MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, December 4, 2024
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee (the “Board”) was held pursuant to public notice published in The Daily News on Wednesday, November 27, 2024, and posted on the Board’s website at: www.memphishehf.com. The published meeting time was 12:00 Noon. The meeting was held in the conference room in the Board offices, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chairman Monice Hagler
Buckner Wellford Cliff Henderson
Howard Eddings, Jr. Vincent Sawyer
It was noted for the record that Director James Jalenak had moved his residence outside of the City of Memphis and Director Katie Shotts had tendered her resignation effective as of December 31, 2024. Hence, proceeding into calendar year 2025 there will be three (3) vacancies on the Board mandating a minimum of one vacancy to be filled to transact official business in 2025.
Staff and others attending: Trey McKnight, Stephanie Bryant, JP Townsend and Nikki Abraham; Charles E. Carpenter and Corbin I. Carpenter, General Counsel; Katrina Shephard (Zoom), legal assistant to General Counsel; Cheryl Hearn, Deputy City Attorney; Janika White, Memphis City Council Liaison.
Also participating in person and/or via remote Zoom virtual platform were Ashley Cash, Director of City of Memphis Housing and Community Development; Carlissa Shaw, Esq.; Austin (A.T.) Harrison of Memphis Interfaith Coalition for Action & Hope (MICAH); Matt Mulqueen and Bruce McMullen of Baker Donelson Law Firm, Kent Mehring, Melanie Wenk and Louis Focaracci of WNC, Inc., and Terry Moore and Julien Moore of MPR Contractors, all appearing in connection with Cavalier Court and Gospel Gardens; Frank Stockdale Carney and Elizabeth Friary of Evans Petree, PC and Neil Knopf representing Bridgeport Manor Apartments; Susan Jarvis with BGC Advantage representing MH Strategies Family RAD I, LP-Askew-Uptown Project; Thomas Robinson and Mallory Key of Alco Management, Inc. representing Hilldale Apartments, Ridgecrest Apartments, and Surrey Apartments; David Shores of Multi-South Management Services, LLC and David Shemano representing Abington Apartments; Tie Lasater of KeyCity Capital representing Grahamwood Place and Pinebrook Pointe; Michael Chance of Baker Donelson Law Firm and Phil Wazonek of Distinct Real Estate representing Whispering Pines Apartments; Simeon Ike of Greater Memphis Housing Justice Project; Kate Bieri of Fox 13 News; K. Durell Cowan of Heal901; Chenise Anthony; Memphis Tenants Union; Mike Humes; and several members of the public were also present.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Daniel T. Reid, Chairman.
Chairman Reid stated that in compliance with the Open Meetings Law codified in Section 8-44-101 to 8-44-108 inclusive of the Tennessee Code Annotated, as amended, The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee is holding its regular meeting on Wednesday, December 4, 2024 @ Noon as an open public meeting in its conference room located at 65 Union Avenue, Suite 1120, Memphis, Tennessee 38103.
Chairman Reid stated supplemental Board meeting materials could be accessed on the Board’s website: www.memphishehf.com and reminded all attendees participating via remote access to enter their name and affiliated entities into the Zoom platform for record keeping purposes.
Public Comment
Chairman Daniel Reid opened the floor for public comment and advised that all comments should be limited to two (2) minutes per speaker.
1. Austin (A.T.) Harrison introduced himself as a neighborhood housing advocate in
attendance on behalf of MICAH. Harrison stated that the Board’s October 2, 2024 Board Meeting Minutes will be considered for approval at today’s Board meeting after approval being delayed thirty (30) days. Harrison stated the Board has really started to do a good job at this. Harrison requested that the Board look at the action of WNC and not what WNC is saying. Harrison asked that the Board look at what WNC has done at each property and what the impact is to the tenants and how have their lives improved, and how are they going to improve? Because this tax break is very valuable, and if we continue to look at what the developer says, but not look at what they are doing, we are going to continue to find ourselves in this situation where all we have left is the nuclear option. Harrison stated that there was great conversation at the Board’s November 6, 2024 Board meeting and he feels like we are starting to get to some ideas on the table where there can be systemic change, but right now, this is another one of those nuclear options or not, with false choices. Harrison stated that we can both preserve the affordability, and we can have a good unit for working class everyday low-income residents, and we do not have to choose one or the other. Harrison stated that he hopes the Board will push the developer and partners like Housing and Community Development (HCD) to figure out what that third option could look like.
There being no further public comment, Chairman Reid advised that the agenda will be modified, and the consideration of Minutes will be moved to the end of the meeting, following the consideration of the Finance Committee Report.
Attorney’s Report
Charles Carpenter presented the legal report, as follows:
1. Carpenter reported three (3) PILOT Closings for November 2024:
a. Northside Square Apartments PILOT Closing for a 20-year term;
b. Place of Grace PILOT Closing for a 20-year term, to close this week;
c. Eden Pointe PILOT Refinancing Closing
Carpenter stated that there are also several other PILOT closings working to be completed by the year end 2024.
2. Carpenter reported receipt of various claims on PILOT properties in the Board’s program, with three (3) of those claims being made by Sherwin Williams for non-payment against:
a. Country View Apartments for approximately $16,000
b. The Boulevard Apartments for approximately $14,000
c. Macon Manor for approximately $14,300
Carpenter stated that the fourth claim is against The Boulevard Apartments from Surface Works in the amount of $7,500 plus legal fees. Carpenter reminded the Board that there is no direct liability or exposure to the Board in these matters, but the Board does receive notice because it holds legal title in its role of providing a public function to the PILOT properties, and his firm provides oversight and ensures these types of claims are adjudicated properly.
3. Finally, Carpenter reported one (1) PILOT property – Whispering Pines Apartments has
been placed in legal default and is included on the Board meeting agenda today, and he would reserve comments regarding this legal default for the Action Items section of the agenda.
Next, Carpenter stated that there has been ongoing communication with the City Administration regarding Cavelier Court and Gospel Gardens. Carpenter stated that the City has contacted the Board regarding its interest in becoming involved with these two properties. Carpenter reminded the Board that the administration of the PILOT program is based on a delegation of authority from the Memphis City Council, and with these two properties, the administration has been in direct communication with the limited partner, WNC, and its legal representatives. Based on that factual basis, the City Administration has made contact with the Board of its interest and Carpenter introduced HCD Director Ashley Cash for further comment. Director Cash attended the Board’s November 6, 2024 Board meeting on behalf of the City Administration and is participating today via the Board’s Zoom platform. Carpenter stated the Board has received information from the legal team of WNC as recent as Tuesday, December 3, 2024, and that information has been shared with the Board, which described the various steps that WNC has taken since the Board’s November 4, 2024 Board Meeting, including a term sheet from Citibank for each property, and other information on security, proposed changes in management, etc. Carpenter stated representatives for WNC and its legal counsel are in attendance today and turned the meeting over to Cash for her comments.
Director Cash began by thanking the Board for the opportunity to speak and participate via the Zoom platform today. Cash stated that HCD and the City Administration have the same goals as the Board, centered around making sure residents are being provided safe, quality, affordable housing. Cash stated that she and her team have had good conversations with the leadership of WNC and internal conversations with HCD’s legal team and leadership, as well as conversations with representatives of MICAH. Cash stated that HCD and the City Administration takes this matter seriously, and by the Board giving HCD and City Administration the opportunity to intervene in between approving minutes, that the Board understands and appreciates where this team is coming from. Cash stated that with the lack of affordable housing units in the City of Memphis, when there is an opportunity to preserve housing, then they want to try to do that. Cash stated from her perspective, there has been new management in place, some other programmatic leadership that is in place, and pending HUD approval on these changes at each site. Cash stated what HCD and the City Administration is asking is for the Board to consider allowing an opportunity for this new management team to come in. Cash stated she understands that there have been a lot of discussions between the ownership and the Board prior to this new management team coming on board, and she certainly understands and appreciates the thoughts the Board may have and the experiences the Board has had.
