MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, August 7, 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, July 31, 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
Katie Shotts (Zoom) Howard Eddings, Jr
Vincent Sawyer
Staff and others attending: Trey McKnight, Stephanie Bryant, Bryce Miller, 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.
Also participating in person and/or via remote Zoom virtual platform were Jamilah Holloway, a resident of New Horizon Apartments; Michael Pico, Patricia Richmond and Renee Weiss of Millennia Housing and Kent Mehring of WNC, Inc., a limited partner, and Warren McWhirter, Esq. of McWhirter, Gaia & Sadler, P.C. all representing Cavalier Court and Gospel Gardens; Tie Lasater of Key City Capital representing Grahamwood Place Apartments and Pinebrook Pointe Apartments; Jennifer Croxton of Knight Development, Josh Stringer of Snyder Construction, Dexter Washington and Luretha Phillips of Memphis Housing Authority (MHA) all representing MH Strategies II, LP (Borda Towers and Venson Center); David Shores of Multi-South Management Services, LLC and Mark Jobe of Glankler Brown, PLLC representing New Horizon Apartments; Thomas Robinson and Mallory Key of Alco Management Company, Inc. representing Pershing Park Apartments; Frank Carney and Elizabeth Friary of Evans Petree, PC and Neil Knopf representing Grainge Hill Apartments and Eden Pointe Apartments; Shirley Bondon of the Black Clergy Collaborative of Memphis; Simeon Ike of Greater Memphis Housing Justice Project; Geoff Hanson; Herbert Broadwater; 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, August 7, 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.
Michale Pico, Patricia Richmond, Kent Mehring and Warren McWhirter, Esq. entered the meeting.
Jamilah Holloway entered the meeting.
Approval of Minutes
Cliff Henderson moved for approval of the Minutes of the July 10, 2024 Regular Meeting, which was seconded by Vincent Sawyer and the motion passed unanimously after proper roll call vote of the Board members.
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. Jamilah Holloway introduced herself as a resident of New Horizon Apartments. Holloway stated that her overall concern is safety at her community for her and her family and other families that live in the community. Holloway stated that she can only speak for her family and experiences, but a back entrance to the property has been blocked, which makes it inconvenient for her because she uses public transportation and having to go around the property an extra mile to get to the public transportation is a safety issue for her, including the commute from her apartment to the main street. Holloway stated there are many abandoned apartments boarded up, broken windows and open doors, all of which are safety concerns. Holloway stated she has an eight-year-old son, and there are plenty of other families with children on the property. Holloway stated there are several electrical issues throughout her apartment and she had called maintenance one month ago and they came into vacuum up standing water in a utility closet. When maintenance personnel plugged in the vacuum, it caused a spark and fire shot out, causing smoke and soot to form on the outside of the outlet. Holloway stated she has put on at least four (4) other maintenance requests for an electrician to come in because the outlets in the main bedroom were also out. Holloway stated the grounds are not being cut and animals could be hiding in the high grass, along with other issues including the framework's structure is a safety concern.
Chairman Reid thanked Holloway for her comments and advised her that the Board has been provided her email, which listed her concerns, stating it is very well written and her concerns have been noted.
There was no other public comment.
Attorney’s Report
Charles Carpenter presented the legal report, as follows:
Carpenter stated that he would reserve all comments regarding PILOTs in legal default for the Action Items section of the agenda.
1. Carpenter reported being served with two (2) new lawsuits in connection with PILOT property:
a. Burnett, Lanartica v. Cavalier Court Apartments et al. This is a Housing Discrimination Complaint and The Department of Housing and Urban Development (HUD) has reached out to confirm contact information of the proper parties. Carpenter advised the Board that his Firm will make sure the complaint is properly addressed and keep the Board informed.
b. Wrongful Death claim vs The Boulevard Apartments from July 9, 2024, which was a widely reported event where the allegations are that the tenant was shot and killed inside her apartment at The Boulevard Apartments. Carpenter advised that his Firm has received notice of counsel for the family indicating that there should be no spoilage of evidence and providing notice of representation. Carpenter stated his Firm just received this notice and is reviewing that now and will keep the Board informed.
Carpenter reminded the Board that it has no legal or financial liability in these types of cases, as the Board only holds the title to the property as it is performing a public function for the City of Memphis. Carpenter stated the Board takes these matters seriously and his Firm monitors them to ensure that all proper responses are received and carried out.
2. Carpenter reported the PILOT Closings for July 2024:
a. Creekside Meadows Refinancing Closing and PILOT Term Extension Closing.
3. Carpenter report there were no Bond Closings for July 2024.
Charles Carpenter turned the meeting over to Corbin Carpenter to report several matters he has been directly involved in.
4. Corbin Carpenter reported confirmation of the Board Liaison from the Memphis City Council. Carpenter stated the Board staff and legal counsel have been working diligently to identify a City Council person that would serve in that capacity, and the Board has not had a City Council Liaison for more than ten (10) years. Carpenter reported the person has been identified as Councilwoman Janika White and she is a practicing attorney in Memphis and has a wealth of experience in housing and in criminal defense. Carpenter stated the process would include his Firm notifying Chairman Smiley and the recommendation would be made at the next City Council Meeting. Cliff Henderson asked what duties the City Council Liaison would have. Chairman Reid responded that the last City Council Liaison the Board had attended all Board meetings and would relay Board business back to City Council and was an advocate for the Board. Chairman Reid stated that the City Council Liaison would also travel and attend educational conferences that the members of the Board attended to see what other cities are doing. Charles Carpenter clarified that the City Council Liaison would be a non-voting representative but would facilitate the cooperation and first-hand information from the City to the Board and vice versa.
5. Corbin Carpenter reported to the Board that his Firm, Stephanie Bryant, and Trey McKnight have been meeting with the Board’s local partners in the City of Memphis to introduce McKnight to these entities as the Executive Director of the Board and to get him acclimated. Carpenter reported the group has met with the executive and PILOT team of the City Treasurer’s office, the Shelby County Trustee, and with Memphis Housing Authority (MHA). Carpenter stated with these meetings, the Board staff and legal counsel has a specific agenda with each meeting, including among other things challenges around collecting delinquent PILOT payments for certain PILOT Lessees, the intricacies with each entity’s systems and how they keep track of things, and best practices on how to alleviate those challenges and increase the strength of communication. Carpenter stated the City Treasurer’s office has some collaboration with Code Enforcement, which will assist the Board with that collaboration too. Carpenter stated that working with the Board’s local partners with PILOT payments, with interlocal agreements and statutory authority and delegation of authority from City Council is important, and the City Treasurer and Shelby County Trustee play a huge role in facilitating the PILOT program.
Carpenter asked McKnight if he would like to add any additional comment. McKnight stated that the lists of delinquent PILOT Payments that have come out thus far have been addressed by Stephanie Bryant and we now have only one remaining PILOT property payment on the delinquent list, and he is committed to working toward getting that taken care of. McKnight stated he does not want the Board’s PILOT properties on any delinquent list because the last thing he wants is for the Board to come up in a public meeting negatively. McKnight thanked the Board staff for their work and legal counsel for the introductions thus far and stated he is committed to working with these entities and elected officials to make sure the Board is where it should be.
6. Corbin Carpenter reported that the County Commission has created a PILOT Ad Hoc Committee that was spearheaded by Commissioner Henri Brooks and Commissioner Mickell Lowery will serve as Vice Chair, and on the committee will be Trustee Newman, Assessor Burgess and the Shelby County Mayor. Carpenter stated his Firm requested on behalf of the Board that McKnight serve as a non-voting ad hoc member, and that is under consideration. Carpenter stated the Board is primarily involved from the City side of government and many times, City and County business is preferred to be kept separate, and that is understandable, but this committee was created to reduce deadweight. Carpenter stated the City of Memphis, in cooperation with Shelby County have the most active PILOTs in the state of Tennessee, but also has the highest city and county property taxes in the state. Carpenter stated the County is creating this ad hoc committee to see how to cut the dead weight and reduce the number of PILOTs. Trustee Newman has alluded to the fact that annually, the County loses approximately $47 million due to the tax abatements afforded to certain PILOT Lessees. Carpenter clarified this is not made up of only PILOTs from the Board, but that Downtown Memphis Commission and Economic Development Growth Engine (EDGE) also issues PILOTs, so this is a strategic think tank committee to see how government can synthesize and improve the PILOT activity locally. McKnight stated that even if he is not on the committee, he will attend the meetings to stay informed.
