MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, April 3, 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, March 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, Secretary
Buckner Wellford (Zoom) James Jalenak (Zoom)
Cliff Henderson (Zoom) Katie Shotts
Vincent Sawyer
The following Director was absent:
Howard Eddings, Jr.
Staff and others attending: Stephanie Bryant, Bryce Miller and JP Townsend; Charles E. Carpenter and Corbin I. Carpenter, General Counsel; Katrina Shephard (Zoom), legal assistant to General Counsel; Cheryl Hearn, Deputy City Attorney; David Hays and Dub Shinault of Wilbanks Architecture & Associates, third party compliance monitor to the Board.
Also participating in person and/or via remote Zoom virtual platform were Shirley Bondon of Black Clergy Collaborative of Memphis; Jan Kidder of Memphis Interfaith Coalition for Action and Hope (MICAH); Becky Scott and Joyce Warren, residents of Memphis Towers; Alex Uhlmann of the Memphis Tenants Union; Brian Myers, Pam Bower, and Joyce Chain of Richmond Asset Management and Henry Zuckerberg of JDF,LLC representing The Richmond Group Affordable Housing, a limited partner and all appearing in connection with Memphis Towers Apartments; Tie Lasater and Meliea Ware of Key City Capital representing Grahamwood Place Apartments and Pinebrook Pointe Apartments; Joy Skidmore of The Annex Group, Christy Everett of Pinnacle Development Group, Kemi Akande and Robert Larkins of Loop Capital, Blair Tavennar and Nick Waugh of Madrone Community Development Foundation, Michael Charlebois of Ballard Spahr LLC, Tony Poteet, Melinda Carlson, and Rene’ Bustamante of the University of Memphis all appearing in connection with the University of Memphis Park Avenue Campus Student Housing Project; Albert Richardson of CAAP, Inc representing Place of Grace; Timothy Stieren of TMF Ridgeway Holdings, LLC and David Shores of Multi-South Management Services, LLC representing Hickory Grove Apartments; Tameca Parker and Pauline Olden of Odin Properties, David Upton, and Sheila Jordan Cunningham; 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, April 3, 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.
Shirley Bondon, Jan Kidder, and Becky Scott entered the meeting.
Approval of Minutes
Katie Shotts moved for approval of the Minutes of the March 6, 2024 Regular Meeting, which was seconded by Vincent Sawyer and the motion passed unanimously after proper roll call vote of the Board members.
Attorney’s Report
Charles Carpenter presented the legal report, as follows:
1. Carpenter began by reporting one (1) PILOT Refinancing Closing during March 2024 for Country View Apartments.
2. Carpenter reported no bond closings during March 2024.
Alex Uhlman and Joyce Warren entered the meeting.
3. Carpenter provided an update on the Housing Discrimination complaint discussed at previous meetings filed against Feels Like Home Senior Living Residences PILOT Property. Carpenter reported the matter has been successfully resolved through the execution of a HUD Conciliation Agreement as provided under the Fair Housing Act of 1968. Carpenter explained that it was an informal process conducted between Housing and Urban Development (HUD) attorneys and the PILOT property, which resulted in the property being put in a probationary status for one (1) year. Carpenter stated there was acknowledgement that there may have been discrimination, but there was no admission of discrimination, and the matter will be overseen by the HUD attorneys for the year, and at the conclusion of the probation, the matter will be dismissed from the record if there are no further infractions during the period.
4. Carpenter advised the Board of three (3) material Notices of Default that were issued during the month of March 2024 for the following PILOT properties:
A. Cavalier Court: Notice of Default was issued on March 15, 2024
B. Gospel Gardens: Notice of Default was issued on March 15, 2024
C. New Horizon: Notice of Default was issued on March 26, 2024
Carpenter reminded the Board that when a property is issued a legal notice of default, the PILOT lessee has thirty (30) days in which to file a cure plan or to cure the deficiencies that are noted in the letter of default. If deficiencies are not cured within thirty (30) days, or an acceptable cure plan has been accepted, at the next meeting, the Board could consider terminating the PILOT or accept whatever the proposed plan would be. Carpenter advised that these PILOT projects are still within the thirty (30) day cure period, and will appear before the Board at the May 8, 2024 Board meeting for a determination of next steps to be made by the Board at that time.
5. Carpenter reported receipt of various notices during March 2024. Carpenter reminded the Board that, as discussed in previous meetings, the model used for notices of nonpayment for some vendors has changed, so as opposed to having a thirty (30) day period, payment is due on receipt. If not paid promptly, the vendor will file an official notice of nonpayment of record. Carpenter reported vendors that have adopted this new model include Sherwin Williams Painting and Binswanger Glass. Carpenter reported his firm is also monitoring other notices of nonpayment and liens that have been placed on certain properties for contractors who have not been paid, Memphis Towers being one of them. Carpenter stated that he would reserve additional comments on Memphis Towers for report during the action items portion of the agenda.