Cash stated that she is essentially asking to give the new management team an opportunity because the City Administration feels that without them, the next step for these units would be detrimental to the residents and to the City, knowing the lack of affordable housing and the lack or limited funds that it has. Cash stated that she has had conversations with Carpenter and WNC and that the City Administration is willing to step in and be the intermediary to the Board to make sure that WNC is following through on what they are required to do and what they said they would do. Cash stated she would allow WNC representatives to speak of the remediations that have been done so far, and Cash stated remediations have started, although there has not been formal HUD approval. Cash stated that security is onsite at both properties, and she understands they are working through some lighting issues, which will take some time, but she is confident in what she has seen so far and heard firsthand. Cash stated that her team and the City Administration are committed to the Board and in this together and want to be responsive partners. Cash stated that if the situation gets to a point where HCD and the City Administration feel like the entity is not doing what they are supposed to do, they will step in and have that direct conversation with the Board to make sure to reduce the undue burden on the Board for that. Cash stated she is happy to answer any questions and asked that the Board would allow WNC representatives to speak specifically of the remediations that have been accomplished in the last thirty (30) days.
Carlissa Shaw, Esq. entered the meeting.
Carpenter stated that before the Board heard those comments, that this is new ground for this Board and that these actions are unprecedented. Carpenter stated that the Board administers the PILOT program based on the delegation of authority from the City Council, so it is working hand in hand with the City. In addition, because the Board has maximized its resources and remedies and the City has additional resources and the City can have more involvement with each entity, Carpenter recommended from the view of the Board, these two (2) properties (Cavelier Court and Gospel Gardens) should be transferred over to the City for the ongoing monitoring and oversight for compliance during this interim period. The Board would like to make clear for the record that during this interim period the PILOT would remain in place.
Carpenter stated the recommendation is based on a conversation earlier today that as the Director of HCD, Cash would be responsible for coordinating an interim period of oversight and monitoring for Cavelier Court and Gospel Gardens and asked that Cash confirm that for the record. Cash stated that is correct, and she would just add that it is in coordination with HCD’s legal division. Carpenter stated that HCD and the legal division will take these two (2) properties (Cavelier Court and Gospel Gardens) over and in consideration of that, the Board will keep the PILOT in place until further direction from the City. Cash stated that is correct and that is the understanding. Carpenter stated that based on those facts.
Carpenter further alluded to the fact that the Board has received written updates from WNC and based on those written updates, the Board does not feel it is necessary for WNC to make any additional presentation on what has been done but rather have the clear understanding and presentation with HCD and the City Legal Division to ensure there is clear understanding of how this would be handled going forward. Carpenter asked if Cash would agree with that, to which Cash responded yes, and that would make sense.
Carpenter stated that based on the involvement of the City of Memphis Administration that is being coordinated through Housing and Community Development (HCD) with Director Ashley Cash, he would recommend to the Board that it modify the meeting minutes at the appropriate time to address this matter and clearly indicate for the record that this new precedent that we are setting for these two (2) properties, that the PILOT be maintained in place pending further instructions from the City Administration and that continuing oversight and monitoring of these two (2) PILOT properties for compliance with the policies and procedures and other Code Enforcement, Environmental Court, and local laws and regulations be coordinated through HCD in conjunction with the legal division for the City of Memphis. That being the case, Carpenter stated the Board’s meeting minutes will reflect that and this matter will now be taken off the agenda and the Board will stand by to work cooperatively, hand in hand with the City of Memphis Administration.
City Councilwoman Janika White asked if this is something the Board would vote on. Carpenter stated that as this is a case of first impression for the Board, he would recommend that a motion be made by the Board, properly seconded, and vote to make that transition. White asked for clarity of this situation, and asked if the understanding is that this Board and its staff will no longer investigate or follow-up on what is being done with these two (2) properties, and follow-up on what is being done will be sent to HCD? Carpenter stated that is correct for the interim period. White asked what kind of reporting would come back to this Board as to what is being done? Carpenter stated that it is to be determined. Carpenter stated that as the Board’s current policies and procedures require quarterly reporting and compliance oversight, HCD and the City Legal Division will do that, and those reports will be shared with this Board, but this Board would not have primary responsibility for that.
White stated that she would like to hear from Director Cash what kind of staffing and oversight will take place through HCD in terms of following up with that has been done and making sure that these conditions change expeditiously. Cash reiterated Carpenter’s comment stating that this is unprecedented territory. Cash stated that the City Administration is taking a strong stance on how it preserves affordable housing and not just be reactionary, but how to be proactive and preserve affordable housing and that this is one of those steps. Cash stated what she sees as next steps would be to have a subsequent conversation with the Board’s Executive Director Trey McKnight and Board Legal Counsel, Carpenter Law, to see what is acceptable. Cash stated is what she envisions is monthly updates around property conditions to the Board coordinated through the Executive Director. Cash stated there are a number of Code Enforcement violations that have been addressed, but there is a bit of a road map as to things that need to be addressed and some of that is in progress. Cash stated she would start with the road map to say what the deficiencies are that have been found, what is currently being addressed, and what the timeline is on curing those deficiencies.
Cash stated HCD is in the position to receive updates on approvals through HUD on the new management team and she spoke with WNC leadership on December 3, 2024 regarding their engagement with the residents, and HCD will be looking for updates on how they are being accessible to the residents of these communities. Cash stated that she is with HCD, but HCD has an entire City team that will work with Code Enforcement. Cash stated she received updates from Code Enforcement on December 3, 2024 and on the most recent inspections of these properties, a few things were found to have been addressed, but there will be constant communication around what those reports are looking like to make sure it is getting to a point of progress. Cash stated there have been questions concerning a timeline, but she would like to have additional conversation to establish some standard of alignment with the City Administration as it related to what the Board already does in terms of “watchlist” properties, and that may be something that can be brought back up directly by the Executive Director or if there is a desire to have an update at a meeting in terms of what that timeline would be. Cash stated that as far as White’s question concerning staff, Cash would be the primary point of contact, but again, this is unprecedented. Cash stated there is a compliance department within HCD and it is staffed by five (5) individuals, including individuals with housing expertise. Cash stated HCD also has inspectors on staff and third-party inspectors that HCD works with. Cash stated HCD has a litany of staff members, so she is unable to provide specifically who will be responsible, but she would imagine that staff across HCD would have different roles. For any issues, Cash explained she would be the accessible and transparent point of contact and would encourage the Board that if they have questions, they are welcome to reach out to her, and she will also be in direct communication with Executive Director McKnight.
Carpenter thanked Cash for her comments. Thereupon, Carpenter introduced Attorney Carlissa Shaw, who has been working directly with the City Administration and Mayor Young, who is present at today’s meeting and has been working diligently with this issue as well. Councilwoman White asked Director Cash and Attorney Shaw what the idea and purpose is behind this move, and if this Board already has the staff and a system in place, and this Board and staff here is already familiar with the issues and what needs to be fixed and remedied, it seems as if there are developing ideas of what oversight would look like in developing this new system with HCD, and she does not understand the purpose of this move for specifically these two properties under the City Administration and would like an answer. Carpenter briefly responded by stating that the Board has exhausted all the resources and oversight capabilities that it has under its delegation of authority and its remaining remedy is termination. Carpenter stated that the City Administration is not limited by the delegation and has more resources and remedies than this Board does, which is this Board’s primary basis and how the Board understands why this process is taking place. Carpenter invited Attorney Shaw to make a further statement from the City Administration’s standpoint about what additional factors may be taken into consideration for this modification.