7. Corbin Carpenter reported that his Firm and Board staff will also be meeting with Housing and Community Development (HCD), representatives for this district from Housing and Urban Development (HUD) and with the County Assessor in the coming weeks. Carpenter reminded the Board about prior discussions involving the allocation of tax credits from Tennessee Housing Development Agency (THDA) and allocations is awarded by the three (3) grand divisions: (i) East Grand Division, (ii) Middle Grand Division, and (iii) West Grand Division. Carpenter reported that the West Grand Division has received the least opportunities to use those tax credits. Carpenter reported that his Firm is working to create a local think tank with HCD and MHA and others and approach THDA with certain initiatives and strategies that would afford the West Grand Division more opportunities because the need is great, particularly in this area with the per capita income, tax rates, and aging housing.
8. Corbin Carpenter reported that his Firm and Board staff have been working on the Board’s Annual PILOT Lessee meeting discussed for some time and the group targeted quarter one of 2025 for the mandatory meeting to be held. Carpenter reminded the Board that this meeting is something that will be reimplemented from what was started over ten (10) years ago but was not continued. Carpenter stated this will be a mandatory meeting for all PILOT Lessees and owners to come to Memphis, have a day of training, and reacclimate them with the Board’s PILOT program expectations. Carpenter reported through the ongoing meetings with the Board’s local partners, they have agreed to participate. These local participants will include the City Treasurer, Shelby County Trustee, the City Mayor, City Council, and representatives of the Memphis Police Department, who have all agreed to participate.
9. Corbin Carpenter reported that his Firm and Board staff have been discussing Board training and the group has targeted early November 2024. Carpenter stated the Board has a robust portfolio and the housing market continues to evolve and become more complex, and the Board should be informed, educated, and aware of all the complexities and intricacies developing in the market as it votes on the various determinations being made each month. McKnight stated he contacted a local third-party vendor that will help with planning this Board training. Carpenter asked Chairman Reid if he would like to form a committee to put together an agenda and strategize for that training. Chairman Reid agreed, stating Cliff Henderson would Chair the committee to be formed.
10. Corbin Carpenter reported an update on Environmental Court and Code Enforcement, stating there has been significant turnover in staffing at the Environmental Court and Code Enforcement, but his Firm has identified two (2) reliable contacts, including attorney Will Gibbons who represents the City of Memphis and Officer Pryer, who is the lead Code Enforcement officer in Environmental Court. Carpenter reported his Firm has been communicating with these two representatives over the last few weeks concerning any Board PILOT properties that are in Environmental Court, two of which will be reporting to the Board today, Cavalier Court and Gospel Gardens. Carpenter reported there are fifteen (15) Board PILOT properties in Environmental Court, explaining that while the Board compliance inspectors monitor the exterior characteristics of each property, Code Enforcement can go inside occupied units and look for mold, asbestos, raw sewage, and things of that sort, and they have more remedies available. Carpenter stated that all entities have the same end goal for these properties to be viable and safe, habitable, and enjoyable for the tenants, so his Firm and Board staff are going to be able to work together with Code Enforcement to have a more comprehensive compliance and monitoring approach as the Board continues to evolve into 2025. Carpenter reported that Environmental Court Judge Dandridge is also very supportive of that approach. Carpenter reported to the Board that he and McKnight attended Environmental Court together on July 16, 2024, to hear about a few matters and reported that some things were surprising to learn, because the Board does not enter occupied units, so it was eye-opening to see the pictures of certain properties and talk with Code Enforcement about some ongoing issues.
McKnight stated that Code Enforcement has been asked to attend regular board meetings and provide a report to the Board quarterly and give the Board an opportunity to ask any questions. McKnight reminded the Board that its internal and external compliance monitors do not enter occupied units, as Code Enforcement does, and their focus is external conditions and tenant benefits. McKnight stated his experience in Environmental Court was eye-opening to see the conditions some tenants are having to live in.
11. Finally, Charles Carpenter reported on Notices of Lien received for the following PILOT properties:
a. RDB Services LLC vs. New Horizon Apartments; a lien in the amount of $76,710
b. Surface Works, Inc. vs. County View Apartments; a lien in the amount of $3,811
Carpenter stated his Firm will monitor both matters and keep the Board informed.
There being no further questions or comments, the Legal Report was concluded.
Action Items-
1. Status updates for PILOTs in Legal Default
a. Cavalier Court
b. Gospel Gardens
Charles Carpenter introduced Cavalier Court Apartments and Gospel Gardens Apartments and advised that each property is under the same ownership group and management company, Millennia Housing, and will be generally discussed together. Carpenter stated that Millennia Housing has made public proclamations that the company is getting out of the affordable housing business, and with these two (2) properties, the limited partner has had to step in, become engaged financially and more active in day-to-day management. Carpenter stated both properties are in legal default and based on internal monitoring and the condition of each in June 2024, Carpenter’s Firm sent out a Notice to Show Cause of why the PILOT should not be terminated. Carpenter stated there are many issues going on and potential business opportunities, including potential sale negotiations going on that the Board should hear about. Carpenter stated the Board should also hear from its internal monitors, and advised the members of the Board that their meeting materials included updates on both properties.
Thereupon, Carpenter turned the meeting over to Millennia representatives in attendance for comment. Warren McWhirter, Esq. introduced himself as a local attorney in Memphis, stating his Firm has been working with Millennia. Although he has not been the attorney for Millennia, he has done his best to be brought up to speed, as the regular attorney for Millennia is out of town. McWhirter stated Millennia has been actively soliciting a purchaser for both properties since last year, and the group believes it has identified a purchaser that is able, capable and familiar with the affordable housing market. McWhirter stated the group cannot disclose that party now, but the group can acknowledge that the potential purchaser has been in contact with HUD and is targeting the fourth quarter of 2024 for potential closing. McWhirter stated that does not in any way mean that efforts to remediate and repair the property will slow down and that remedial efforts will continue. McWhirter stated representatives have the requested documentation to present to the Board showing the ongoing efforts, including copies of checks and things along those lines requested by the Board. McWhirter stated representatives were not able to get everything together prior to the today’s meeting, but they do have quite a bit of information to tender at the meeting today. McWhirter stated he is a local attorney and has been practicing in Memphis for thirty-two (32) years, and his father was a practicing attorney in Memphis for thirty-five years, further stating he is local and can be reached at any time.
Michael Pico introduced himself as the Chief Operating Officer of Millennia. Pico stated Frank Sinito, owner of Millennia Housing, was in Memphis and had planned to personally attend today’s meeting but became ill, had to seek medical treatment and is flying home. Mr. Sinito sends his apologies. Pico stated they did tour the properties this morning and he is joined today by Patricia Richmond, the regional manager for Millennia, and Kent Mehring of WNC, limited partner in connection with both projects.
Mehring introduced himself, stating he was unable to attend the Board’s July 10, 2024 Board meeting due to a family holiday, but he attended the June 5, 2024 Board meeting and made his initial introduction at that time. Mehring stated that as a representative of WNC, Inc., which represents the investment limited partner and special limited partner, WNC has been actively involved in moving things forward, making sure they are seeing positive progressions based on the Board’s concerns, and putting pressure on Millennia based on the rights and remedies in their agreements. WNC will continue to do that, maybe more aggressively, until the closing occurs. Mehring stated the closing of the potential sale is now anticipated for the fourth quarter 2024. Further, his previous report of a potential sale proposed to take place in September or October 2024, however, due to the negotiating process taking longer than expected he expects to see some completion in October or November. Mehring stated there is a sizable sum of assets in addition to the Memphis properties, that will be involved in the potential sale and WNC, Inc. is involved in those conversations. Mehring stated he is hopeful that Cavelier Court and Gospel Gardens will be included in the first grouping of those transactions, but that remains to be seen.