6. Finally, Carpenter reported that there are two (2) Board reappointments that were to be considered by City Council that were deferred from the March 19, 2024 meeting and are currently scheduled for April 23, 2024.
There being no further questions or comments, the Legal Report was concluded.
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.
Initially, no one present indicated an interest in making public comments; however, as the board meeting continued to populate there did appear to be an interest and public comment was commenced, as follows:
1. Joyce Warren introduced herself as a resident of Memphis Towers. Warren stated that Richmond Asset Management has done a tremendous job of starting work on the building, but she would appreciate it if the Board would hold up on determining that the PILOT is in compliance until Richmond Asset Management finished one of the projects and meets the Memphis Tenants Union’s list of demands. Warren stated that because of Millennia, residents have a fear that if Richmond Asset Management gets the PILOT, they will not do anything else.
2. Becky Scott introduced herself as a resident at Memphis Towers. Scott stated she would like to echo Warren’s comments and she feels that Richmond Asset Management has made a lot of promises, but it is easy to make promises in the beginning. Scott stated that before Richmond Asset Management is handed taxpayer dollars, they need to be sure that Richmond Asset Management follows through on their promises and can be trusted.
Chairman Reid thanked everyone for their comments.
Action Items-
Brian Myers, Pam Bower, Joyce Chain and Henry Zuckerberg entered the meeting.
1. Status updates for PILOTs in Legal Default
a. Memphis Towers
Charles Carpenter introduced this agenda item, stating that Brian Myers is the president of Richmond Asset Management Group and has previously reported to the Board and Myers is in attendance today to provide an update of what has taken place since the March 6, 2024 Board meeting. The Board was then provided a packet of materials from Memphis Towers for the Board’s information and reference. Myers stated that his group is going to follow through on its promises and he does feel like it is appropriate and reasonable for tenants to hold his group accountable and stated he endorses and respects those public comments made today. Myers began his presentation stating that Memphis Towers is not a run-down building, and his group is coming to the end of a $23,000,000 renovation with all units having been rehabbed with brand new kitchen counter tops, appliances, new flooring, doors, bathtubs, blinds, etc. Myers stated there is still some work to be completed, but the building is in good shape and has all new windows, new roof, mechanicals have been replaced and elevators have been upgraded. Myers stated that although there has been negativity concerning Memphis Towers, he mentions these completed items to say that there are some good things too.
Myers stated his group is still working on a list of items to be completed, including first floor lobby and community space still needs to be rehabbed, and progress is being made on that with development plans with a local architect. Myers stated his group is trying to get the contractor back on site and expects that to take between ninety to one hundred twenty (90-120) days to make that happen, but it is in the works. Myers stated the project still needs new mailboxes, and that his group has met with a vendor concerning the trash compactor, which has been a problem in the past leading to the trash issues and infestation issues the building faced, and the plan is to get the trash compactor replaced. Myers stated all front and rear doors have been repaired and are functioning, but his group also plans to replace those with new doors, upgrade the monument sign, install a new gazebo and seating area to provide a gathering space for residents outside to accompany grills that have already been installed. Myers reviewed the renderings provided to the Board of what planned improvements to the lobby and community space upgrades might look like after modernization. Myers stated that though the physical work has not started, his group is doing the groundwork to get the work done.
Myers stated that after the review of the physical work that needs to be done, there are management-related items that needed to be implemented. Myers stated that Richmond Asset Management has taken control of the building and has identified a replacement management company, although the building is being self-managed by Richmond Asset Management currently. Richmond Asset Management has identified SPM, LLC as the replacement management company, which Myers stated is a multi-state property manager that does a lot of HUD housing and is a well-respected company. Myers stated his group is currently going through the formal approval process with HUD, the state agency, and the Board, and if all necessary approvals are received, they would take over officially on May 1, 2024.
Myers stated that some items done in the interim period, which has only been thirty (30) days, includes hiring a security company that now provides 24-hour security, seven (7) days a week on the property, the front door that was not working has been repaired, and all tenants have been issued key cards. Myers stated that his group has also paid many bills that were a problem for the property because vendors would not show up because they were not getting paid and the property has gotten a bad reputation, so Myers stated his group has been trying to rectify that. Myers stated the work his group has put in at the property in the short amount of time has translated to an uptick in both leasing activity and vendors. Myers stated that a lot of good progress has been made both with the residents and with the vendors, and at some point, it will translate to improvement of the building. Myers stated a new perimeter security fence has also been installed, trash shoots have been cleaned up and repaired, landscapers are on the property now putting in new plants to make the property look better. Myers stated that residents had suggested at the Board’s March 6, 2024 meeting that management enter some sort of regular engagement with the residents, and a meeting was held with the residents the week of March 24, 2024, lunch was served to the residents, and management got a lot of feedback from residents. Myers stated the feedback by all accounts has been that residents are thrilled, and many thanks were expressed. Myers stated pest control was also an prior issue at the property because they had not been paid, and Richmond Asset Management has gotten pest control reengaged and has doubled the treatments to aggressively tackle the bed bug problem and the property has made great progress, but still has a handful of units still being treated.