Shaw thanked the Board for the opportunity to speak, stating she has practiced law for thirteen (13) years and a large bit of that practice has been blight. Shaw stated is her last role, she started as the Chief Policy Advisors to the Shelby County Environmental Court and was able to do a lot of strategic planning, long term development, and implemented the first set of court rules. Shaw stated she also transitioned the receivership program. Shaw stated in February 2024; her firm was able to join the City of Memphis in creating a long-term blight litigation plan. Shaw stated that plan identifies problem properties, of which many properties that have been identified she is sure have come before this Board, specifically Cavelier Court and Gospel Gardens, as well as Serenity Towers, and they have been working tirelessly in the last six (6) months to figure out long term solutions to these problem properties. Shaw stated that she loves Memphis, and she loves what she does, and she is inspired by her work. Shaw stated these properties create challenges when we talk about long-term solutions to how to deal with them, including discussions of receiverships and who could become a receiver of these properties. Shaw stated that when thinking of additional oversight, she often looks to the priority of boots on the ground, which is Code Enforcement. Shaw stated that Code Enforcement inspectors work tirelessly, especially on these properties, to ensure there is progress. Shaw stated that Code Enforcement inspectors are going to these properties weekly, sometimes more than once a week, depending on what is happening, and she is the attorney assigned to all of these properties. Shaw stated that the entire former-Millennia portfolio if now under her purview and she is in constant contact with the Court Code Enforcement Inspectors as well as the assigned Code Enforcement inspectors about what is happening on these properties with week-to-week updates on the progress or lack thereof, and the ability for the owners to come into compliance.
Shaw stated that the City of Memphis has approximately 2,500 problem properties, and as she looks at long-term solutions, the long-term solution is not the City of Memphis putting in the money to fix those problem properties, and ideally the desired outcome is for the property owners to fix the problematic properties, and that would save the City long-term and save taxpayer resources, which in this particular case of Cavelier Court and Gospel Gardens is what her team is looking to do. Shaw stated her team is trying to make the property owner the one who is accountable to rehabilitating and abating the public nuisance that is currently Cavelier Court and Gospel Gardens. Shaw stated she has been in contact with WNC representatives over the last couple of weeks about the status updates and was able to meet them on property to walk Gospel Gardens to identify some of the problem areas and solutions. Shaw stated she has also been in contact with Code Enforcement Inspectors about updates and significant changes or modest changes to the property and where to go. Shaw stated the perspective here is allowing the property owners to come into compliance with the problem property. Shaw stated her litigation approach has been more aggressive in the last six (6) months than what has been seen in the last decade in the City of Memphis, making sure that these properties come into compliance, so this is not a pass. Shaw stated she is thankful for the work the Board has done and continues to do and restated that this litigation will be more aggressive moving forward to make sure that those approximately 2,500 property holders come into compliance with their problem properties.
Councilwoman White stated that she understands and appreciates the litigation efforts that have been presented and thinks they are great, but there are a lot of things being lumped together. White stated that everyone’s goal is of course for people to be able to live in safe, affordable, and clean housing and she understands there are several different ways to approach this. White stated that she still does not understand everything as it pertains to this Board in terms of a tax benefit that is now being taken away due to continuous default. White stated she does not understand the overlap as it pertains to the execution of litigation and enforcing remediation as it pertains to this specific situation of a tax incentive that may now be taken away because of excessive noncompliance, and the two situations are not meeting.
Carpenter stated that as the Board understands it, HCD in conjunction with the legal division are taking on these two (2) PILOT properties as a case of first impression back under their wing to ensure that they come into compliance with the policies and procedures, and once that happens, it will be returned for ongoing compliance to this Board. Carpenter stated that if it does not happen, then the PILOT will be terminated. Carpenter stated that during this period of diligence, the Board is agreeing to hold the PILOT in abeyance and not terminate, as it had determined to do at the Board’s October 2, 2024 Board meeting. Councilwoman White stated she understands that, but for what purpose? Carpenter stated he is unable to answer that further. White asked what the reason or the benefit is of this step of keeping the PILOT in place? Bruce McMullen stated that the PILOT affects the capital stack of financing, which allows affordable housing to be afforded. McMullen stated that all funds received from HUD do not cover everything the owner needs, and the PILOT makes the owner able to keep affordable housing up to code and make it nice for the residents. McMullen stated that if the PILOT goes away, there is a question of if the housing is viable for the investor.
Member of the public, Austin Harrison spoke out of turn at this point stating that the Board was aware of that when it voted to terminate the PILOT for these two (2) properties. Harrison stated that he understands the impacts to the financing, just as everyone on this Board understood the impact to the financing, and the Board made the decision to take it away and voted knowing those answers. Harrison stated it sounds like now the City Administration is coming in and making moves to extend the PILOT and stated he agrees with everything Councilwoman White has said. Harrison stated that this is just a move to keep the PILOT and not actually trying to solve the problem, and again, we are falling into this false option of we either keep the PILOT and make the developer happy so that they can make profits or we do not or the tenant lives in the same condition, but there is a third path. Harrison stated that if the owner was going to fix the problem, it would have been fixed already. Harrison stated that the public has seen other owners, when the Board has threatened default, move and start making investments and change. Harrison stated this owner has not done that yet, and he does not know what HCD is going to do to change that.
Carpenter interrupted, stating the Board meeting needs to maintain order, asked Harrison to cease his comment and if there were any Board members that have questions about this item.
Cliff Henderson stated that Carpenter’s last comment brought it into clarity for him and if the Board is looking at this as an interim step and allow HCD to come in and oversee remediation of this, and then at a future date, they can come back into the fold, given all the conditions are met and everyone is in agreement. Henderson stated that this is unprecedented and that is the part we will have to try to figure out moving forward.
Ashley Cash stated that she would like to make a clarification specifically around the transfer between the Board and HCD in conjunction with its legal division. Cash stated that HCD will be the lead and the point of contact and will work with the legal division to ensure HCD is doing things legally, but the legal division does not actually have any role in the compliance oversight. Cash stated for clarity that HCD’s legal division will only advise on legal matters, including Carlissa Shaw, who is in attendance today on behalf of the City Administration.
There being no further questions or comments,
Howard Eddings, Jr. moved to maintain the PILOT in abeyance and transfer all oversight of Cavelier Court and Gospel Gardens to Housing and Community Development (HCD), with Director Ashley Cash as the lead and point of contact, and the Board will take no additional action pending further direction from the City of Memphis Administration. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Let the record reflect that Buckner Wellford was recused from this vote.
There being no further questions or comments, the Legal Report was concluded.
Austin (A.T.) Harrison left the meeting.
Matt Mulqueen, Bruce McMullen, Kent Mehring, Melanie Wenk, Louis Focaracci, Terry Moore and Julien Moore left the meeting.
Katie Bieri left the meeting.
Executive Director’s Report
Trey McKnight thanked the Board Members, as volunteers, for their service this year.
Action Items-
1. 3rd PILOT Refinancing Closing Extension for Cambridge Development Holdings, LLC (d/b/a Bridgeport Manor Apartments)
Frank Stockdale Carney and Neil Knopf entered the meeting.
Charles Carpenter introduced this agenda item, stating that he will be deferring to his partner, Corbin Carpenter for presentation. Corbin Carpenter introduced representatives Frank Stockdale Carney, counsel to the PILOT Lessee and Neil Knopf in attendance. Corbin Carpenter stated that the Bridgeport Manor PILOT commenced in January 2023, and the PILOT Lessee is appearing before the Board today requesting an extension of a refinancing application approval for Bridgeport Manor Apartments. Corbin Carpenter stated that a third (3rd) PILOT Refinancing Closing Extension is unprecedented and asked the Board’s internal compliance monitor to provide the Board with an update on the observed conditions of the property.
