MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, July 10, 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 3, 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 James Jalenak (Zoom)
Cliff Henderson Katie Shotts (Zoom)
Howard Eddings, Jr Vincent Sawyer
The following Directors were absent:
Monice Hagler, Secretary Buckner Wellford
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; Garrison Green, legal intern to General Counsel; Cheryl Hearn, Deputy City Attorney.
Also participating in person and/or via remote Zoom virtual platform were
William Tuggle, Mary Collier, Andrea Smith, Joyce Warren and Helen Evans, residents of Memphis Towers and representatives of the Memphis Towers Tenants Union; Devin McGrath, organizer of the Memphis Tenants Union; Brian Myers of Richman Asset Management and Henry Zuckerberg of JDF, LLC representing The Richman Group Affordable Housing, a limited partner appearing in connection with Memphis Towers Apartments; Michael Pico and Patricia Richmond of Millennia Housing and Adam Gutteridge of WNC, Inc., a limited partner, all representing Cavalier Court and Gospel Gardens; Tie Lasater of Key City Capital representing Grahamwood Place Apartments and Pinebrook Pointe Apartments; Michael McCanlek of the University of Kentucky; Simone Ike of the Greater Memphis Housing Justice Project; Shirley Bondon of the Black Clergy Collaborative of Memphis; Chenise Anthony of the Fair Housing Council of Metropolitan Memphis; Geoff Hanson; Shiela Jordan Cunningham; Desmond Nugent of ABC 24 News; Oscar Aquilar of WREG Channel 3 News; 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, July 10, 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.
Brian Myers and Henry Zuckerberg entered the meeting.
Michale Pico, Patricia Richmond and Adam Gutteridge entered the meeting.
Desmond Nugent and Oscar Aguilar entered the meeting.
Michael McCanlek, Simeon Ike and Shirley Bondon entered the meeting.
Approval of Minutes
Cliff Henderson moved for approval of the Minutes of the June 5, 2024 Regular Meeting, which was seconded by Vincent Sawyer and the motion passed unanimously after proper roll call vote of the Board members.
William Tuggle, Mary Collier, Andrea Smith, Joyce Warren, Devin McGrath, and Helen Evans entered the meeting.
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 one (1) new lawsuit in connection with PILOT property:
a. Barbara Greer vs. Millcreek Apts, et al. Carpenter stated that as registered agent for the Board, he was served with a copy of the lawsuit. Carpenter advised that his firm has been in contact with plaintiff's counsel, advised of the Board’s statutory exemption from liability, and after confirmation of the law, Plaintiff’s counsel has agreed to removing the Board as a party defendant from the lawsuit. Carpenter stated his firm will continue to monitor this issue and keep the Board advised.
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.
2. Carpenter reported there were no PILOT Closings for June 2024.
3. Carpenter continued by reporting that his firm participated in the Tillman Cove Ribbon Cutting, which was a very nice event. The Tillman Cove project is a new construction project with an established developer, Elmington Capital, and the Community Development Corporation located in the Binghampton area. Carpenter reminded the Board that it participated in issuing tax-exempt bonds for this project.
4. Carpenter reminded the Board that at the June 5, 2024 Board meeting, the Board approved a Final Bond Resolution for Madrone CDF PropCo LLC (University of Memphis Park Avenue Campus Student Housing Project). Since that time, Carpenter reported the development team has taken a different approach and has notified his firm that the group is formally withdrawing its application before this Board. It is the group’s intention to move forward with The Health, Educational and Housing Facility Board of Shelby County, TN because that Board does not have ongoing Issuer and Administrative Fees as this Board does. Carpenter advised that The Health, Educational and Housing Facility Board of the City of Memphis, TN is the only Board of its kind in the state of Tennessee that has a full-time staff. Carpenter reported that this Board is the only Board of its kind in the state of Tennessee to also provide a PILOT program. Carpenter advised that representatives in Metro Nashville are putting together a PILOT program, but it operates completely differently than this Board’s program does, and his firm has been consulting with them over the last couple of years and giving them information on how this program operates, but Nashville has taken a different approach, but it is very limited at this point.
5. Finally, Carpenter reported on industry highlights, that the Municipal Securities Rule Making Board has published the second quarter report for this year and there has been an increase in trade volume of thirty-one percent (31%) this year versus last year, and a significant increase in new issuance of tax-exempt bonds of thirty-five percent (35%) this year versus last year, with volume reaching approximately $242 billion. Carpenter reported this increase in activity because the industry is getting over the remnants of COVID-19 and supply chain disruption, deferred projects, deferred maintenance, and a lot of the trading and new issuances are taking place prior to the presidential election because it is unknown how that will impact the market. Carpenter reported that the third quarter is forecasted to be a robust quarter based on points made previously, in addition to July 1st being a very strong maturity date, so there will be a lot of activity going on during that time.