Myers reviewed Memphis Towers property financials with the Board, stating that at the time this project renovation was put together with Millennia in 2019, the plan was Millennia would earn approximately $2.9 million developer fees, but that did not work out as planned and there were massive cost overruns on hard costs, soft costs, and financing costs and there is currently a $3.9 million deficit on the building, which is not Richmond Asset Management’s issue to resolve, and they will, but Myers stated he wanted to share this overview to show that this project is not a windfall for anyone. Myers then reviewed operating costs for Memphis Towers, stating that insurance costs have tripled, security costs for 24/7 security on site are now being incurred, and the building is not currently fully leased, so the building will lose approximately $127,000 a year, and if the PILOT is terminated, the loss would be approximately $640,000 a year. Myers again stated his review of these numbers is to show that this project is not a windfall for anyone.
Carpenter asked what the status of the ongoing discussions with HUD is about the approval of Richmond Asset Management and the proposed management company. Myers responded there is a due diligence checklist and a couple of items remain, and those are expected to be completed by the end of this week. Myers stated that the information is collected and processed by the Loan Servicer through HUD and he is told the process may take up to two (2) weeks for HUD to review and grant formal approval, but the plan is to have that done no later than May 1, 2024 so that the new management company can take over. Carpenter asked about the status of the contractor returning to complete the renovation process. Myers stated that has been a slower process because HUD approvals are involved here as well, and his group has talked with the contractor and gone through a budget with them, and his group is also trying to get the lien on the property released, but the contractor does not want to release the whole lien without full payment, but HUD does not want to release the full payment, so it is a bit of back and forth right now. Myers stated as of right now, the lien is still outstanding, but he anticipated resolution in the next two (2) weeks. Carpenter thanked Myers and his team for the preparation of the slides provided to the Board, as it gave the Board members a good overview of where things are. Carpenter asked, given the scope of work left, what is the best estimation of when it will be completed? Myers said he expects it to take at least thirty (30) days to get the contractor remobilized, but following that, he anticipated all work to be completed in about one hundred twenty to one hundred fifty (120-150) days.
Chairman Reid asked if SMP, LLC manages any other properties in Memphis. Myers responded no, but that the company does manage other properties in Tennessee and he will try to get a list of the property management portfolio for the Board. Reid asked if Myers expects any slippage once Richmond Asset Management turns Memphis Towers over to SMP, LLC. Myers stated that SMP,LLC has already shared with Memphis Towers their regional maintenance person to provide additional support, and he has been at the building all week and will continue to be there for the next week. Myers stated that though SMP, LLC is not officially in charge yet, they are committed to the property and to providing resources to help through this transition period, so he believes the Board will find that they are an exceptional company, and he believes everyone, including the residents will be happy with the company. Reid thanked Myers and his team for the review of the financials of the project as it provides a good snapshot of once the project is stabilized, the deficit and cash flow, and then with and without the PILOT and the devastating effect that it would have on this project if the PILOT were terminated.
Reid asked Myers how confident he is in the figures he has presented to the Board today. Myers stated the figures provided to the Board today are a budget and some may not be identical to the actual costs, but some figures are actual costs based on current invoicing, but other figures are in the ballpark and were prepared internally. Corbin Carpenter asked if these figures factor in Tower B that has not been leased yet. Myers stated figures include Tower B completed, which means the actual numbers for today are worse because the property is currently sixty percent (60%) occupied, as they are waiting on the Certificate of Occupancy to begin lease up on Tower B. Corbin Carpenter asked the status of the Tower B Certificate of Occupancy. Myers responded one of the holdups was the fire department, which must sign off on the safety systems and the person in charge has been on vacation for two (2) weeks and is to return next week. Myers stated his group has an upcoming meeting at the property next week with the contractor, the architect, an in-house architect, and he hopes to coordinate this meeting with the fire department, but following that, he plans to have a better sense of what remains. Corbin Carpenter asked what occupancy level was used to get to the stabilization numbers presented to the Board today, to which Myers responded ninety-five percent (95%) occupancy.