JP Townsend stated there are several buildings that renovations have not been completed, but all completed and occupied buildings are well maintained. Townsend stated there are some issues with the playground equipment and tenant areas, which include damages. Townsend stated that at the time of his most recent inspection, the grass needed attending to, but overall, occupied areas are being maintained. Stephanie Bryant stated that the property is still in the construction phase and is due to be completed in June 2025 and the property is thirty-one percent (31%) occupied but reminded the Board that the minimum occupancy requirement does not go into effect until the construction phase is completed. Cliff Henderson asked if there were any health or safety hazards at the playground. Towsend stated his concern is with the slides, stating both slides are damaged. Henderson asked if the damage could injure a child playing, to which Townsend stated yes. Henderson asked if the Lessee has received and recommendation to review this issue. Townsend stated he has included it in the last approximately three (3) progress reports to the PILOT Lessee, with the most recent progress report being provided in the last month.
Trey McKnight advised the Board that each time Townsend inspects a property, the property inspection is followed by a detailed email regarding his observations, so the report being provided to the Board today does not include any observations or information that the PILOT Lessee has not been made aware of beforehand.
Henderson asked if the Board extends the safety consideration to the remainder of the construction, if in Townsend’s observations show that things are partitioned off well enough that young children or persons on the property would not be injured. Townsend stated that the rest of that area under construction is fenced off, including a pool area that has not been renovated yet, but the playground is not fenced off. Townsend stated that one slide was removed from the playground several months ago, but there are still two (2) existing slides that are damaged and are a safety concern. Henderson asked for a report on the vacant buildings. Townsend stated there are vacant buildings on the property that are exposed, and there is a fire damaged building that has been chained off and caution tape has been put up around that building, but all other vacant buildings are exposed and can be accessed by anyone walking up to them.
Howard Eddings, Jr. stated that it appears there has not been a lot of progress in the last year or more. Townsend stated that there has been upkeep, meaning the buildings that have been renovated and occupied are being maintained, but he has not observed any additional construction or renovations. Eddings asked if it appeared that ownership would be able to meet the construction timeline of a June 2025 completion date. Townsend stated it is possible to complete construction in that timeframe, but he is unable to provide the Board with any progression of construction because there has not been any construction progress. Townsend stated that there have been issues with Memphis Light Gas and Water (MLGW) and asked Neil Knopf if he could advise the Board of any update with those issues.
Knopf stated that there are two MLGW issues at this property, with the main one being that most of the pole lighting on the property is off right now and he expressed that he appreciated any help the Board may be able to provide with that issue. Knopf also stated that there was a lot of back and forth with MLGW on this property concerning electric and gas meters, which they have recently seen significant improvements. Knopf stated that there were some buildings that MLGW wanted ownership to perform work differently, and there was back and forth with that, but the work was performed and MLGW reinspected and there has been good progress on that, which is helping in moving in more people in the last few months.
Corbin Carpenter reminded the Board that Mendel Fischer and Shrage Marasow, owners of Bridgeport Manor, entered the Board’s PILOT program in 2020 and currently have six (6) other properties that are active participants in the Board’s PILOT program. These properties include Bridgeport Manor, Eden Pointe, Grainge Hill, Scenic Hills (f/k/a Hunters Ridge), Timber Pines (f/k/a Gowan Pines), Watkins Manor, and Willow Oaks. Corbin Carpenter stated that three (3) of these properties have gone through a refinancing in the past eight to nine (8-9) months, with the closing of the Eden Pointe Refinancing on tomorrow, December 5, 2024. Corbin Carpenter stated that ownership is actively working to get this done, notwithstanding this third consideration for a closing extension. Corbin Carpenter turned the meeting over to Frank Stockdale Carney for an update on the lender and commitment letter that is in place, updated sources and uses table, tenant benefits, etc.
Carney stated that Corbin Carpenter is correct, and he believes there have been five (5) properties his team has been working on refinancings since December 2023 for this owner, and with that number of properties, some refinancings have been put on the back burner to accomplish others. Carney stated that the sources and uses from the time of the original Bridgeport PILOT Refinancing Application are still in place and the tenant benefits have largely been completed. Carney stated that with the closing of the Eden Pointe Refinancing tomorrow, December 5, 2024, that will bring Bridgeport PILOT Refinancing to be the focus point. Chairman Reid asked about the status of the lender’s commitment letter. Carney stated that the commitment letter is in place from KDM Financial and was included in the application. Reid asked what the expiration date on that commitment letter is. Carney did not know the expiration date of the commitment letter but would confirm.
Buckner Wellford asked about this being an unprecedented step and stated that he only recalls closing extension requests for PILOT Closings and PILOT Term Extension Closings, but does not recall closing extension requests for refinancings, which seems to be a different animal. Wellford stated that he does recall one instance that there was a seventh closing extension of a PILOT, but there was additional discussion in that circumstance and that the Board does not like to do that. Wellford stated that he understands the Board’s role in a refinancing is to ensure that all the equity is not taken out of the property to the property’s detriment, but a refinancing is different from approving the PILOT in the first place. Corbin Carpenter stated that Wellford is correct, and that with the closing extension that reached seven closing extensions was only through the precedent of the Board that said it is only appropriate when it is a public-private partnership with Memphis Housing Authority (MHA) and would be one of the only situations that would surpass this number of closing extensions. Wellford stated that that situation was not in dealing with refinancing. Corbin Carpenter affirmed, stating that it was for a new PILOT.
Corbin Carpenter stated that the Board has not seen more than two (2) closing extension requests with any refinancing, because with a refinancing, the commitment from a lender is for a certain period of time and is not indefinite. Wellford stated that it seems the Board should be looking at is not so much the refinancing, but what is going on with the property and if the Board was not reviewing a refinancing application, would this property be in legal default, and if so, does the refinancing have something to do with whether the Board will move forward with it. Wellford asked if the main issue would be is the property making enough progress given the poor condition of the property, but it is under construction. Wellford stated he has noted that there was an owner investment of $10 million into this property of their own funds prior to receiving the PILOT. Wellford stated if that is true, that would provide this ownership group some credibility.
Charles Carpenter stated that the Board is also concerned with what the use of the proceeds would be from a refinancing, and if the property is thirty-one percent (31%) occupied, then is the ownership going to use the proceeds to complete the remaining construction and occupy the remaining sixty-nine percent (69%) versus taking the money out as equity and doing something else with it which is a vital component of the Board’s evaluation. Carpenter stated that because the legal title is in the name of the Board, under the policies and procedures for the Board’s PILOT program, the Board would have to approve not only the extension, but the refinancing as well. Wellford stated that the applicant has earmarked $9.75 million for renovation, to which Carney confirmed. Corbin Carpenter asked Carney if this closing extension is approved today, what would be the anticipated timeline for completion of construction. Knopf responded, stating that once the refinancing is completed, ownership anticipates completing construction in approximately six (6) months. Knopf stated that the developer recognizes that approximately one third (1/3) of the property is in the construction phase, but the once the refinancing is closed the developer can go in and finish the renovation rapidly. Knopf stated the focus is on lease up to enable the developer to move further.