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. William Tuggle introduced himself as a resident of Memphis Towers. Tuggle stated his concern is security. Tuggle stated there are security cameras when you get off the elevators and they go down the hallway, but no cameras go around in a circle. Tuggle stated there is a bigger problem with porch pirates and people stealing packages that residents order. Tuggle stated there is no way to look at the film to see who is stealing the packages because the cameras do not go around in a circle, and they only go down the hallway. Tuggle stated other than that, he thinks the Richmond Group is doing a good job and it is so much better than when Millennia was running it. Tuggle stated there has been a lot of improvement, and it is still not perfect, but it is a big improvement.
2. Mary Collier introduced herself as a resident of Memphis Towers. Collier stated her issue is with the office staff and that they do not treat tenants with respect. Collier stated staff goes through tenant’s rooms, is not sure what they are looking for, and she is talking about the office and maintenance staff. Collier stated she came back to live at Memphis Towers because she thought it would be a safe place to retire and it is not safe for anyone to live there. Collier stated there needs to be two (2) securities, one at the front desk and one to walk the halls and stairs. Collier stated her issue is with the old Millennia staff and they need to go because they are not safe to be around and for the people that worked all their life to be living in a safe place is her issue. Collier stated just imagine a mother or grandmother staying there and loved ones would want them to be safe and that is her issue with Millennia.
3. Andrea Smith introduced herself as a resident of Memphis Towers. Smith stated she has been a resident for four (4) years and her problem is they do not fix anything on the demand list that the Memphis Towers Tenants Union have said until it is time for Richmond Group to be in town, and when they leave, it goes back to the old way, not fixing anything. Smith stated she has gone down and put in orders many times, her lightbulbs and light in her bathroom and her sink, which is leaking. Smith stated she has a problem with that because she does not have any lights in the bathroom sometimes and it takes about two hours for them to come on. Smith stated they need to fix it or get out and they do not know what they are doing.
4. Joyce Warren introduced herself as a resident of Memphis Towers. Warren stated she has been a resident for over eleven (11) years. Warren stated Richman Group is doing a great job, but she is going to hold them to their word, and they do not need a PILOT until they complete the project. Warren stated again they are doing a great job, but she wants them to keep their word. Warren stated she has been there for ten (10) years and waiting for someone to keep their word and Richman Group is doing a good job, but she does not want the PILOT released until the project is complete.
5. Devin McGrath introduced himself as an organizer of the Memphis Towers Tenants Union. McGrath stated that when The Richman Group assumed ownership of Memphis Towers in March, we were skeptically optimistic that ownership would prioritize the living conditions, quality of life and dignity of tenants at Memphis Towers. However, a startling pattern has emerged. Richman staff flying to Memphis a few days prior to the HEHF Board meetings and leave almost immediately after. Memphis Towers is left in the hands of the same staff who managed the property during Millennia's ownership. Millennia’s mentality is still very much alive at Memphis Towers, with building staff retaliating against union members, stealing and lying to tenants, and frequently entering apartments without notice. I ask the HEHF board to consider how they would feel if their loved ones were in a situation where theft, violation of privacy, and harassment were part of their daily reality. Many of Richman's promises and agreements with tenants have gone unaddressed while they attempt to meet the minimum occupancy requirements to reinstate the PILOT, we ask that the board set a clear precedent that the health, safety and living conditions of tenants in Memphis will be considered above the short-term solvency of an out of state developer. We ask that until ownership can demonstrate the consistent commitment to working with tenants to improve living conditions at the property, no movement is made by the board to reinstate the pilot at Memphis Towers.
Action Items-
1. Status updates for PILOTs in Legal Default
a. Memphis Towers
Charles Carpenter introduced this agenda item, introducing Brian Myers as the president of Richman Asset Management Group and stated that at the Board’s June 5, 2024 meeting, there were still items that were incomplete, including the certificate of occupancy for the third tower, Tower B, and a request from a Board member for confirmation that Tenant Benefits have been complied with. Also, Carpenter stated there was a request from Memphis Towers representatives for consideration by the Board to be moved out of legal default because of certain interest that was accruing at that time. Since the June 5, 2024 Board Meeting, Carpenter reported receiving the Certificate of Occupancy for Tower B and confirmation from the limited partner through the General Contractor, Marous Brothers, that the Tenant Benefits have been complied with. Carpenter reported also receiving a copy of a letter from Grand Bridge Real Estate Capital regarding the extension fees that have been either accruing or incurred since March 2020. With that, Carpenter turned the meeting over to Myers for comment.