Mehring stated that until the Purchase Sale Agreement is signed, which was supposed to happen the first week of August, but they are not there yet, the group is under a Non-Disclosure Agreement and cannot share who the potential purchaser is. However, Mehring stated that WNC, Inc. and its limited partners have other business dealings with the unnamed company on several assets throughout the country, and once WNC, Inc. can share who that is, the Board will be pleased with their skillset. Pico stated he has copies of invoices and checks for the Board and work that is coming, but the information does not include Goshen Guard, All Service Plumbing, and Infinity Heating and Air documents, which will be provided electronically following today’s meeting. Pico passed out copies to the Board.
Shirley Bondon entered the meeting.
Carpenter thanked representatives for coming and letting the Board know exactly what the status of things are, but advised representatives that this has been going on for a long time and it has been a lot of repeat comments that have been made before, and remain unfulfilled; meanwhile, based on the policies and procedures of the Board’s PILOT program, these properties are still not in compliance. Carpenter stated there is a balance that the Board tries to strike, not to impede any business discussions or consummations of business activities, but there is a lot of scrutiny from the City Mayor’s office on down with the oversight, or lack thereof. Carpenter stated that both properties are in Environmental Court with tenants enduring very unpleasant conditions and the Board must determine whether this PILOT can stay in place between now and the fourth quarter before these business transactions are consummated. He also reminded the representatives that the Board is looking at different metrics as to how it evaluates whether or not the PILOT stays in place. Carpenter did advise that the Board understands the PILOT is an integral part of the sale discussions and negotiations that have been ongoing because it has an economic impact. Thereupon, Carpenter invited the Board’s internal monitors to provide comments on their observations of each property.
JP Townsend reported since his last inspection of Cavelier Court, there are windows still boarded up, the property appears to have been pressure washed, there was some excess trash, and he observed what appeared to be several bullet holes in windows at the main front entrance to the property. Townsend reported observing the basketball hoops and poles have been repainted, although some of the poles were damaged prior to repainting. Townsend reported soot on one of the second-floor units at the back of the property that appeared to have been damaged by fire, which is a different building that had previous fire damage. Each building remains damaged with no movement observed repairs to either fire damaged building. Townsend reported the property appeared relatively cleaner than his previous inspection, but very minimal movement at Cavelier Court. Trey McKnight stated he went on a site visit with Townsend to this property and the playground equipment seemed to be from the 1960’s and would not want anyone to play on it. Townsend stated the playground equipment is at the front building, is old and dated metal jungle gyms, which he mentioned in prior meetings and is a safety hazard due to the rust and old metal pieces. Buckner Wellford stated that “Playgrounds” was a $35,000 tenant benefit commitment at the time of application for the PILOT.
Mehring asked if Pico could be given the opportunity to respond to these statements, as these items were addressed in Millennia’s response to the Board provided via email on August 6, 2024. Pico stated regarding the basketball courts that A901 is working at the site from Saturday throughout this week restriping the parking lot, repainting the curb, the speed bumps and the potholes, and are on site now, and will move to the basketball courts, which is in the scope of work. Pico stated Millennia will also retain services for the playground and to address the grounds on each property, whether it is mulch coating or other needs. He advised that the original plan was to paint the original playground equipment. Pico stated that the plan to repaint the playground equipment is now not believed to be feasible based on the age of the equipment, as noted, so Millennia will look for a complete replacement of that, and work on both of those is in progress. Pico stated that once the parking lot scope of work is complete, he will provide check copies to the Board for that work, and they will be moving to the basketball courts next. Pico stated that what is happening at Cavelier Court now also is fixing the upper railings and banisters where they were missing and addressing the vinyl siding.
Mehring stated that he would like to add, on behalf of the limited partner, not visiting the property with any frequency like Millennia does, but he did visit the property this week, and having seen it two months ago, prior to the Board’s June 7, 2024 Board meeting, and Patricia Richmond has been an incredible addition to the team and has been able to address staffing issues whereas her predecessors could not. Mehring stated getting the property properly staffed is critical to address these issues and have a better culture among the residents, and it is challenging to say the least. However, Richmond is making great progress, and Mehring stated he was pleasantly surprised. Despite the shortcomings that were pointed out here today, Mehring stated the property is making progress on a lot of those elements that have been listed.
Pico stated one of the main items discussed in the last Board meeting was security, which has been addressed and Millennia has hired Goshen Guard, which the Board will see in its materials provided by Millennia today. Pico reported that Goshen Guard has begun services at all of Millennia’s Memphis properties late last week and that is armed guards at Cavelier Court, as well as patrols at Gospel Gardens, as well as other properties, and they are the ongoing security vendor. Pico stated that with this, security is in place, and they will be getting an online portal to track security and will receive reports, but from a resident point of view, security has been sorely lacking, so he wanted to emphasize that change to the Board.
McKnight stated to the Board that he has been advised that these issues are the same issues that have been ongoing since 2019. Buckner Wellford added that surveillance and security system cameras were all initial tenant benefits that were valued at $175,000 for Cavelier Court alone, and the same was committed to for Gospel Gardens. Wellford stated the Legal Notice to Show Cause was issued to the PILOT Lessee for both Cavelier Court and Gospel Gardens on June 25, 2024 [which followed the Legal Notice of Default issued to the PILOT Lessee on March 15, 2024 for Cavelier Court and Gospel Gardens], and security was accelerated only last week, and referenced a letter dates August 5, 2024 and an invoice provided to the Board by Millennia representatives that reflects two armed security officers on site seven days a week for 8-hour shifts. Pico stated Millennia did a full vendor packet with Goshen Guard and vetted them. Wellford stated he would reserve the rest of his comments at this time. Carpenter asked if Bryce Miller had any additional comments from his observations of Cavelier Court. Miller stated the property does look a little bit better, but it is only just enough to get another thirty (30) days. Miller stated the progress at the property appears to be an effort of trying to do just enough to get by with the Board, but not to do better and make change for the tenants. Monice Hagler asked what the occupancy rate is at each property, to which Stephanie Bryant responded eighty-one percent (81%) occupied at Cavelier Court and eighty-six percent (86%) at Gospel Gardens. Chairman Reid referenced Board Meeting Materials, stating occupancy had increased to 81% in Q2 2024 from 80% in Q1 2024 at Cavelier Court, whereas occupancy had decreased at Gospel Gardens from 90% in Q1 2024 to 86% in Q2 2024.
Townsend began his report on conditions observed at Gospel Gardens, stating the property has always appeared in better condition in comparison to Cavelier Court, but a main issue at Gospel Gardens is there are several units that have broken windows, and the units have been exposed to the elements for multiple seasons at this point. Townsend reported that a couple of days prior to the Board’s July 10, 2024 Board Meeting, those windows were finally boarded up, but he is unsure of what measures have been taken for the internal areas of those units. Townsend stated that safety is a major concern at Gospel Gardens, the property has license plate readers at the entrance of the property, but there are several vehicles parked directly across the street that appear to be avoiding those cameras and license plate readers. Townsend reported it even appeared that someone had taken their own weed eater and made a parking spot in the overgrowth across the street, as the grass was cut just around the perimeter of the vehicle. Townsend reported more between 6-10 cars parked there at the most recent inspection, and up to 20 cars parked there at the previous inspection.
McWhirter stated to the Board that Cavalier Court had two plumbing issues at 2506 & 2584 Perez that have been corrected as of August 5, 2024 and asked Patricia Richmond to provide any clarity she may have regarding this. Richmond stated they are two separate units that plumbing issues that the plumber had to jet out.