Buckner Wellford thanked Myers and his team for their presentation to the Board and asked if Myers received the list of tenant benefits and the anticipated cost of them that were associated with the grant of the PILOT. Myers responded that he has not, but he thought it was mostly the scope of the rehab. Corbin Carpenter stated for the record that an updated list of tenant benefits will be part of the amended and restated PILOT documentation, which will be required due to the removal of Millennia as the general partner on the project that may include a clarification of the tenant benefits going forward. Wellford stated that he asks that because he thinks it would be helpful to the Board to see what progress is being made on the tenant benefits, where there has been a specific commitment and an anticipated cost to track what was promised and what is being provided. Wellford stated the anticipated cost will likely be more than the original estimate, but he thinks that is within the Board’s control, as the Board has limited authority over the property, but the Board clearly has control over the level of tenant benefits that were promised, and he would like to see that in a report format at the next report to the Board by Richmond Asset Management. Myers agreed and stated his hope is that most of the list has already been addressed, but he will review the tenant benefits promised and report back to the Board. Wellford stated that would be helpful, and that many items that have been reported on in previous meetings are more HUD issues and environmental court type issues, but he wanted to reference them as they were discussed at the Board’s March 6, 2024 Board Meeting. Wellford stated some things have been addressed and asked if 24-hour security is still on site, to which Myers replied yes. Wellford asked if the front desk is still manned 24/7, to which Myers replied yes. Wellford stated he heard the report today regarding an update on pest control, but asked the status of the trash compactor, to which Myers replied that the trash compactor has been repaired, but as it is twenty-one (21) years old, it needs to be replaced. Wellford stated that he agrees with some of the sentiments that were expressed, and it is clear to him Richmond Asset Management is not making a windfall on the property and the group is coming in and trying to stabilize the situation, and he appreciates that. Wellford stated he is trying to balance what Richmond Asset Management is doing with the Board’s role as an oversight entity since the property is in legal default.
Cliff Henderson stated that he appreciates the progress and the status update. Henderson stated that the property cannot operate at a deficit and asked what the long-term plan for the property is and asked if in twelve (12) months from now, will Richmond Asset Management still be the owner of the property or are there plans to sell the property? Myers responded he would like to address the deficit problem first, stating that it must be funded from an outside source, because there is not enough revenue coming in to cover the operating costs, and Richmond Asset Management will have to cover this operating shortfall. Myers stated that at this point, there are no plans for transfer of ownership, and that his group has a plan for now, is the current owner and he does not expect that to change, but he also cannot commit to that. Henderson stated this is something the Board and Richmond Asset Management needs to think through as a scenario, and the Board needs to have a clear understanding of how Richmond Asset Management plans to close that deficit based on proposed changes in the future through cutting other expenses or raising rents, etc. Henderson stated the Board will need to view that and make a decision with the PILOT and how this needs to be monitored during that period. Myers stated he can provide the Board with financial statements to see Richmond Asset Management’s capacity to fund the deficit, if that is helpful. Henderson stated that he is sure there are contingencies in the Richmond Asset Management portfolio where a draw can be made on certain sources right now to fund this, but as an ongoing entity, the deficit will need to be covered somehow, and if that scenario becomes an exit plan for Richmond Asset Management, the Board needs to know that and consent to that. Myers stated he understands, but his group is not in that place now and that is not really a viable option at this time, and no exit plan is currently under consideration.
Charles Carpenter then introduced the Board’s external compliance monitors with Wilbanks Architecture and Associates, stating that they have been performing regular site visits to Memphis Towers and noting their observations. Carpenter stated the Board’s internal compliance monitors do a great job, but there are times when a question of whether the work that was done or the deficiencies were at certain levels, so Wilbanks inspectors were asked to attend today’s Board meeting and Carpenter invited them to provide their comments to the Board regarding Memphis Towers. David Hays introduced himself and Dub Shinault with Wilbanks Architecture and Associates, stating they were on site on March 13, 2024 at the request of Board staff, as well as March 31, 2024 for a supplemental inspection. Hays stated that Wilbanks has been performing inspections of Memphis Towers for the last three (3) years and it has been a slow-moving project. Hays stated it is obvious that great effort has been made in the last three (3) weeks, he has observed the new fence, the sewage pipe being replaced, which was an ongoing issue, landscaping, and a significant renewed effort on the property. Dub Shinault agreed, stating that he has also observed big improvement in the last three to four (3-4) weeks. Carpenter thanked Hays and Shinault for their comments.
Carpenter stated the property remains in legal default, and based on the report that has been made and on the timing of the continued improvements, he would recommend the property remain in legal default and that the developer should report an update to the Board at the May 8, 2024 Board meeting. Carpenter thanked The Richmond Group for the professional, conscientious effort because, as the presentation indicated, there is a lot of money involved here, this is not a slum property, and it has just fallen in a predicament because all of the budgets and forecasting did not work out on the projected time frame and as a result, there is a lot more resources that are needed to complete the project. Carpenter stated that the Board staff would continue to provide the monitoring and oversight with the hope of working cooperatively with Richmond Asset Management so that they may be able to work with the tenants to get the property back in good standing. There being no further questions or comments, it was agreed that representatives will report back for an update to the Board at the May 8, 2024 Board meeting.
Brian Myers, Pam Bower, Joyce Chain and Henry Zuckerberg left the meeting.
Carpenter reported as a supplement to the Legal Report to the Board regarding Cavalier Court and Gospel Gardens, like Richmond Asset Management, that his firm and Board staff have been contacted by the limited partner with Cavalier Court, Gospel Gardens, and Hope Heights, and the limited partner is starting to implement a similar process as Richmond Asset Management has with Memphis Towers. As that process moves forward, Carpenter stated he would provide that information to the Board in more detail.