Myers stated he is pleased to announce the Memphis Towers received the Certificate of Occupancy for the third and final tower, Tower B, a few weeks ago, and the management team learned on July 9, 2024 that all approvals have been received to begin moving residents into that Tower B. Myers stated management is actively leasing those units with a goal to have the building completely leased by the end of the year 2024. Myers stated that in respect to some of the public comments that were made, he would like to speak with residents after this meeting, as he was not aware of any security issues, as 24-hour security was put in place the day The Richman Group took over operations. Myers stated there were approximately forty-five (45) cameras installed as well around that same time, and there is a second phase of cameras that his group plans to deploy, which he believes will help with some of the concerns like staff entering apartments, because it is certainly not acceptable and he was not aware of that.
Carpenter asked, concerning his review of the Grand Bridge communication, if the extension fees are being incurred because of the inability to rate lock or if that was caused by the legal default placed on the project by the Board, as this was not made clear at the last meeting and it was indicated that the legal default was the cause. Myers clarified that the legal default is not the cause but is an obstacle to resolving it. Myers explained that Housing and Urban Development (HUD) has a term called File Endorsement on the loan and there are items that must be complete to achieve the endorsement, first of which is completing the building, which has just been finished and the Certificate of Occupancy has been received, which was the biggest hurdle. Myers stated this is a process with HUD and The Richman Group must finish all conditions as well as resolve the PILOT, so the PILOT legal default was not the cause, but it is currently an obstacle. Carpenter asked what the status of the other conditions are for the endorsement. Myers stated his group is working through it and he had a call yesterday that indicated it would be at least a couple of months away from getting there at this point.
Carpenter asked for a status update on the common areas. Myers reported that he visited the site on July 9, 2024 and walked the property with the architect of record and the general contractor of record and the plans that the architect put together and there were deficiencies in a couple of places, some electrical outlets must be moved and some other things, so it is going back to the drawing board and revise the plans with hopes of submitting new plans to the city in the next couple of weeks. Myers stated he said the same thing at last month’s meeting, and he is frustrated it has taken as long as it has, but the new architect and contractor have indicated work would start in two (2) months and finish in four (4) months. Carpenter stated this timeline would put total completion accomplished by the end of the year 2024 and asked Myers if that is realistic, to which Myers agreed and said it is. Myers asked the Board to keep in mind that these are the common areas only that are awaiting completion.
Cliff Henderson asked for a report from the Board’s internal monitors. Bryce Miller reported that internal monitors have visited Memphis Towers several times throughout the month and stated he has observed additional seating in common areas that was not there prior to The Richman Group taking control of the property in addition to a lot of new seating areas outside. Miller stated the external conditions of the property appear to be in good condition and it has been a complete turnaround from six (6) months ago. Vincent Sawyer asked if there has been any change in the timeline to coming into full compliance. Myers stated that his group believes the property is in full compliance. Sawyer clarified his question was regarding occupancy. Myers stated he is hopeful that it will be full by the end of the year, which is somewhat of a conservative outlook and hopefully it will happen sooner, but the expectation is the property should be full by the end of the year 2024. For the record, Carpenter stated there are three (3) towers and asked what the current occupancy level is for the two towers that have been in service. Myers stated they are all leased, and management is still waiting for approximately twenty (20) tenants to move in the units that had been previously occupied, so approximately ninety percent (90%). Stephanie Bryant stated that the most recent Quarterly Occupancy Report submitted by the PILOT Lessee shows the property at fifty-five percent (55%) occupied. Bryant clarified this occupancy rate includes all units, including the Tower B units that have just received the Certificate of Occupancy. Carpenter stated that under the Board’s policies, that is how occupancy rates are calculated, by using the total number of units.
Myers asked for clarity, stating that he has looked back, and it looked like that occupancy statement is applied only after lease-up is complete for obvious reasons. Carpenter stated that is true, but in extenuating circumstances like this property is in, occupancy is looked at based on the facts and circumstances. Carpenter stated that once a property becomes active in the Board’s program and the PILOT is applied to the property, a schedule is submitted as to when the lease-up period is to be done and this project is way outside that lease up period approved due to various circumstances discussed here. Carpenter stated that as has been indicated previously, the Board is very pleased with the progress since Richman Group has come in and become very active and the Board wants to work with Richman Group and be cooperative so that everything continues to move in a very beneficial way for everyone.