Pico stated that it is his understanding that the cars parked across the street from Gospel Gardens were mentioned at the Board’s July 10, 2024 Board meeting and Richmond called about those vehicles. Richmond stated that the area across the street is not the property of Gospel Gardens and Millennia is unable to have any vehicle towed that is not on their property. Richmond continued, reporting that all Gospel Gardens residents must have decals on each vehicle and bring their registration to the office, and if cars are on property after hours without the proper decal, Millennia has a tow company come through the property and tow those vehicles. Richmond stated Millennia has no control outside of the property. Townsend stated Millennia has stated today that new security has been established at both sites and asked when the security company starts and are they doing anything about individuals coming onto the property on foot, potentially from the vehicles parked across the street. Richmond responded that security is onsite from 7:00 pm to 3:00 am at both properties, and they also have rolling patrols during that same time. Townsend stated he understands that Millennia has no control of someone parking outside of the property’s perimeter, but Millennia should have control of who is entering the property. Pico stated that Millennia may have the opportunity to expand its security and Millennia is also receiving feedback from the security company, as they are new to Millennia and to the properties and residents.
Mehring addressed the down units due to fire months ago, stating those units have not been completely made ready and are in various stages of completion. Mehring stated WNC, Inc. has submitted a conditional consent agreement for the investment limited partner's consent to move forward with the buyer to sign the Purchase Sale Agreement, and that was presented approximately one week ago. Mehring stated discussions are ongoing, and there is a condition that they advance dollars to address those items as soon as reasonably possible, and if they do not, WNC, Inc. will then take other actions. Mehring stated WNC, Inc. is trying to get those units back online through Millennia because it impacts occupancy, but they cannot be leased until they are completed, but this is part of the behind-the-scenes work WNC, Inc. is doing as part of the overall transaction so WNC, Inc. can tackle those items not at closing, but at signing of the Purchase Sale Agreement.
Cliff Henderson asked how soon it would be before closing. Mehring responded that the Purchase and Sale Agreement (PSA) was supposed to be signed early August 2024, but they are still negotiating after the buyer’s final site visits of over 100 assets, but WNC, Inc. is aggressively pushing for a signed PSA in August. Mehring stated he was set for a meeting with Frank Sinito to go over these very items following today’s Board meeting, but his admin texted Mehring that Sinito is unwell, as was reported earlier in today’s meeting. Buckner Wellford pointed out that under the Board’s own policies and procedures, the very first basis for revoking a PILOT is failure to maintain tenant benefits; the second is uninhabitable property conditions, among the definition of that is failure to maintain the property and all residential rental units in compliance with all applicable sections regarding rental housing as set forth in Memphis and Shelby County housing and building codes, which are Environmental Court issues. Wellford stated another issue specifically is failure to timely repair any residential rental units that are substantially impaired due to fires, inclement weather or related incidents.
Trey McKnight asked Corbin Carpenter to report what they heard and witnessed in Environmental Court in July regarding Cavelier Court and Gospel Gardens. Corbin Carpenter reported that Cavelier Court and Gospel Gardens, to Wellford’s point, have been in Environmental Court for some time and when Carpenter and McKnight attended Environmental Court of July 16, 2024, the entire afternoon docket was committed to these two properties from 1:00 pm to 4:30 pm. Cavelier Court has approximately seven (7) outstanding Environmental Court Notices, whereas Gospel Gardens has approximately forty-six (46) outstanding Environmental Court Notices, clarifying that each notice is regarding a separate unit. Carpenter stated the Board’s focus is tenant benefits and security, but the bigger issues with the Environmental Court matters are lack of air conditioning, asbestos, plumbing issues, and raw sewage. Carpenter stated that Environmental Court Judge Dandridge has no authority but to give civil penalties, and he is giving penalties ten times the amount of the previous penalty, notating this is how egregious these instances are. Carpenter stated the lead officer over these two properties with Code Enforcement has agreed to come report to the Board and provide a full presentation whenever the Board would so request that to happen, and this would provide the Board with a full and comprehensive analysis of each property that would go beyond the exterior conditions and tenant benefits. Carpenter stated the Board would be very unhappy with the interior conditions of these properties.
Cliff Henderson stated that he is assuming all of this did not just happen in the last few months and had to be a build up over the last couple of years to get to this point. Henderson asked how many times Millennia has been in court before now and were the properties in Environmental Court in 2022 and 2023, and is it a failure on the Board’s side that it has not acted. Carpenter stated it has not been a failure on the Board’s side, as the Board focuses on different things, but moving forward, that is what the Board would need to improve on from a comprehensive outlook on things. Henderson stated that if the Board knew then what it knows now, the Board should have been quicker to pull the plug on this, and as we have gotten to this point and the parties are at the goal line of purchase, he believes the Board can agree that Millennia has been a bad character and the Board should have acted sooner on them, and there were indicators that the Board has seen other property owners or managers turn things around and Millennia did not. Henderson stated the Board gave Millennia rope, as it did others, and the Board got burned, and he got burned. Henderson stated as the Board begins to think about what it is going to do now, Millennia is out the door and someone else is coming in and the Board must think about the tenants that are in these two properties. Henderson stated that if the potential purchase and sale agreement falls through, the Board should get out, but if this potential purchase is alive and if WNC, Inc. was not here, like the situation with Memphis Towers and the Richman Group, there is an example of those partners stepping in, and the Board should take that into consideration. Henderson stated that everything that has been reported is deplorable and something that has built up over time and the Board must look at as a lesson learned to figure out how to get better and coordinate with Code Enforcement and hold people accountable.
Vincent Sawyer stated he is in Environmental Court weekly, and he cannot remember the first time he saw these two properties in Environmental Court, as it has been so long ago. Going forward, Sawyer stated he is happy to be the eyes and ears and coordinate more with staff about what is happening on a weekly basis. Trey McKnight stated he and Corbin Carpenter will be attending Environmental Court regularly to catch these things before it gets too far. Carpenter added that when a property is in legal default, Code Enforcement has volunteered their time at no charge to the Board to come and give a full presentation to the Board of their findings so that the Board can have the full color and perspective on things. McKnight reinforced that the Board’s internal and external monitors can only review the exterior conditions of each property, and code enforcement is able to go inside actual occupied units and see the conditions, and that is where the Board needs more information.
Charles Carpenter stated, to bring the Board back to where we are now so that some determination can be made as to how the Board wants to proceed, one of the things staff and legal counsel have been attempting to do with the Notice of Legal Default, followed by the Notice of Show Cause is to bring some sense of urgency as to the living conditions of the tenants at this time. Carpenter stated that today the Board has discussed health and safety concerns with banisters, security issues, and there has been some effort, but there has not been the urgency that is really needed. Carpenter stating in speaking with the lender and the limited partners, it is a matter of whose responsibility it is, but time has run out for that and unless the Board is shown that there are immediate efforts made in good faith, then the PILOT should be terminated. If this step is taken however, everything that is trying to be done on the business side goes away, and the Board realizes that action hurts everything by terminating the PILOT. Carpenter stated terminating the PILOT would hurt the tenants, as well as the business side of the transaction, but the Board must adhere to its policies and procedures, and that is the point that the Board is having a difficult time conveying to the PILOT Lessee.
Carpenter stated Millennia has continued to bring in new representatives, and it is not a lack of personal credibility, but Millennia and the developments have lost all credibility at this point, and it is a difficult challenge for the Board to balance these equities going forward. Carpenter stated these are complex issues, there is a timing to this and there has been some indication that some effort has been made, and his Firm still needs time to go through everything for each of these properties. Carpenter recommended keeping both Cavelier Court and Gospel Gardens in Legal Default, with the Show Cause still in place and reset the matter for one meeting so that there can be a status update to see where things are at that time and if they have not improved, then the Board could take more definitive action at that time.