Alex Uhlman, Becky Scott and Joyce Warren left the meeting.
Tie Lasater and Meliea Ware entered the meeting, regarding:
b. Grahamwood Place
c. Pinebrook Pointe
Grahamwood Place and Pinebrook Pointe are under the same ownership and management company and were discussed together. Carpenter introduced these two agenda items and welcomed representatives Tie Lasater and Meliea Ware in attendance for these properties. Carpenter stated at the Board’s March 6, 2024 meeting, Lasater reported an update to the Board on the activities that had taken place during that period and mentioned that with the refinancing of the KeyCity Capital portfolio, ownership had to reach certain milestones to be successful, and it was reported the targeted date for these milestones to be completed was September 2024. Carpenter asked Lasater to provide a recent update and turned the meeting over to representatives for further comment. Tie Lasater stated he would begin with tenant benefits at each property and then discuss occupancy. Lasater stated he did not have the list of tenant benefits for these two properties that had been committed to at the time of the application of the PILOT, but Board staff provided those to he and his team. Lasater stated that as reported by the Board’s internal compliance inspectors, Grahamwood Place had surpassed the tenant benefits requirements and is in good standing and his team continues the process at Grahamwood. Lasater stated that occupancy at Grahamwood has increased from sixty percent (60%) to sixty-four percent (64%) and continuing to move in a positive direction and moving quickly. Lasater reported the construction team is performing work on the interior units and turning them as quickly as they can, with an additional ten (10) units expected to be completed and ready for lease up in the next seven to ten (7-10) days. Lasater stated units are being pre-leased just as quickly as they become available.
Lasater reported Pinebrook, which is currently where most deficiencies remain, and following the receipt of the list of tenant benefits committed to for the PILOT, his team reviewed the list and notated what had been done and what items remained. Lasater stated perimeter fencing was a major issue that had not been completed previously, but was completed April 2, 2024, and there is now a new wrought iron fence along the entire front elevation, with work on the entryway and landscaping at the entrance currently happening. Lasater also stated lighting was another item not completed from the list of tenant benefits, and there are now all brand-new LED lights on the building exteriors and in the common hallways. Lasater did report an issue with Memphis Light Gas and Water (MLGW), and that many of the parking lot lights are out, creating a problem with security cameras, which were also a commitment in the tenant benefits for the property. Lasater reported that ownership had installed sky cops cameras but they would not power on due the parking lot lights only hitting 90 watts, and the sky cops cameras require 110 watts, in addition to many lights not working at all. Lasater stated his group has reached out to MLGW multiple times and made them aware of the issues and are actively working on that issue.
Lasater reported delivering sheets of plywood to start boarding up fire units on April 2, 2024, and reported his team has received scopes of work back and expect to start work on those fire damages units within the next sixty (60) days. Lasater reported the insurance proceeds have been completed and he expects the first draw on that will a $250,000 draw to get all the roofs done and the dry-in done so that will be the first scope of work to be completed as soon as construction starts. Lasater stated this will bring 28 down units from fire damage back online. Occupancy went from sixty-seven percent (67%) to seventy three percent (73%) as Pinebrook Pointe and is right on the verge of the seventy-five percent (75%) occupancy requirement and continuing to push toward the ninety percent (90%) occupancy for lender requirements.
Carpenter asked the Board’s internal compliance monitors for any comments they may have from observations at these two (2) properties. Bryce Miller reported that Grahamwood continues to improve with every site visit and both he and compliance monitor JP Townsend have both noted an uptick in occupancy. Miller reported that he and Townsend met Lasater and performed a walkthrough of both Grahamwood Place and Pinebrook Pointe on March 19, 2024 and they observed progress at both projects. Miller reported seeing the fence installation at Pinebrook Pointe and the fire-damaged units boarded up and more secure than previously observed. Townsend echoed Miller’s comments, stating that he appreciated seeing the fences fixed, as they have been damaged for quite a while. Townsend also reported his top concern was the security of the fire damaged units and he appreciated seeing all first-floor windows have been boarded up and open doors have also been secured, which was discussed during the property walkthrough. Townsend stated Grahamwood continues to look better, and ownership has gone above and beyond with tenant benefits, including new security cameras. Townsend stated many times it is small items that transform into larger issues, and he has observed at Grahamwood that management stays on top of taking care of the small things, citing an example of three boards missing out of the fence two weeks ago that have already been repaired, and he has observed that kind of maintenance and care that needs to be taken into these properties to prevent small things from growing into larger problems.