Corbin Carpenter stated that Chairman Reid had asked representatives about the status of the lender commitment letter from KDM Financial and asked representatives again for a status. Carney stated they do not have a status at this time but will get that information and provide it to the Board. Corbin Carpenter asked what the anticipated closing date of the PILOT Refinancing would be. Carney responded the PILOT Refinancing is anticipated to close in quarter one of 2025. Charles Carpenter asked what the delay is for that. Carney stated that ownership is still working with the lenders and stated that Carpenter is aware of the market and lending is in disarray, and ownership is in the process of finalizing things. Carney stated ownership experienced a similar situation with Eden Pointe PILOT Refinancing and that began approximately one (1) year ago and is just now due to close tomorrow, December 5, 2024. Carney stated with changes in interest rates, it has made it difficult. Corbin Carpenter asked if the underwriting has been completed or is still in process. Knopf stated he believes the underwriting has been completed. Monice Hagler asked if this would be a six (6) month closing extension, to which Corbin Carpenter responded yes.
Charles Carpenter stated that as the Board knows, Chairman Reid is a banker, and as previously indicated, commitment letters are not open-ended and indefinite. Carpenter stated that with Carney’s statement concerning ownership continuing to work with the lender due to changes in the market and so forth, that terms of a commitment letter could be changed, and it is important for the Board to know the expiration date. Carpenter stated commitment letters are typically valid for sixty (60) days, or some other determined period, and Carney has indicated closing would not take place until quarter one of 2025, which would be ninety (90) days or beyond, which gives the Board pause, particularly this being the third occasion of ownership making this closing extension request. Carney stated he will speak with the developer and see what the status of the commitment letter is as well as the status of the underwriting. Carpenter asked for confirmation from Carney that he previously stated today that there is a commitment letter in the materials, to which Carney responded there was a commitment letter included in the original PILOT Refinancing Application materials submitted to the Board in 2023.
Carpenter asked Carney if he is saying that original commitment letter is still in place. Carney stated that to his knowledge it is, but he will confirm that with the developer. Carpenter stated that based on what has been presented by the PILOT Lessee today, his firm’s recommendation would be to defer this matter unless the Board wishes to move forward, but stated he does not believe there is enough information available to approve this, but that would be up to the Board as to how it wants to proceed with this matter today. Monice Halger stated she would agree to defer this matter to the Board’s February 5, 2025 Board Meeting. Carpenter stated that would provide the developer an opportunity to finalize this matter by February 2025. Carpenter stated that is important because with the Board’s oversight, matters lingering from meeting to meeting is unacceptable, and the fact that this developer has other properties performing well in the program is a benefit for this action, but going forward, timelines have to be complied with in order to receive any favorable action from the Board. There being no further questions or comments,
Cliff Henderson moved to defer action for the 3rd PILOT Refinancing Closing Extension for Cambridge Development Holdings, LLC (d/b/a Bridgeport Manor Apartments) to the February 5, 2025 Board Meeting, pending receipt of a revised commitment letter from the lender and a construction schedule. Monice Hagler seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Frank Stockdale Carney and Neil Knopf left the meeting.
2. Bond Reissuance Application for MH Strategies RAD I, LP-Askew/Uptown Projects
Susan Jarvis entered the meeting.
Charles Carpenter introduced this agenda item stating that this is a public-private partnership with Memphis Housing Authority (MHA) and the Board is well familiar with it. Carpenter stated that as mentioned earlier, this PILOT closing was extended several times but was successfully closed in December 2021. Carpenter stated today’s request involves the tax-exempt bonds, which the Board also issued for this project and the bonds were to be paid and completed with the construction schedule, but that has been delayed. As a result of the delay, Carpenter stated that this public-private partnership had asked the lender to extend that for a one (1) year period. Based on the extension under the tax law, the weighted average maturity of the bonds and some other tax implications have changed, which has caused in tax law a reissuance of the debt. Based on this reissuance, the applicant has come to the Board seeking approval. Carpenter stated that a new TEFRA Hearing would be required, as well as other legal documents signed to facilitate this legal process and will extend the “placed in service” date from January 1, 2025 to January 1, 2026 to allow completion. Carpenter stated his firm has reviewed the matter and it does comply with the Board’s Bond program policies and procedures and would recommend approval of this agenda item. There being no other questions or comments,
Monice Hagler moved to approve the Bond Reissuance Application for MH Strategies RAD I, LP-Askew/Uptown Projects. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Susan Jarvis left the meeting
3. Bond Inducement Resolution for APP Hilldale Partners, L.L.L.P. (d/b/a Hilldale Apartments)
Thomas Robinson and Mallory Key entered the meeting.
Charles Capenter introduced this agenda item stating that he will be deferring to his law partner, Corbin Carpenter for presentation of the next three (3) agenda items. Corbin Carpenter stated that the next three (3) agenda items will be discussed together but voted on individually. Corbin Carpenter introduced Thomas Robinson and Mallory Key in attendance for these agenda items.
Corbin Carpenter began with Hilldale Apartments, stating this is a one hundred forty-eight (148) unit development and the applicant is requesting the Board’s consideration and approval of the bond inducement, which outlines the parameters of the financing, including the not-to-exceed amount of $15 million. Corbin Carpenter stated this property will be an in-place rehabilitation and has an existing HAP contract, as do Ridgecrest Apartments and Surrey Apartments. Corbin Carpenter stated pursuant to existing tax law, Alco Management has committed to reserving forty percent (40%) of the units to residents earning sixty percent (60%) or below the area median income (AMI). Corbin Carpenter turned the meeting over to Robinson for an overview of Hilldale Apartments.
Robinson stated this property went through a bond financing a rehabilitation that was approved by the Board approximately sixteen (16) years ago, and Alco Management has had the opportunity to purchase the property from the current owner. Robinson stated the property has been well-maintained, but it is time for a major renovation, which will include application for tax credits and bonds, and the property will be 100% affordable with two thirds of the units being supported by a HAP contract, allowing deeper income targeting, and the remaining units will be reserved for residents earning sixty (60%) or below AMI. Corbin Carpenter stated that although the bond application is before the Board today, Alco Management intends to come before the Board at its February 5, 2025 Board meeting with PILOT applications for each project, but the Bond Applications are the first step. Corbin Carpenter stated that this application does comply with the Board Bond program policies and procedures and if the Board approves the Bond inducement for each of these three (3) projects, the approval will authorize Carpenter Law to conduct a TEFRA Hearing for each, which will then allow the developer to proceed in due course with 1st round submissions to Tennessee Housing Development Agency (THDA) in 2025 for the consideration of the allocation of tax credits.