McKnight stated that Board staff has seen other companies come in and turn properties around, but they are not seeing that with Cavelier Court and Gospel Gardens. Mehring stated that McKnight is correct, and that Millennia is a lame duck that is experiencing staffing issues at the corporate level and WNC, Inc. is fighting to keep lenders comfortable, funding money to try to keep their head above water until this buyer comes in, but they do realize it will be months before that happens. Mehring stated Pico and Richmond have both done a great job since they have been brought on board with Millennia, which has been very recently, and he agrees that some of the things that have been reported today are deplorable and he has witnessed some of that yesterday, when he sent a scathing email to Frank Sinito and counsel. Mehring stated WNC, Inc. is meeting tomorrow to see how much more aggressive they are going to be here and whether WNC, Inc. is going to allocate more funds and so on. Mehring stated the challenge with Frank Sinito is that he has advanced tens of millions of dollars to these assets, and if he is approached to fund more money, he is going to wonder how much longer he can do this, but WNC, Inc. is going to get more aggressive on the personal guarantees and see where they land. Mehring stated he wanted the Board to know that WNC, Inc. is not taking this lightly and they want to get to the finish line. Mehring admitted he does not like what he saw either, although the properties look better than a few months ago, but there are bigger fundamental issues that must be addressed, and it is going to cost some money. Mehring stated he knows there is an action plan in place, and Richmond has been more transparent than anyone else he has worked with from Millennia on the property level, as has Pico, and WNC, Inc. has no choice but to show improvement to the Board.
Carpenter stated that all the underwriting and number crunching and forecasting that has been done includes the PILOT tax abatement, and if that goes away, then everything crashes, and it is back to square one, so the matter is urgent that this is done immediately, not in 60 days or 90 days. Carpenter stated that this Board has the discretion to change the whole picture today, which would change the whole scenario with a vote to terminate the PILOT, so when WNC, Inc. representatives have their meeting, they must have that urgency and the immediate action to be taken, otherwise the Board will have no other alternative.
Further, Carpenter stated that WNC, Inc. needs to ensure that the potential purchaser understands what they are getting involved with and there is also a transfer process that must take place with the PILOT, and it is not automatic. When the potential purchaser comes before the Board, they will need to be able to express to the Board what their intentions are and how they are going to fund it. Mehring stated he has discussed with the potential purchaser that there is a timeframe of sixty (60) days for that process with the Board and other approvals that will be required from HUD and other agencies and lender approvals, so they are building in some cushion there. Mehring stated a GP transfer is a much easier execution to document than a fee simple sale, which is what many of these assets are involved in this overall transaction. Mehring stated he is hopeful that WNC, Inc. can move this transaction to the front end of this overall execution, it will get in front of the Board sooner rather than later, and once the PSA is signed, he will advise the Board of who the entity is. Corbin Carpenter stated, as a point to really nail down the sense of urgency, that Millennia is on the watchlist, not just for the Board, but for the City Council and the City Mayor’s office, so the Board cannot stress the sense of urgency enough to cure these deficiencies, or at some point the Board will be left with no choice but to act. Mehring said he also met with the City Mayor’s office and is aware.
Cliff Henderson stated that if Mehring was not present at today’s meeting representing WNC, Inc., he would personally put a motion forward to terminate the PILOTs and everything is hinging on WNC, Inc. now. Henderson stated he means no disrespect to Pico or Richmond, but if he gets any indication that things are not progressing, he will be putting a motion forward to terminate the PILOT for both properties.
Howard Eddings asked if any investment will continue to be made by Millennia to resolve issues at either property. Mehring stated that investments continue, and the properties are at a break-even operation, and when security and other things are added, the properties are below a break-even point, so money must be advanced to keep the properties going. Mehring clarifies that all the numbers provided to the Board in the information provided by Millennia today are advances and WNC, Inc. has also advanced up to $500,000 to these properties in the last six (6) months for various things and making sure there is adequate insurance and the properties are protected. Mehring stated WNC. Inc. has been advancing money and may have to continue advancing money, depending on WNC, Inc.’s success in working with Frank Sinito of Millennia and his ability to provide what his obligation is.
Vincent Sawyer stated he is a little confused on that because it seems like many of these things happened in the past and he would like a more concrete plan on how the properties are going to get through the next sixty (60) to one hundred fifty (150) days, or more so he can cross reference what is wrong, what needs to be fixed, and what is intended to be left broken at closing. Eddings stated that basically, the Board wants to improve the conditions for the families that are currently living at these properties, and waiting another sixty (60) days to figure this out from a sales perspective does not do much good for those families. Eddings stated that the property can call someone out to the property to address the raw sewage, and that there must be a bigger problem. Mehring stating that is unacceptable, and it is his understanding through Richmond and the property manager that residents sometimes put things down sewer pipes, including grease, which aggregates, and then plumbers must jet out the systems to clean them out. With management staffing changes, there was not enough attention to that, and it is now being addressed and Richmond has put an action plan in place to address that. Eddings stated he understands why it happens, and Millennia cannot control that, but it is Millennia’s responsibility as providers to respond to it. Eddings stated that it is deplorable, and it is the Board’s job to hold owners and managers accountable, providing people with decent, safe, quality and affordable places to live and the Board is not doing a very effective job with that in this particular instance.
Mehring stated that with the exception of Hope Heights, that the remaining Memphis properties that WNC, Inc. is invested in come as such a severe discount on value, that if it was not for the other assets in this overall transaction, he believes WNC, Inc. would be left high and dry, so they must work with the parties because it is the other assets with value that are helping the transaction on these deals. Mehring stated he would love to provide a definitive timeline, but he only has a general idea. Henderson stated that the Board appreciates WNC, Inc., and if there is any regression from Millennia’s current actions, or any regression from where the properties are, the Board would like to see more, and would expect WNC, Inc. to step in, as Richman Group did with Memphis Towers. Hendson made clear that as WNC, Inc. is putting pressure on Millennia, the Board is putting pressure on WNC, Inc. and everything hinges on WNC, Inc., because of the lack of trust the Board has with Millennia.
Cliff Henderson moved to defer action of Cavelier Court and Gospel Gardens for an additional thirty (30) days, seconded by Monice Hagler, and the motion passed by majority after a proper roll call vote of the Board members.
For the record, Chairman Reid and Buckner Wellford voted not to defer action for an additional thirty (30) days.
Corbin Carpenter advised the Board that these two properties are set to appear in the Environmental Court for a status update in two (2) weeks, and he will be attending to be able to provide the Board with a full status update on the progress, if any. Trey McKnight stated he will also be attending Environmental Court with Carpenter.
Buckner Wellford stated that he understands the reasonableness of the majority prevailing in this vote, and stated that representatives reported to the Board at the July 10, 2024 Board meeting that they would be able to disclose the lender within two (2) weeks of that meeting, and now representatives are still reporting that they are unable to disclose the potential purchaser today. Wellford stated he is going to begin looking at these things more simplistically, as he has been shocked when the Board has these properties in default, and the Board asks the representatives about the tenant benefits, many times the representatives do not even know what the tenant benefits are and the Board and staff have to inform the representatives what was promised when the PILOT was granted. Wellford stated that under the Board’s policies, when the PILOT Lessee does not provide tenant benefits, the Board is supposed to terminate the PILOT, although the Board has the discretion not to, but it is supposed to do it. Wellford stated when a PILOT property has uninhabitable conditions, the Board is supposed to terminate the PILOT. Wellford stated he is going to be more simplistic, as there is a consistent pattern where these PILOT Lessees have not, for a lengthy period, provided tenant benefits that were promised to the Board when the tax abatement was granted, and he will be voting to terminate the PILOTs. Wellford stated that action will start to get the message out into the community that needs to get out.
Michael Pico, Patricia Richmond, Kent Mehring and Warren McWhirter left the meeting.
c. Grahamwood Place
d. Pinebrook Pointe
Tie Lasater entered the meeting.
Cheryl Hearn left the meeting.
Carpenter introduced this agenda item and introduced Tie Lasater, stating he has been the representative in attendance for the development group for Grahamwood Place and Pinebrook Pointe and has reported to the Board in prior meetings on the status of these two properties. Carpenter stated these two properties that the developer has previously explained to the Board that a refinancing is scheduled for September with a portfolio of properties, of which these two properties are part of. Carpenter turned the meeting over to Lasater to provide an update on what has been taking place since the last report to the Board. Lasater stated that both properties have now achieved seventy-two percent (72%) occupancy and Grahamwood had fifteen (15) electrical inspections that Memphis Light Gas and Water (MLGW) came out and passed, which allowed management to move eight tenants into the property in the last thirty (30) days, as well as MLGW fixed the parking lot. Lasater thanked Trey McKnight for his assistance with MLGW. Lasater reported that management had to evict eight (8) tenants at Pinebrook that management was working on payment plans with but were not able to get those things worked out, but fifteen (15) new tenants have been moved into the property. Lasater stated each property needs seven (7) new leases to each the Board’s minimum occupancy requirement of seventy-five percent (75%), which should be accomplished within the next eight to ten (8-10) days. Chairman Reid asked if the properties have a waitlist, to which Lasater replied they do, and the waitlist runs across four (4) properties and includes approximately fifty-five (55) people right now.