Carpenter stated that based on these reports, Pinebrook Pointe seems to be in worse condition than Grahamwood Place, but the occupancy increased more substantially at Pinebrook Pointe than at Grahamwood Place and asked representatives what they would attribute that to. Lasater stated that Grahamwood required a bigger overhaul to the interior of the units, which were in bad condition at the time of the purchase of the property, and the unit interiors are a little bit bigger, which takes more work, a larger crew and longer process. Lasater said Pinebrook Pointe unit interiors were closer to being rentable or in better condition, so crews could complete work more quickly. Lasater stated that as occupancy reaches closer to between eighty and eighty-five percent (80%-85%), there will be a little bit more work at Pinebrook Pointe. Meliea Ware stated that ownership also has a property across the street from Pinebrook Pointe so if tenants are looking for an apartment and that property does not have something available, management is sending those tenants over to Pinebrook Pointe, whereas Grahamwood Place is off by itself and ownership does not have another property close by.
Corbin Carpenter asked for confirmation of the ninety percent (90%) occupancy requirement by the lender and if the deadline is still September 1, 2024. Lasater responded that it is September of this year, but he will confirm the exact date, and the occupancy requirement by the lender is for all six (6) properties included in the KeyCity portfolio, of which Grahamwood Place and Pinebrook Pointe are two of those properties, and the other four (4) properties are not part of the Board’s PILOT program.
Carpenter stated that based on the reports and the Board’s internal compliance monitors review, he would recommend the PILOT Lessee appear before the Board in sixty (60) days at the June 5, 2024 Board meeting, which will allow the PILOT Lessee time to finalize the improvements and the Board’s internal and external compliance monitors will continue overseeing the progress of each property during that time. Carpenter stated the Board would expect the occupancy and improvements would be trending toward the completion and toward the underwriting requirements for the PILOT Lessee’s lender at that point. There were no further questions or comments.
Tie Lasater and Meliea Ware left the meeting.
2. Bond Inducement Resolution for Madrone CDF PropCo LLC (University of Memphis Park Avenue Campus Student Housing Project)
Joy Skidmore, Christy Everett, Tony Poteet, Melinda Carlson and Rene’ Bustamante entered the meeting.
Charles Carpenter introduced this agenda item stating that this is a bond inducement for the financing of student housing. Carpenter stated this is a proposed 501(c)(3) financing commonly known as a P-3 public private partnership between the University of Memphis and Madrone, a national 501(c)(3) entity. Carpenter turned the meeting over to representatives in attendance for introductions to the Board and then asked representatives to provide an overview to the Board of the project.
Rene Bustamante introduced himself as the current Chief Financial Officer for the University of Memphis and said two members of his team joined him. Melinda Carlson introduced herself as the Vice President for Student Affairs and Tony Poteet introduced himself as the Chief University Planning Officer. Christy Everett introduced herself with Pinnacle Development the P-3 lead on the project, and Joy Skidmore introduced herself with The Annex Group, stating they are the developer on the project.
Tony Poteet stated this team is here before the Board because this will be a transformative project that has been in the works for quite some time and is a way to develop the South Campus and have student housing that is going to house the athletics groups as well. Poteet stated this is providing a footprint, and at the same time there is a demand for housing, as there is a wait list, and the public private partnership is so important in terms of developing housing that is going to be on campus is going to be more secure for the students.
Carpenter asked if representatives would tell the Board a little bit about how things got to this point with the competitive process and how the partner was selected. Poteet stated his team presented to the State Building Commission November 2023 to issue an RFP, his team developed the RFP, got approval for it, solicited through the procurement office, and then had several responses that provided the details of their response in terms of design, teammates, financing, and the duration of the term. Poteet stated his team went through a process to narrow it down to the top three (3) and then each had to present a best and final offer. The group worked with a consultant through Brailsford and Dunlevy that helped his team look at the value and cost and the overall response, the quality of the design and intended mix. Poteet stated his team did not try to dictate the mix, but instead wanted the market to dictate that and this was the best proposal and the only proposal that was a 30-year term and still had a good return on investment. Poteet stated The Annex group had also just completed a similar size facility just off the side of campus and so they know the Memphis market in terms of rental rates and how to provide services because it is mainly University of Memphis students living in that facility. Poteet continued, stating the group obtained the building commission approval to award pre-proposal contract to them and they have gone through the design development for the plans and specifications, done a market study, and the team has been putting together a ground lease, which is the document the State of Tennessee will sign for the 30-year period, and then all of the agreements for the residence life and asset management and associated bond documents.
Carpenter advised the Board that the information being discussed has been provided in their Board packets, and the developer is proposing about 540 beds in 243 units that would be used by the students. Carpenter asked if representatives could advise the Board of the time frame that the University and the P-3 Partner would be looking at if the Board should approve this Bond Inducement today. Christy Everett responded that if the Board approves the inducement and the project will move forward to financial close, which is anticipated for mid-June 2024. Everett stated the group will be approximately 50% of the way through construction documents at that point and expects to be issued permits in July 2024 and begin construction immediately and in time to deliver in summer of 2026 for the 2026 school year.