Howard Eddings, Jr. asked if Alco has previously owned these properties, to which Robinson responded Alco Management has not owned or managed Hilldale Apartments. Robinson stated Hilldale Apartments was owned by a non-profit, then another group out of Indiana developed the property approximately fifteen (15) years ago, then a group out of California purchased the property approximately six (6) years ago, so this will be the first time Alco Management has owned or managed Hilldale Apartments. Robinson stated that Ridgecrest has been managed by Alco Management for approximately six (6) years, and then Surrey Apartments has never been managed by Alco Management. There being no further questions or comments,
Howard Eddings, Jr. moved to approve the Bond Inducement Resolution for APP Hilldale Partners, L.L.L.P. (d/b/a Hilldale Apartments). Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
4. Bond Inducement Resolution for APP Ridgecrest Apartments, L.L.L.P. (d/b/a Ridgecrest Apartments)
Corbin Capenter introduced this agenda item stating that this would be a larger development and bond capacity of a not-to-exceed amount of $35 million and turned the meeting over to Thomas Robinson for an overview of the project. Robinson stated the project is two hundred fifty-six (256) units located on Rangeline Road, south of Hilldale Apartments. Robinson stated that Alco Management was the replacement general partner approximately six (6) years ago. Robinson stated the property had previously gone through a Board finance tax credit bond rehab, and Alco Management has stepped in and helped stabilize the property, brought resident services to the property, and has done a lot of work, with the anticipation of another rehab using tax credits and bonds, because the property needs it, and it will be a real high impact project. There being no further questions or comments,
Monice Hagler moved to approve the Bond Inducement Resolution for APP Ridgecrest Apartments, L.L.L.P. (d/b/a Ridgecrest Apartments). Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
5. Bond Inducement Resolution for APP Surrey Partners, L.L.L.P. (d/b/a Surrey Apartments)
Corbin Capenter introduced this agenda item stating that this property is a one hundred eight (108) unit complex, and the bond application is for a not-to-exceed amount of $10.5 million and turned the meeting over to Thomas Robinson for an overview of the project. Robinson stated that Surrey apartments if north of Ridgecrest Apartments and is a 100% Section 8 property with deep income targeting. Robinson stated that Alco Management has had the desire to purchase this property over the last ten (10) years and an opportunity has come to do that now, and Alco Management had put together a big rehab plan which will provide good quality affordable housing for many years to come. Corbin Carpenter asked if these three (3) bonds will be public or private placement, to which Robinson responded that Surrey Apartments will be a public offering, while Ridgecrest Apartments and Hilldale Apartments will be private placements. Corbin Carpenter stated the underwriting for Surrey Apartments will be performed by Raymond James. Corbin Carpenter stated his firm will hold regular calls, as is precedent, with the Alco Management and the full finance team, and stated that his firm has a good working relationship with all parties and has worked with these same finance teams on other projects and he looks forward to working with them again and bringing these projects to a close and filling the void and need for more affordable housing in Memphis. Corbin Carpenter thanked Robinson and the Alco Management team for its partnership in these efforts. There being no further questions or comments,
Cliff Henderson moved to approve the Bond Inducement Resolution for APP Surrey Partners, L.L.L.P. (d/b/a Surrey Apartments). Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Thomas Robinson and Mallory Key left the meeting.
6. PILOT Refinancing Application for Parkview 2016 LLC (d/b/a Abington Apartments)
David Shores and David Shemano entered the meeting.
Corbin Capenter introduced this agenda item stating that this is a refinancing application for Abington Apartments, introduced David Shores and David Shemano, representatives in attendance for this agenda item, and asked the Board’s internal compliance inspector for an overview of the property conditions. JP Townsend stated that he and Executive Director Trey McKnight recently performed a walkthrough of Abington Apartments with David Shores of Multi-South Management, the management company for the property. Townsend stated there are some deficiencies that were observed with some of the roofs, gutters, and fascia, stating that David Shores has a complete understanding of what needs to be done. Townsend stated that the property’s tenant benefits include a gym, pool, and playground area that are all well-maintained. Stephanie Bryant reported that the property is eighty-four percent (84%) occupied and stated that part of the refinancing application is the commitment to use proceeds to remedy the deficiencies mentioned. Trey McKnight stated that staff is supportive of this refinancing request and the commitment to make the necessary repairs discussed during the walkthrough with management. Corbin Carpenter turned the meeting over to David Shores for an overview of the refinancing request.
Shores stated that this property is part of a refinancing that also includes a property in Missouri with a total loan amount of $45,650,000, which will be used to pay off an existing loan obligation of $41,036,939, as well as to provide working capital to perform the necessary improvements that have been mentioned by Townsend and McKnight. Shores stated that the current occupancy has increased from previous reports submitted to HEHF staff and is now closer to ninety percent (90%) occupancy, and the property is stable and quiet. Shores stated there is no unusual circumstances in this refinancing request and the bulk of the proceeds it being used to pay off an existing loan, with the part being attributed to Abington Apartment being roughly forty percent (40%) of the total loan proceeds. Charles Carpenter asked if there is a timetable for completing the construction deficiencies. Shores stated that, weather permitting, they should be completed in the first quarter of 2025. Corbin Carpenter asked for confirmation that the commitment letter is still in place, to which Shores responded yes. There being no further questions or comments,
Monice Hagler moved to approve the PILOT Refinancing Application for Parkview 2016 LLC (d/b/a Abington Apartments). Howard Eddings, Jr. seconded, and the motion passed unanimously after proper roll call vote of the Board members.
David Shores and David Shemano left the meeting.
7. PILOT Status Update for Grahamwood Apartments and Pinebrook Apartments
Tie Lasater entered the meeting.
Charles Capenter introduced this agenda item stating that these two (2) properties have been before the Board for quite a period of time, introduced Tie Lasater, representative in attendance for this agenda item, and asked the Board’s internal compliance inspector for a review of the recent conditions observed at Grahamwood Place and Pinebrook Pointe.
Townsend began with Grahamwood Place, stating that there are still some minor shingle repairs that need to be made and some gutter issues, but overall, the property is still being maintained. Townsend stated that his main concern from his observations is that there are some driveway surfaces, stating there is a rear area next to a gutter that is falling in, but this area is not the property owner’s responsibility and stated that management representatives and Trey McKnight have been working with MLGW and the City of Memphis to get these repaired. Townsend reported on Pinebrook Pointe, stating that many repairs have been made, and construction has been completed on some of the burnt-out units. Townsend stated that one pending issue was that the property did not have an outdoor grill, which is part of the property’s stated tenant benefits, but that outdoor grill has now been installed. Townsend stated there was also a pending issue with the perimeter fence around the playground area and that it has also been repaired. Townsend stated there was excess trash on the property during his most recent inspection but noted there were crew members onsite working on that during his inspection.
Tie Lasater stated that the grill that was recently installed at Pinebrook Pointe was stolen over the weekend. Lasater explained that the grill was concreted into the ground, but this is the third time it has been stolen, with thieves appearing to be using a cutting torch. Corbin Carpenter asked Stephanie Bryant to report occupancy rates for each property. Bryant stated that based on a November 26, 2024 rent roll submitted to staff, occupancy rates have declined and are now at sixty-six percent (66%) occupancy rate for both Grahamwood Place and Pinebrook Pointe. Corbin Carpenter asked Lasater to provide an explanation to the Board for this decrease in occupancy. Lasater stated that both properties had a number of evictions that were filed, those tenants are now out and the units have been leased back up to seventy-four percent (74%) and seventy-eight percent (78%) as of the beginning of this week. Lasater stated that out of the completed fire units, six tenants have moved into those.
Bryant stated that the Board has received conflicting occupancy reports and rent rolls from different representatives for each of these properties. Bryant advised Lasater that the Board is concerned with physical occupancy, not pre-leased units, and when a rent roll is requested for these properties, it is to be provided from each property’s management software and not in another format that can be changed or manipulated, such as an excel submission. Bryant clarified that quarterly occupancy reports are to be submitted on the excel format spreadsheet that has been provided to all PILOT Lessees, but all rent roll requests are required to come from management software. Lasater confirmed the next quarterly report submission would be due in January 2025. Bryant confirmed that, stating that she has not encountered issues with those submissions from property management. Bryant stated the issue has been during the period of additional compliance oversight for each of these properties, rent rolls have been requested many times, and staff is provided with an excel spreadsheet format of a rent roll and not a rent roll from management software. Bryant stated that HEHF staff has even been onsite at each property and requested a rent roll at that time and HEHF staff was denied those requested rent rolls by property management, and she wants to ensure clarity that when rent rolls are requested, they are received and provided directly from management software. Lasater stated that he will send what is included in the package to Arbor, the lender for each property.