Lasater reported discussions have begun with Pinebrook’s parking lot monitoring crew on restriping. Lasater stated that ownership had a group come in and clean up tires that a tire company continues to dump, and cameras have been placed on site that are monitoring the dumpsters and ingress and egress, trying to catch who is dumping those tires. Lasater reported that additional windows have been boarded up and/or replaced where necessary. Lasater reported that the property did not have a computer in the common area for tenants, as stated in the tenant benefits for this property, and the computer has now been purchased and is being picked up this afternoon. Lasater stated both properties overall are looking good, and occupancy is moving in the right direction.
Carpenter asked the Board’s internal monitors to report on their observations of the conditions of the properties. Bryce Miller began, stating that Pinebrook is to a point where there are ongoing exterior issues, including the three (3) buildings as you first enter the property. Miller stated that on a recent inspection, there was a dead tree that was laying in the parking lot and there is a lot of work that needs to be done to that area, putting aside the burn units that have been an ongoing concern and construction has not begun on those burn units yet. Miller stated Grahamwood remains consistent, may have had a couple of additional broken windows in comparison to the last inspection, but overall property conditions are in compliance, except for the occupancy level. Lasater reported that the lead maintenance tech for Grahamwood retired approximately three (3) weeks ago and he has since been replaced and management has added two (2) more people, so those windows have now been addressed. Lasater reported that ownership now has two people that specialize in A/C units and another couple of guys that work only on glass, and they are all working in those items, and the glass for windows is an ongoing cycle on all the developer’s properties in Memphis.
Miller stated he will be reaching out to Lasater to schedule an onsite walkthrough of both projects prior to the Board’s September 11, 2024 Board meeting. Lasater stated that the lender if going to be in town the week of August 12, 2024 to do a walkthrough of both sites as well in preparation for the refinancing. Corbin Carpenter asked Lasater who the lender is anticipated to be on the refinancing, to which Lasater responded Arbor Realty. Corbin Carpenter advised Lasater that procedurally, because Grahamwood Place and Pinebrook Pointe are active in the Board’s PILOT program, each property must submit a PILOT Refinancing Application to the Board forty-five (45) days prior to the Board meeting at which the application should be considered.
Buckner Wellford stated that according to the Board’s July 10, 2024 Board meeting minutes, representatives were scratching together and they did a roof replacement, which was the largest part of the tenant benefits committed to. Wellford stated a business center was supposed to be onsite, but now the Board is being told there is just a computer sitting on a table, so Wellford asked if ownership is any closer to meeting the tenant benefits that they promised to the Board. Townsend reported that he and other monitors have reviewed the list of tenant benefits committed to for Pinebrook and of those tenant benefits, there was a business center listed, but at the property, there was only a table and the ability to wirelessly connect to a printer, but there was no computer for tenants. Townsend stated that Lasater reported to the Board today that a computer is being put there in the coming days. Townsend reported another stated tenant benefit for Pinebrook is there are supposed to be outdoor grills between the pool and playground that are not there. Townsend reported on Grahamwood tenant benefits, stating that the playground has been replaced and the common areas look very nice. Townsend stated his biggest concern at Grahamwood was the pool and he is not sure if that has been completed, to which Lasater responded that the pool had been completed two days following the Board’s July 10, 2024 Board meeting.
Wellford stated that representatives have indicated that a refinancing of both Grahamwood Place and Pinebrook Pointe is imminent, but the properties have been under legal default since October 2023. Wellford stated the Board has the right after three (3) months to seek legal fees and other fees associated with the Board having to pay special attention to these properties, requiring additional monitoring by internal and external compliance monitors. Wellford stated he is happy to do whatever the Board needs to do to see the refinancing application come in, but he would like the Board’s legal counsel to work with Board staff to put together a proposal that the Board could consider at the next Board meeting as to what those costs are that have been associated with this. Wellford stated his vote on whether to terminate the PILOT may depend on how the Board assesses the fees associated with this additional oversight.
Charles Carpenter asked when the refinancing of these two properties is expected to take place. Lasater responded that it is expected to take place in September 2024, explaining that ownership has a five (5) year loan with Arbor Realty, and they are only in year three (3), so refinancing will be to the benefit of ownership and the properties, because the interest rate is about 7.5% interest right now and ownership is trying to get a 6% interest refinance, which is contingent on the ten (10) year treasury and they are watching that closely. Lasater stated Arbor Realty will service the refinance, and it will be a Fannie Mae Refinancing, and Arbor’s fee to service that is about 180 basis points. Lasater stated they are currently at a 6.2% interest rate and will continue to monitor that before they lock in and solidify the refinancing. Carpenter asked if ownership met the eligibility requirements from an underwriting standpoint so it can rate lock. Lasater responded they have. Carpenter stated there are still outstanding issues with the burn units and other items at Pinebrook Pointe, as well as occupancy at each property, which is on the bubble of meeting the 75% minimum occupancy requirement of the Board. Carpenter stated the timing of the refinancing is important for the Board to understand and consider, because as Wellford stated, these two properties have been in legal default for a long time and are just now getting to the point of trending in the right direction.
Lasater stated that ownership believes Grahamwood Place is one of their better properties in their total portfolio and it was a bigger overhaul when ownership purchased the property in 2021. Lasater stated that when ownership bought the property, it was not in compliance, and to get it there has been a major overhaul but has turned its way and ownership is excited about it. Lasater stated that Pinebrook Pointe, which was also purchased by current ownership in 2021, has all the fire damaged and burn units and is a little bit bigger of a lift and has taken ownership longer with the structural issues that come with that. Lasater reported to the Board that he has signed and executed contracts on August 6, 2024 with construction crews for work to begin on the burn units. Lasater stated that both Grahamwood and Pinebrook are moving in the right direction and moving along quickly. Lasater stated that he stepped in on these two properties in January 2024 and started managing the legal default and attending the Board meetings and occupancy has risen from fifty-five percent (55%) and fifty-seven percent (57%) at that time to seventy-two percent (72%) occupancy at both properties today, so that has increased as was expected and continues to do so. Lasater stated the credit for that belongs to the construction team, as they have done a great job, and he and his asset manager are constantly tracking markets from a financing and underwriting perspective with Fannie Mae and monitoring interest rates.
Charles Carpenter stated that although these are all difficult matters to address, however, the developer has come and worked consistently with the Board, the properties are trending in the right direction, and based on the plan that has been outlined to the Board, the properties are on the cusp of the refinancing that will allow ownership to finalize the improvements in the plan. Carpenter recommended resetting the matter for the September 11, 20241 Board meeting to get a status update of where things are and hopefully help these properties get to the finish line so that they will be in full compliance.
Cliff Henderson moved to defer action on Grahamwood Place and Pinebrook Pointe for an additional thirty (30) days, seconded by Vincent Sawyer, and the motion passed unanimously after a proper roll call vote of the Board members.
Buckner Wellford stated he will be bringing up the issue of fees at the September 11, 2024 Board meeting and would appreciate Board legal counsel and staff having that available for the Board use in determining any fees assessed moving forward. Wellford stating that Lasater has done a great job since January 2024, and that is not the issue.
Corbin Carpenter advised Lasater that his Firm has worked with Fannie Mae and there is a process of working with them regarding timing and asked that Lasater get the refinancing application submitted to Board staff as soon as possible so that we can ensure a smooth process.
Tie Lasater left the meeting.
Mark Jobe and David Shores entered the meeting.
At the request of Monice Hagler, the Board moved Action Item #4 to this portion of the agenda to be considered.