Carpenter reminded the Board that this inducement is not a final approval, but it induces the developer to move forward with finalizing the structure of their financing. Carpenter stated this would be a public offering and Loop Capital is the investment banker that is working with the developer and the University of Memphis. Carpenter advised the Board that his firm has been in weekly working group meetings and this project has a very experienced finance team, the documents are being put together and are in good shape at this point, and based on the proposed timeline of the project, it is anticipated that the team would appear before the Board at the May 8, 2024 Board meeting, or shortly thereafter, to seek a final bond resolution, which will have all the financing structure in place at that time.
Monice Hagler asked if the stated rents in the application are per bed or per unit, to which Everett replied they are per bed. Buckner Wellford stated there is a comment in the application that states that the structure of this tax-free bond structure is used in student housing, including recently at the University of Tennessee Knoxville. Wellford stated he is aware that municipal bonds have been used in different places in the country, sometimes to assist colleges and their footprints and with housing, but this seems to be a new trend and he is curious as to what was being done at the University of Tennessee when it was approved, and his question is always, is it necessary to have tax-free financing in order to develop this housing or could it be done without tax-free financing. Carpenter stated the structure of this is a 501(c)(3) financing, and each state has different ways of financing student housing, such as a Higher Education State Board in the state of Mississippi, and they do the financing for the student residences, but there is always an attempt to look at the lowest form of interest financing for these developments and the tax exempt bond market has been utilized to do that.
Carpenter stated that this Board was not involved in the financing for the University of Tennessee, but some of the members of this working group on the University of Memphis Student Housing project were involved, and it was done on a tax-exempt basis. Carpenter stated he thinks the Board will see more of these opportunities coming forward because as the market study indicates, there is a significant need for updated student housing throughout the country, and particularly in Tennessee. Wellford asked for confirmation that the Board could decide if there will be a PILOT issued along with the Bond. Carpenter stated that because the land proposed to be used is already tax exempt, there will be no request for a PILOT for this project, and there will be no PILOT monitoring and oversight through the Board’s PILOT program. Carpenter clarified the Board is only being asked to facilitate the issuance of 501(c)(3) bonds for this development. Wellford thanked Carpenter for the clarification.
Carpenter stated that the application complies with the Board Bond policies and procedures and would recommend a favorable motion from the Board, further stating that if approved, the applicant will come back before the Board for a final authorizing bond resolution at another date. There being no further questions or comments,
Monice Hagler moved to approve the Bond Inducement Resolution for Madrone CDF PropCo LLC (University of Memphis Park Avenue Campus Student Housing Project). Katie Shotts seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Joy Skidmore, Christy Everett, Tony Poteet, Melinda Carlson and Rene’ Bustamante left the meeting.
3. Affordable Multifamily PILOT Application for Cocaine and Alcohol Awareness Program, Inc. (CAAP, Inc.) (d/b/a Place of Grace)
Albert Richardson entered the meeting.
Carpenter introduced this agenda item stating this is a new PILOT Application for Place of Grace, and the developer is Albert Richardson, CEO of CAAP, Inc., a well-established provider in our community and a current participant in the Board’s PILOT program. Carpenter stated the CAAP, Inc. project currently in the Board’s PILOT Program, is Uptown Manor Senior, an established PILOT property that has significant benefits for its residents and is located directly across the street from the proposed location for the Place of Grace. Carpenter referred the Board members to the information included in the Board packet that provides additional information on this proposed development.
Carpenter turned the meeting over to Albert Richardson for further comment on the proposed project. Albert Richardson introduced himself, CEO of CAAP, Inc., and stated the proposed project is to provide ten (10) units of housing for underserved elderly people in the community ages sixty-five (65) and older. Richardson stated the units will be one bedroom, approximately 610 square feet, and there will be a coinless laundry room to be located on the premises to be constructed from the ground up, which will be free to all residents. Richarson stated there will be an iron gate around the property for security, lighting will be installed outside of each unit and the breezeways, and all units will be ADA compliant and handicap accessible. Richarson stated the property itself will provide amenities to the residents including mental health and primary health services, case management services, as well as other services and the project will have mobile vehicles that will collaborate with Tri-State Community Health Center to provide the medical services necessary for all residents. Richardson stated the focus will be on residents at 60% or below area median income (AMI), and the project will begin immediately, if approval is granted by this Board, and then the registration process for the residents will also begin.