Lasater stated that regarding the potholes at Grahamwood, management spoke with MLGW on Monday, December 2, 2024 and they have more electrical wiring issues that they are still working on and when they are done, they will let Grahamwood Place management know, and MLGW plans to be at the property of December 5 or 6, 2024 and plans to have a completion date following that. Charles Carpenter asked Lasater to state to the Board a completion date for the fire damage repairs and other outstanding items. Lasater stated the fire damage repairs at Pinebrook Pointe are anticipated to be completed in September or October 2025, stating five (5) units have been finished, another ten (10) units have been dried in, with the remaining twelve (12) units to be dried in next, and then work will start on interiors. Lasater stated that two (2) units have a full electrical rewire, which will require inspections, which will take a bit longer, but ownership anticipates full completion by September or October 2025 and ninety (90%) percent completion, aside from the two (2) units requiring rewiring, by April or May 2025. Lasater stated he can provide the Board with a detailed construction plan of that.
Corbin Carpenter asked Lasater for a status update on the planned refinancing of the entire portfolio. Lasater reported that has been paused and KeyCity received a two (2) year extension that was executed with the existing lender, so instead of refinancing, KeyCity is staying with the existing lender for at least two (2) years. Corbin Carpenter asked if the existing lender has the occupancy requirements in place. Lasater stated the current lender has a net operating income (NOI) requirement and an occupancy requirement, and a construction guideline requirement. Lasater stated that Townsend brought up gutters, which was not included in the lender requirement, but is included on the construction timeline, although he is not sure what the timeline for the gutters is right now on when that is scheduled to be done but will provide that to the Board. Bryant requested that Lasater provide all lender requirements with HEHF staff via email following today’s meeting and asked that he include the entire HEHF team in that email, to which Lasater agreed.
Monice Hagler asked if this agenda item required action from the Board. Charles Carpenter advised the Board that this is a status update, and the Board would need to determine whether the Board would want the PILOT Lessee to come back a provide a further update to the Board and if so, at what period of time. Carpenter stated that based on the report provided to the Board today, there is progress being made and the property is no longer under “legal default” status, but in an “under observation” status, and asked staff it they had a recommendation on when the PILOT Lessee should appear before the Board. Stephanie Bryant recommended the PILOT Lessee appear before the Board at the March 5, 2025 Board meeting to provide a status update to the Board. Bryant stated this would allow the PILOT Lessee time to complete a substantial amount of construction, while also allowing time to come into compliance with the Board’s minimum occupancy requirement of seventy-five percent (75%). There being no further questions or comments,
Vincent Sawyer moved to defer action on the PILOT Status for Grahamwood Apartments and Pinebrook Apartments and for representatives to appear before the Board at the March 5, 2025 Board Meeting to provide a status update for each property. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Tie Lasater left the meeting.
8. Status updates for PILOTs in Legal Default
a. Whispering Pines
Michael Chance and Phil Wazonek entered the meeting.
Let the record reflect that Buckner Wellford is recused.
Charles Carpenter introduced attorney Michael Chance. Chance stated he is filling in today for attorney Sam Blair. Phil Wazonek introduced himself as president of Whispering Pines. Carpenter continued, stating that at the Board’s November 6, 2024 Board meeting, the Board considered the legal default for Whispering Pines Apartments, and attorney Sam Blair with Baker Donelson presented information to the Board. Carpenter stated he understands that Blair is not present today, but his law partner Michael Chance is here representing the ownership group. Carpenter stated that it is the Board’s understanding that Phil Wazonek, who had been the principle for the ownership group, has been removed and there is a new principle general partner. Carpenter stated that this Board is not concerned with that, but the Board does have information included in its Board materials that shows that Whispering Pines has been a participant in the Board’s PILOT program, has not complied with an updated construction schedule that had been presented and approved by this Board, and based on governance issued and litigation among the parties, this matter has been on hold for quite some time. Carpenter stated that at the Board’s November 6, 2024 Board meeting, Sam Blair indicated that steps were being taken to move forward with construction and submitted information on December 3, 2024, which included a construction contract agreement which has been distributed to the Board for its review. Carpenter asked the Board’s internal compliance inspector to provide an update to the Board on recent observations of the property conditions. JP Townsend stated that there has been no change to the external physical conditions of the property since the Board’s November 6, 2024 Board meeting and construction appears to be on hold. Townsend stated that he has not observed construction crews onsite, there has been excess trash on the grounds and grass has not been maintained. Townsend stated there remains roof, soffit, and window issues on the existing buildings. Stephanie Bryant reported that the occupancy rate has never exceeded fifty-one percent (51%) for the entirety of the property’s participation in the Board’s PILOT program.
Michael Chance stated that the property manager, Valerie Banks, was unfortunately in a severe car accident on her way to today’s meeting, so unfortunately, she is unable to attend and present a current rent roll. Chance stated there has been a contractor at the property cleaning up debris and reinstalling gutters, fixing shingles and wood issues. Chance stated that Banks had taken some pictures of the property as of the afternoon of December 3, 2024 and he will be happy to provide those to the Board upon her return, but work is ongoing. Chance stated that ownership has a General Contractor contract for Building 4, reminding the Board that the property consists of five (5) buildings, and ownership anticipates the work will be completed in three (3) months. Chance stated he has been informed that the existing loan has been extended for a year and financing has been lined up for renovations of Building 4 and Building 5. Chance stated that ownership does not have a contract for Building 5 because ownership wants to put the contractor that is doing the work for Building 4 in a fast-forward position to get work done and get it done right, and if he does, ownership will sign another contract for Building 5. Chance stated ownership anticipates being fully leased by the end of summer 2025.
Carpenter turned the meeting over to Phil Wazonek for his comments. Wazonek apologizes for bringing the Board into an internal dispute between the general partnership. Wazonek stated that he has not been removed legally and Glankler Brown has been engaged and is reviewing their position so that is clearly wrong. Wazonek stated that Sam Blair does not represent the general partnership and cannot present facts today as if they are a part of the general partnership, this dispute is ongoing, and thus he is here today and is the only general partner in Memphis, located here full time and has been for the last four years. Wazonek stated he has received endless calls about the lack of work that is being done, and this so-called general contractors' agreement must be passed by the general partner, and he has not seen anything for his review and his acceptance. Wazonek stated that the financing is under dispute, and we will see where that goes.
Wazonek stated that speaking to the existing financing that is currently in place is problematic as payments are not being made and so all these unfortunate situations are accumulating into a massive problem that he has been endeavoring to resolve and would have liked to think it would have been resolved by now given the fact that he has been offered a couple of proposals from his partner that they are negotiating right now, but at this point, he has not been removed. Wazonek requested that he and Glankler Brown have access to all material that pertains to Whispering Pines, whether it is a proposal for refurbishments, rent rolls, the reporting that is required that, to his knowledge, has not been done. Wazonek stated that he is in fact an active partner and requires that information.
Charles Carpenter asked for clarification purposes if there is ongoing litigation right now. Wazonek stated that formal litigation has not begun, but the attempt to move him, as per the commentary that was just had, has happened but is completely illegal and that is where the litigations are starting. Wazonek stated he wants to leave the property but will only do so under certain circumstances and those circumstances have not been met and as such, he is staying and is actively involved. Wazonek stated that his personal guarantee is on the existing mortgage and a $3.5 million mortgage has very serious financial implications for him. Wazonek stated that upon him being removed from that mortgage, amongst a few other things, he would be gone and be applauding their endeavors as he believes Whispering Pines is a tremendous property and fulfills its mandate for workforce housing. Carpenter asked that since Wazonek is stating he is the principle and in charge, what has he done in over the past year or so to cure the deficiencies that are existing at the property. Carpenter stated that the Board is concerned with the compliance with its PILOT program policies and procedures and not the internal governance issues. Carpenter stated what the Board is looking at today with the legal default is whether to continue this PILOT based on these deficiencies and the ability to cure the deficiencies on a timely basis.