4. 9th MHA PILOT Closing Extension for MH Strategies II, LP (Borda Towers and Venson Center)
Chairman Reid introduced this agenda item, stating that this is an unprecedented 9th MHA PILOT Closing Extension, but it would not be setting precedent moving forward and will not be used by others because of the way this is structured, and this is a public private partnership with Memphis Housing Authority (MHA).
Jennifer Croxton, Dexter Washington, Luretha Phillips, and Josh Stringer entered the meeting.
Charles Carpenter reminded the Board that this project is a MHA PILOT administered by the Board and consists of a public private partnership between MHA and Knight Development and is in the final phase of the original plan of development that began several years ago. Carpenter stated this project is structured and is participating as a part of the Rental Assistance Demonstration (RAD) program administered by HUD, which was the first in the state of Tennessee and one of the first in the country. Carpenter stated the program changes the whole methodology of how public housing would be maintained and improved, whereas before the RAD program there was only annual federal appropriations that would be awarded to the public housing developments and they would have to use that allocated amount to figure out what deferred maintenance was the most acute in order to keep the properties going. With the RAD program, it allowed the public housing authorities to leverage the equities that they had in each property, partner with a private partner to leverage and finance substantial improvements to each of the assets that the public housing authority maintain, which approach has been successful.
Carpenter stated the current project includes the last two (2) properties from the original plan, both senior housing facilities with tremendous rehabilitation plans in place. Carpenter stated the challenge has been various delays, and as the Board’s closing extensions are for a six (6) month period, and now this project is seeking its 9th closing extension, by asking the Board to balance the equities and responsibilities that it has, while assisting MHA and Knight Development to complete the job. Carpenter reminded the Board that it administers its own PILOT program, but it also administers the MHA PILOT program, and this is an MHA PILOT, with MHA as the principal in this project. Additionally, Carpenter stated the Board is aware from experience that in dealing with the federal government, things go very slow, while also having gone through the COVID-19 pandemic, which changed the whole landscape of how business is conducted at every governmental level. Carpenter stated that after this extended period, all the necessary approvals have now been obtained through the RAD program and a potential closing date has been set within the next sixty (60) days. Based on these facts, Carpenter recommended approval of this extraordinary 9th MHA PILOT Closing Extension, acknowledging that all parties know that this will be the last, and if the project does not come to a closing, then everyone involved in this project goes away, the years of hard work would go down the drain, and unfortunately, the residents would continue to live in the current conditions going forward. Carpenter turned the meeting over to Board members to ask any questions they may have for the project representatives present today. There being no further questions or comments,
Cliff Henderson moved to approve the 9th MHA PILOT Closing Extension for MH Strategies II, LP (Borda Towers and Venson Center). Monice Hagler seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Jennifer Croxton, Dexter Washington, Luretha Phillips, and Josh Stringer left the meeting.
e. New Horizon
Charles Carpenter introduced this agenda item, stating that New Horizon has been part of the Board’s PILOT program for a long time and has encountered ups and downs. Carpenter stated that the property has taken a downturn since the failure to close a potential sale and is currently in the Chancery Court under receivership. Carpenter introduced David Shores, who is the Receiver appointed through the Chancery Court and is currently managing day-to-day operations. Carpenter also introduced Mark Jobe, Esq. as legal counsel to the current owner, stating Jobe has reported to the Board concerning this property on many occasions. Carpenter reported having communication with Spencer Clift, Esq., who is a member of the Baker Donelson Law Firm and represents KeyBank, who is the primary lender on the property.
Buckner Wellford, who is a member of the Baker Donelson Law Firm requested that he be recused from this discussion.
Buckner Wellford left the meeting.
Carpenter stated representatives for New Horizon reported at the Board’s June 5, 2024 Board Meeting, and at that time, the Board received the report that the property was not in compliance in a number of ways and the Board is here today as the legal default continues to make the determination as to where the property stands and how the Board moves forward. Carpenter reported that at the June 5, 2024 Board Meeting, Cliff Henderson requested more information about KeyBank and what its position would be going forward and what its plans were as to injecting continued resources into the property. Carpenter reported that KeyBank has not responded to the Board’s request for that information. Carpenter gave the meeting to David Shores for his comment on the current condition of the property.
Shores stated there are thirty (30) pre-leased units, and management is trying to identify thirty (30) units that it can make-ready efficiently and quickly. Management has identified twelve (12) units so far. Shores reported that about seventy (70) HVAC units have been replaced and about twenty-five (25) appliances have been replaced, and management can begin to cut down security a bit. Shores reported that Memphis Police Department Raines Precinct is thrilled with the progress that has been made, as there have been about one hundred (100) people arrested for criminal trespassing on site, so management is making strides and crime is down. To address the public comments made by Jamilah Holloway today, Shores reported that management has received nineteen (19) work orders that have been entered and completed at her residence, with the electrical issues, replacing several outlets, and he believes the physical issues have been addressed. With respect to the grass issue, Shores reported that it has rained a lot, and it has been hard for groundskeepers to get out and keep the grass cut, but it was cut on August 6, 2024 and there has been progress made. Shores reported that KeyBank has put this on the market to sell the loan and has engaged Shores as the Receiver not to foreclose, but to sell it. Shores stated there have been discussions with a group the Board is familiar with about a potential sale, and he sees if this property is heading toward a sale, it would likely close in November or December 2024.
Carpenter asked what the current occupancy rate is, to which Shores responded the property is currently forty-four percent (44%) occupied. Shores stated that regarding the lien on the property from RDB Services LLC pertains to demolition work that was done in December 2023 and as Receiver, Shores stated he us unable to pay that, but he will bring it up with KeyBank and see how they would like to proceed, as they may want to protect from that, but as of now, he is unable to pay it without KeyBank and Chancery Court directing it to be paid.
Trey McKnight advised the Board that New Horizon is also delinquent on PILOT payments due to the Shelby County Trustee is the amount of $77,191.35. Shores stated that this amount does not comply at all with what the PILOT Agreement states, and management is trying to get that resolved with the Shelby County Trustee now through tax counsel. Corbin Carpenter stated his Firm is also working with tax counsel to resolve that issue on behalf of the Board. Corbin Carpenter stated that at the time of calculation, New Horizon was one of the first “High Impact” PILOTs for the Board, so at that time, the calculation was nuanced, and representatives are working together to resolve the calculation issues and is actively being worked on. Charles Carpenter asked Mark Jobe if he would like to add any comments. Jobe stated that Shores and his management company, Multi-South Management, LLC is doing a good job trying to get the property back on track, but as his client has no involvement, no control, and no involvement in day-to-day, he is in the dark as to the going on, except to the extent that they are receiving financials and Shores is providing updates. Jobe stated aside from that, he has no specific comment or update for the Board.
Charles Carpenter asked the Board’s internal monitors to provide a report to the Board of their observations of the property. Townsend stated that, as Ms. Holloway stated in her public comment, the property grass was not cut for quite a while. Townsend stated that when it comes to the external items that he reviews and observes at each property to review compliance to report to the Board, that there is no part of New Horizon that is in compliance with the Board’s policies and procedures, nor the tenant benefits that were committed to the Board for this PILOT that he would be able to report. Shores stated he is fully aware of this. McKnight reported to the Board that he also toured New Horizon with Miller and Towsend and would concur with those findings. As a reminder, Carpenter stated that at the Board’s June 5, 2024 Board meeting, he as the Board’s legal counsel recommended termination. At that time, Shores reported that KeyBank had some plans to move forward and was given sixty (60) days to come forward with that plan. Shores stated in his report that the property was listed for sale and there is a potential interested party.
Carpenter stated that this property is very large, with eight hundred seventy-eight (878) units, and is forty-four percent (44%) occupied, whereas the Board’s minimum occupancy rate is seventy-five percent (75%), and it is not likely the property would reach that minimum occupancy rate anytime soon. Carpenter stated there were tenant benefits in place, including Red Door and some other social services, and asked Shores for an update on that. Shores said he does not have an update. Carpenter stated that his Firm's recommendation has not changed. Because of the underwriting and the amount of work that needs to be done, Carpenter stated any purchaser would be better off applying for a new PILOT term rather than assuming the existing PILOT. Carpenter stated there is still a request to keep the PILOT in place, as management believes it does have some value from a marketing standpoint, but that is where things stand, and his Firm’s recommendation remains unchanged, and it would be to terminate the PILOT.