Carpenter asked the Board’s internal compliance monitors for any comments on their observations of the site. JP Townsend stated this will be a full renovation, there are three buildings at the site, all two (2) stories high, and he expressed his enthusiasm for the project based on his experience in monitoring the current CAAP, Inc. Project in the Board’s program, Uptown Manor Senior. Townsend stated management takes very good care of their property and it would be a good addition to that neighborhood. Monice Hagler stated the schedule submitted to the Board includes a completion date of February 28, 2024 and asked for an updated anticipated schedule of completion. Carpenter stated the applicant has received all the approvals necessary through code enforcement and asked once construction begins, what the anticipated timeline of completion. Richardson responded that the project will be completed within ninety to one hundred twenty (90-120) days following Board approval. Hagler stated for full disclosure, she has worked with Richardson before and really appreciated the level of services his group provides, and the tenant benefits chart looks great with the number of benefits proposed for this project. Carpenter stated, as indicated earlier, those benefits and services are ongoing with the property across the street, Uptown Manor Senior, so it is not just being proposed, the team will just augment these additional units into what is already in place. Carpenter stated that his firm and Board staff have completed the application submittal conference and tenant benefits. Carpenter added that as these are two-story buildings, the application also includes a commitment of an elevator to be added as part of the tenant benefits at the project to help the seniors. Carpenter stated the application fully complies with the Board’s PILOT policies and procedures and recommended a favorable consideration of this application. There were being no further questions or comments,
Katie Shotts moved to approve the Affordable Multifamily PILOT Application for Cocaine and Alcohol Awareness Program, Inc. (CAAP, Inc.) (d/b/a Place of Grace). Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Albert Richardson left the meeting.
4. PILOT Refinancing Application for TMF Ridgeway Holdings, LLC (d/b/a Hickory Grove Apartments)
David Shores and Timothy Stieren entered the meeting.
Carpenter introduced this agenda item stating this is an existing PILOT property that is in good standing. The applicant is coming before the Board with a refinancing application for permanent financing for Hickory Grove Apartments. Carpenter introduced the principal for the project, Tim Stieren and the principal of the management company, David Shores, and further stated his firm and Board staff completed the application submittal conference for this application and the allocation of the use of funds are in line with the Board’s policies and procedures. Carpenter invited representatives to provide any additional comment.
Tim Stieren thanked the Board for the partnership and stated all tenant benefits, as far as capex items, have been completed or are ongoing regarding daily tenant benefits. Carpenter asked the Board’s internal compliance monitors to provide comments from their observations of the project. Bryce Miller stated that this property is very well maintained and clean, tenant benefits are in place, and there are only minor structural issues observed at the project. Miller stated the issues include a balcony sagging issue on one building and possible issues developing around some of the skylights where the roof seems to be sagging. Miller stated the balcony is the most pressing issue and it does have caution tape around the area for security, but otherwise the property is in compliance and is very well maintained. Stieren stated the caution tape is in place and contractors are already looking at that for repair. Miller stated that around some of the skylights where the roof covers the walkway and the stairwells, there are several buildings where both he and Townsend have noted drooping in the roof at some of those areas above the stairwells. David Shores stated he and the ownership will add this to the list of things being worked on at the property.
Katie Shotts stated that in the application, security patrols are taking place as needed with one person during the day and two people at night and asked for clarification. Stieren stated there is 24/7 security on site.
Carpenter stated the application complies with the Board’s policies and procedures and would recommend favorable consideration of the refinancing application. There being no further questions or comments,
Katie Shotts moved to approve the PILOT Refinancing Application for TMF Ridgeway Holdings, LLC (d/b/a Hickory Grove Apartments). Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
David Shores and Timothy Stieren left the meeting.
David Upton entered the meeting.
Jan Kidder left the meeting.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended February 29, 2024. After discussion,
Vincent Sawyer moved for acceptance of the Finance Committee Report for the month ended February 29, 2024, properly seconded by James Jalenak, and the motion passed unanimously after a proper roll call vote of the Board members.
New Business
David Upton stated he believed he was supposed to provide a report to the Board today but was wrong. Upton stated the application for Mill Creek PILOT Term Extension will be turned in to the Board and he and representatives will be present at the Board’s June 5, 2024 meeting and he would like to schedule a walkthrough with Board internal compliance monitors during the month of May 2024 for an overview of each property.
David Upton left the meeting.
Buckner Wellford stated that he would like to add items to the Board’s May 8, 2024 agenda as they relate to properties that are in legal default. Wellford stated he would like to discuss setting up a formalized structure where the Board would notify the Memphis City Council as well as the Mayor’s office monthly after each Board meeting of all properties that are in legal default and the property address. Wellford stated he would also like to discuss within the boundaries of what the Board is legally permitted to do, what options the Board has when a property is in legal default for an extended period. Wellford stated he does not know whether the Board is permitted to temporarily remove some PILOT benefits, and he realizes there are a lot of details associated with that, but he would like to explore what the Board’s legal options are when a property is in legal default for an extended period. Wellford stated he believes the Board will need to do something to increase a sense of urgency in getting off the legal default status or curing that. Cliff Henderson asked if Wellford is referring to only properties in legal default status or watchlist properties. Wellford stated he meant properties in legal default status, but he does think any property on the watchlist is separately accounted for in terms of reporting to the Memphis City Council and sent to the Mayor’s office.
There were no other questions or comments.
Chairman Reid stated that the next meeting of the Board is scheduled for Wednesday, May 8, 2024 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 01:22 p.m.