Wazonek stated that if the Board reviews the history of Whispering Pines when he was the manager, which was over a year ago, and the legal removal happened at that time, there was money being spent on the property. Wazonek stated he had numerous conversations with HEHF compliance staff, the property was cleaned up, renovations were underway and continuing under his stewardship. Wazonek stated that all came to a halt, and nothing has happened since he has been vacated from his position and the dispute has ensued. Wazonek stated that as to the question of what he has done personally, he does not have the ability to mandate and make those daily decisions and he appreciated the fact that the Board is not involved in the general partner dispute. Wazonek stated that his partner is in Canada and is at an advanced age of eighty years old and believes he can run the property, run a crew, run a property manager, and run a general contractor from Canada, but Wazonek stated he is here locally and has around thirty (30) years of experience, which speaks to the ridiculous nature of the situation. Wazonek stated that as to the issue of work being able to go forward under these circumstances, he would look to his counsel to comment on that, but personally, he does not see how that happens in light of circumstances created by his partner. Carpenter asked Wazonek if his counsel was present. Wazonek stated that he is not, but it will be Glankler Brown and stated that he has represented him before. Corbin Carpenter asked if Change and Wazonek agree that no rehabilitation will be performed on this property until the internal matters are completed with ownership. Wazonek stated that is his position. Chance stated that the property manager has reported to him that the contractor has been doing cleanup work and work on the gutters, roof shingles and wood is underway, but has unfortunately been in an accident and could not bring pictures. Wazonek stated that respectfully, cleaning up gutters and changing shingles is not renovations and does not change the direction of what needs to be done in order to fulfill the mandate. Wazonek stated that he sincerely wants the mandate to go ahead, and it is in the best interest of the community, the renters, the owners, the partners, and he wants this resolved as soon as possible. Wazonek stated that granted the Board does not know the details, but he has done everything he can to extradite himself from this thing so that they can go ahead and do whatever they feel is in its best interest.
Carpenter stated that he is aware that Chance is filling in today for Sam Blair, but the construction contract agreement provided to the Board appears to have been signed by all parties and it indicates that upon the execution of this contract for $454,200. That $151,733 was due upon execution and aske Chance if he is aware whether that has been paid or not. Chance stated he does not know the answer to that, but he will find out. Carpenter stated that it is very important for this Board to know because, as mentioned at the onset of this agenda item, the Board is not concerned with the governance issues and there is this contract for sixteen (16) units and if the funds have actually been paid according to this agreement, the Board would look at this differently that if it has not been paid. Carpenter asked if Townsend has any additional comments and then it would be up to the Board as to how to proceed with this limited information. Townsend stated that in his observations, there has been no work performed on this project since June 2024 and that was the last small bit of movement. Townsend stated there are still exposed, broken windows, soffit damage, the grounds have not been maintained, and his last inspection of the property was Monday, December 2, 2024 and has been inspecting this property no less than two times per month. Townsend stated that from his observations, the property is not in compliance with the Board’s standards and has never complied. Trey McKnight stated that the staff recommendation is PILOT termination. Bryant stated that this will be the first property that has gone through all formal steps of the Board’s new compliance process that is in place. Bryant stated a formal walkthrough of the property was performed with HEHF Compliance staff, Wazonek, and property manager Valerie Banks. Bryant stated this property had a pending PILOT Transfer Application that was due to be considered by the Board at its December 6, 2023 Board meeting and the potential purchaser withdrew the application the night prior to that meeting and stated to the Board they would not be proceeding with the purchase of the property. This initiated additional compliance oversight, as the property has never been in compliance. Bryant stated that ownership used the COVID-19 pandemic, stating it was a factor in the delaying construction due to supply chain issues, and this was a continued excuse for a long time. Bryant stated that since the end of the pandemic, there still has not been sufficient progress on this property, neither from a physical construction standpoint, nor an occupancy rate standpoint, to be in compliance with the Board’s PILOT program policies and procedures. There being no further questions or comments,
Cliff Henderson moved to terminate the PILOT for Whispering Pines Apartments. Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Let the record reflect that Buckner Wellford is recused.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended October 31, 2024. After discussion,
Vincent Sawyer moved for acceptance of the Finance Committee Report for the month ended October 31, 2024, properly seconded by Howard Eddings, Jr., and the motion passed unanimously after a proper roll call vote of the Board members.
Approval of Minutes
Chairman Reid stated that each set of Board Meeting Minutes will need to be voted on separately. Charles Carpenter stated pertaining to the October 2, 2024 Board meeting minutes, that the minutes can be approved as they have been written and presented to the Board and clarification will be reflected in today’s meeting minutes that will record the transfer or responsibilities for Cavelier Court and Gospel Gardens to the HCD Division of the City of Memphis. Carpenter stated that in the reading of the October 2, 2024 Board meeting minutes, there was a show cause motion why the PILOT should not be terminated. Carpenter stated there was a motion made to extend the period, but there was no second to that motion, so by the terms of the show cause, the PILOTs were terminated, but there was not a second motion to terminate the PILOTs. Carpenter advised the Board that, as the October 2, 2024 Board meeting minutes were presented, the December 4, 2024 Board meeting minutes from today will clarify the record and would keep the record correct in documenting the two PILOTs for Cavelier Court and Gospel Gardens. There being no further questions or comments,
Monice Hagler moved for approval of the Minutes of the October 2, 2024 Regular Meeting, which was seconded by Cliff Henderson and the motion passed unanimously after proper roll call vote of the Board members.
Let the record reflect that Buckner Wellford is recused from the October 2, 2024 Board meeting minute approval vote.
Cliff Henderson moved for approval of the Minutes of the November 4, 2024 Special Meeting, which was seconded by Buckner Wellford and the motion passed unanimously after proper roll call vote of the Board members.
Howard Eddings, Jr. moved for approval of the Minutes of the November 6, 2024 Regular Meeting, which was seconded by Vincent Sawyer and the motion passed unanimously after proper roll call vote of the Board members.
Board Office Nominations & Vote
Stephanie Bryant advised the Board that following a staff meeting with Chairman Reid and Board legal counsel on December 3, 2024, it has been determined that the Board’s Nominating Committee will present nominees for each position to the Board at its February 5, 2025 Board meeting. There were no other questions or comments.
Carpenter addressed the Board regarding Board Member vacancies and stated that his firm is in the position to ensure that Board stays in legal compliance, and the Board is currently one member short of complying following the recent resignation of Katie Shotts. Carpenter asked that Board members submit any nominations that they may have to Board staff so that the Nominating Committee is able to put forth the selected nominees to Mayor Young’s office for consideration and then Mayor Young would submit his selections to Memphis City Council for consideration and confirmation. Corbin Carpenter advised the final Memphis City Council meeting for this year will be held on December 17, 2024. Corbin Carpenter reiterated that the Board currently has three (3) vacancies. Chairman Reid asked how many nominees have been submitted to staff, to which Stephanie Bryant responded five (5) nominees have been submitted. Howard Eddings, Jr. asked if there is a vetting process through the Board as a whole, to which Bryant responded that the Nominating Committee would select its top candidates, and those selections would be submitted to Mayor Young’s office for his consideration, and then his office would move his selections forward to the Memphis City Council. Eddings asked for clarification that nominees are submitted from the Committee level to the mayor and do not go through full Board approval. Corbin Carpenter stated that is correct, but that the power really rests within the mayor’s office, but he has requested recommendations from the Board Nominating Committee and stated that he would take those recommendations under consideration, and he would make the decision of the candidates that are presented to Memphis City Council.
New Business
There was no new business.
Chairman Reid stated that the next regular meeting of the Board is scheduled for Wednesday, February 5, 2024 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 01:49 p.m.