Cauley, MPA, Director of Economic and Community Development
Jeffrey Morin, Housing Program Manager
DATE: January 12, 2026
RE:Title
Authorize Aubrey Hills Apartments Affordable Housing Loan SubordinationTitle
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COUNCIL DISTRICT(S):
Council District(s)
District 4
b
Relationship To Strategic Plan:
GOAL II: The City of Fayetteville will have a Responsive City Government supporting a diverse and viable economy.
• Strategic Priority 3: Continue the City's commitment to revitalization efforts and housing needs
GOAL III: The City of Fayetteville will be a city invested in Today and Tomorrow.
• Strategic Priority 3: Continue the City's commitment to revitalization efforts and housing needs
GOAL IV: The City of Fayetteville will be a highly desirable place to live, work and recreate.
• Objective 4.5: To ensure a place for people to live in great neighborhoods
• Objective 4.6: To reduce poverty and homelessness
Executive Summary:
Aubrey Hills is a 32-unit garden-style apartment community for families located at 148 Horseshoe Road that is currently under development. City Council is asked to authorize the subordination to a new lender and execution of updated loan documents.
Background:
Halcon Development, LLC. is a private developer constructing a 32-unit community and producing eleven (11) HOME rental units. The property is a vacant parcel located at the southern end of Horseshoe Road off Yadkin Road. Funding in the amount of $2,145,000 has been allocated from the City’s annual allocation of HOME funds, the development requires a 2% interest loan calculated to be repaid over 30 years with a balloon payment expected at year 20.
At the April 3, 2023, Work Session, City Council reviewed information about this project as a 52-unit development. At the April 22, 2024 City Council Regular Meeting, City Council approved the issuance of Loan Commitment Letter with a reduction in units from 52 to 32. That letter stated “the collateral shall consist of a second lien Deed of Trust encumbering the property. The City of Fayetteville shall execute such subordination agreements as shall be required by senior lenders for the development.”
Since that time, the developer has realized price increases after starting construction in early 2025 and now wants to obtain additional debt to cover those costs. The additional debt will result in a reduction in the amount of cash flow available to repay the city’s HOME loan. The developer has submitted to the City a request to take on additional debt for the project. This action would require the City to subordinate to the new lender, placing the City of Fayetteville in third lien position.
Issues/Analysis:
Authorization of the subordination will allow the City to draft the updated legal documents to secure the City’s investment in the third position.
Budget Impact:
There is no impact on the budget, as City of Fayetteville has committed $2,145,000 from the HOME Program. The project has passed the 50% completion point and has currently drawn down $858,000 and has $1,287,000 remaining.
Options:
• Authorize the subordination, execution, and filing of amended loan documents.
• Do not authorize the subordination, execution, and filing of amended loan documents.
• Direct Staff to some other action
Recommended Action::Recommended Action
Staff recommends that Council move to authorize the subordination, execution, and filing of amended loan documents.
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Attachments:
Executed Aubrey Hills Commitment Letter 04.22.24
Aubrey Hills Apartments - RHD Request Letter 11.10.25