Cliff Henderson asked if KeyBank is funding everything at this point, to which Chairman Reid responded yes. Henderson stated that he was hoping for a more extensive update since the June 5, 2024 Board meeting, but the only update is that KeyBank has put the loan out for sale and there is someone interested in acquiring the loan. Henderson asked if the Board terminated the PILOT, KeyBank would be liable for all the taxes or change in taxes and everything else, so his assumption would be that they have the pockets to absorb that hit, but would it hurt the marketability of putting the loan out for sale. Henderson stated he would assume that whoever buys this property would have the foresight to understand that they could apply for a new PILOT term. Shores stated that he has spoken with the potential purchaser, and they do recognize that, and it would be a better course of action, as Carpenter indicated, to start a new PILOT, but what they do not know is how long will it take for them to gain the deed. Henderson asked about the implications for the families that are there if the Board terminated the PILOT and asked if anyone foresees any negative impact of terminating the PILOT given where the property is today. McKnight stated to the Board that he has toured the property and could not see how conditions could get much worse. Henderson countered that conditions could always be worse, and although he is in favor of terminating the PILOT, there has been no discussion about the implications for the families that are there and does termination make things worse.
Shores responded to Henderson, stating that KeyBank is large and the increase in taxes is something they would be able to absorb, as they have committed to putting over $150,000 a month into the property and understand what it is going to take. Shores stated management has closed over seven hundred (700) work orders in the last three (3) months, grass has begun to be cut regularly, seventy (70) HVAC units and twenty-five to thirty (25-30) appliances have been replaced, management has identified buildings that they cannot move people into as well as buildings that are secure enough to begin work inside the units and get things ready, so progress is being made, but management will not be able to make the progress it takes to get to seventy-five percent (75%) occupancy without an infusion that he is sure KeyBank will not want to make. Shores reported there are many buildings that are boarded up and that is not consistent with the terms of the PILOT, and he understands that.
Corbin Carpenter asked Shores, out of the $150,00 that is allocated monthly by KeyBank toward the property, how much of that is going for security per month. Shores responded that $110,000 is going toward security, and the crime element has been reduced at the property. Charles Carpenter added that as far as the impact to the tenants, what the lender is doing is protecting its investment, so the termination of the PILOT will not impact that. Carpenter reported that the City is going into a new tax cycle now, which would be some impact, but as far as what KeyBank is doing, the focus is on protecting the investment the best it can, and the court supervised receivership must maintain those minimum standards to keep that in place. Carpenter stated this is a unique circumstance that the impact to the tenants would be minimal. McKnight asked that if the PILOT is terminated, is the Board able to ensure all fees due to the Shelby County Trustee are paid in full prior to another PILOT for the property being considered, to which Carpenter responded yes. Monice Hagler stated the lender would require that. Carpenter said it would be required to be paid in full for any title to transfer. Hagler stated that given the recommendation of the Board’s legal counsel and hearing the status of KeyBank’s position, she would recommend termination of this PILOT. There being no further questions or comments,
Monice Hager moved to terminate the New Horizon Apartments PILOT. Vincent Sawyer seconded, and the motion passed by majority after proper roll call vote of the Board members with Cliff Henderson and Howard Eddings voted not to terminate the PILOT for New Horizon Apartments.
Corbin Carpenter advised the Board that procedurally, his Firm will draft the Quit Claim Deed returning the property to the appropriate ownership group, share the change in ownership with the appropriate taxing authorities to ensure the property is properly removed from the PILOT program and reassessed at Fair Market Value and returned to the tax rolls.
David Shores and Mark Jobe left the meeting.
Jamilah Holloway left the meeting.
2. 1st Bond Inducement Resolution Closing Extension for APP Pershing Partners, LLLP (d/b/a Pershing Park Apartments)
Thomas Robinson and Mallory Key entered the meeting.
Charles Carpenter introduced this agenda item, stating that the Board induced bonds for Pershing Park at the February 7, 2024 Board Meeting, and then approved the PILOT at the March 6, 2024 Board meeting. Carpenter reported that the property has received allocation of tax credits form THDA and the project has a very established professional working group that is working together, and all things are in place and moving forward with an anticipated pricing and closing within the next sixty (60) days. Carpenter introduced representatives in attendance, Thomas Robinson and Mallory Key and turned the meeting over to them for additional comments. Robinson stated his team is excited to move forward and on track with most required approvals already obtained and the team is working on closing out the rest of the financing process and anticipates a closing in the next sixty (60) days and then begin renovations. Robinson thanked the Board for its support. Carpenter stated his Firm would recommend approval for the bond and PILOT closing extensions. There being no further questions or comments,
Howard Eddings, Jr moved to approve the 1st Bond Inducement Resolution Closing Extension for APP Pershing Partners, LLLP (d/b/a Pershing Park Apartments). Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
3. 1st PILOT Closing Extension for APP Pershing Partners, LLLP (d/b/a Pershing Park Apartments)
There being no further questions or comments,
Howard Eddings, Jr moved to approve the 1st PILOT Closing Extension for APP Pershing Partners, LLLP (d/b/a Pershing Park Apartments). Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Corbin Carpenter advised the Board that representatives would appear before the Board at its September 11, 2024 Board meeting for consideration of the Final Bond Resolution for this project.
Thomas Robinson and Mallory Key left the meeting.
4. 9th PILOT Closing Extension for MH Strategies II, LP (Borda Towers and Venson Center)
This agenda item was considered and voted on earlier in this Board meeting.
5. PILOT Refinancing Application for Mazal in Grainge Hill, LLC (d/b/a Grainge Hill Apartments)
Frank Carney and Neil Knopf entered the meeting.
Charles Carpenter introduced this agenda item, stating that this developer has multiple properties in the Board’s PILOT portfolio. Carpenter reminded the Board that one of the things the Board has done is looking at PILOT properties portfolio wide as opposed to a property-by-property basis. The Board changed its approach to looking at the portfolio of a developer in order to have matters considered as a whole, and that all assets in a developer’s portfolio would need to be in good standing. As Board staff and legal counsel went through this process, Carpenter reported it was determined that in the portfolio there were some property deficiencies with the taxing authorities. Carpenter reported that those issues have now been cleared up, so that was a very positive benefit that has come out of looking at developers from a portfolio-wide basis, and there continues to be significant benefit from that approach. As a result, Carpenter reported that Action item five and six are in good standing and introduces representatives present, Frank Carney and Neil Knopf, and turned the meeting over to them for further comments.
Carney stated the first item is the PILOT Refinancing Application for Grainge Hill. Carney reported the property is about ninety percent (90%) complete and more than seventy-four percent (74%) occupied and is a refinancing of the original construction loan on the property. Largely, Carney reported ownership is paying off earlier debt and receiving a reduction in the interest rate, which will help the future development of the property. There being no further questions or comments
Monice Hagler moved to approve the PILOT Refinancing Application for Mazal in Grainge Hill, LLC (d/b/a Grainge Hill Apartments). Ketie Shotts seconded, and the motion passed unanimously after proper roll call vote of the Board members.
6. PILOT Refinancing Application for Mazal in Eden, LLC (d/b/a Eden Pointe Apartments)
There being no further questions or comments,
Cliff Henderson moved to approve the PILOT Refinancing Application for Mazal in Eden, LLC (d/b/a Eden Pointe Apartments). Howard Eddings, Jr seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Frank Carney and Neil Knopf left the meeting.
Shirley Bondon left the meeting.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended June 30, 2024. After discussion,
Howard Eddings moved for acceptance of the Finance Committee Report for the month ended June 30, 2024, properly seconded by Vincent Sawyer, and the motion passed unanimously after a proper roll call vote of the Board members.
New Business
There was no new business.
Chairman Reid stated that the next meeting of the Board is scheduled for Wednesday, September 11, 2024 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 02:05 p.m.