Further, Carpenter stated it has been clarified at this meeting why the project extension fees were being incurred, as the Board was under the impression it was due solely to the PILOT legal default, but it is not. Considering the fact that there still remain other conditions that must be satisfied before the extension fees go away and it is not just the legal default that is keeping things from moving forward, and there continues to be tenant concerns and other concerns, Carpenter recommended the representatives reappear at the Board’s September 11, 2024 Board meeting to provide a status update at that time. Carpenter stated the Board’s internal monitors will continue their review of the property during the interim period and at the Board’s September 11, 2024 Board meeting, the Board will look to take more aggressive action as far as reducing oversight or removing the legal default at that time. Myers asked for confirmation of the Board’s minimum occupancy requirement, to which Carpenter responded seventy-five percent (75%). After consensus, representatives are to appear before the Board at the September 11, 2024 Board meeting for a status update.
William Tuggle, Mary Collier, Andrea Smith, Joyce Warren, Devin McGrath, and Helen Evans left the meeting.
Brian Myers left the meeting.
Desmond Nugent and Oscar Aguilar left the meeting.
b. Cavalier Court
c. Gospel Gardens
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 introduced these two agenda items and stated that both properties are in legal default and similar to Memphis Towers, Board staff and his firm have had communications from other financing entities involved with these properties including KeyBank, the lender, and WNC, Inc., the limited partner. Carpenter stated that with Memphis Towers, the limited partner came in and took control of the property and removed Millennia. With these two projects, the limited partner has appeared before the Board previously, but they have allowed Millennia to continue full operations of the day-to-day activities.
Based on internal monitoring and the condition of each of these properties in the month of June, 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, 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. Michael Pico introduced himself as the Chief Operating Officer of Millennia and said he is joined by Patricia Richmond, the regional manager for Millennia, and Adam Gutteridge of WNC, limited partner on both projects. Pico stated Millennia provided a response to the Notice of Show Cause, addressing each of the items for both Cavalier Court and Gospel Gardens and included a photo exhibit of some of the key areas that have been talked about and then addressed in the notice, there is activity on each. Pico stated there has been discussions about the potential buyer of the general partner interest in both Cavalier Court and Gospel Gardens, and although he is not at liberty to disclose that name again today, he will say that the Letter of Intent (LOI) has been signed and is rather robust and the buyer and Millennia hope that will move to a Purchase Sale Agreement within the next couple of weeks, or by the end of July 2024. Pico stated at that point, they would be able to disclose their name. Pico stated the potential buyer has been to the properties to inspect them, noting the areas of deficiency. Pico turned the meeting over to Adam Gutteridge for further comment.
Gutteridge stated the group has a LOI from the buyer, but it is comprehensive as a purchase sale agreement, and the potential buyer has substantially completed due diligence on the properties. Gutteridge stated this is a 15,000-unit sale for $6 billion. Gutteridge stated the potential buyer was at Cavalier Court and Gospel Gardens on Monday, July 8, 2024 and things went well, and although he cannot disclose who the buyer is at this time, he stated it is one of the top five largest owners of apartments that is an owner-operator. Gutteridge responded to Carpenter’s comment concerning The Richman Group taking control of Memphis Towers and removing Millennia, stating the WNC has been quite involved and forced placed coverage of the insurance to make sure that the properties had property insurance. Gutteridge stated WNC has forwarded a half a million dollars to date for operating deficits and WNC has a draft delegation agreement, as necessary, as issues come up like air conditioners being stolen and WNC needs to step in as a limited partner to play more of a general partner role. Gutteridge reiterated that WNC has been highly involved in day-to-day operations of the properties and he has been onsite for the last several days. Gutteridge stated the Board may not have had time to digest the response to the Notice of Show Cause letters, but he thinks it is robust and similar to Memphis Towers, but Millennia is still operating the properties until both are taken over by the buyer.
Pico stated one of the biggest issues has been that of air conditioning at Cavalier Court, but the Board will see the same response has been issued for Gospel Gardens and last week, Millennia issued over forty (40) window units, but realizing window units are only a temporary fix and not a permanent solution. Pico stated there is an issue at Cavalier Court with theft of air conditioning condensers and he has brought one of his regional facilities personnel from out of state to start assessing the overall state of what needs to happen to get these air conditioners back up and running. Pico stated that in the last five (5) days, Cavalier Court has lost thirteen (13) condensers that have been stolen from the property, so before they are replaced, there must be a plan in place for cages on all of those, because otherwise this issue will perpetuate. Pico stated this is not a stall tactic, and he has someone onsite today to provide an estimate on one vendor and another vendor is also coming and cages must be in place. Pico stated the condenser theft issue is not happening at Gospel Gardens, although Gospel Gardens is experiencing air conditioning issues that are more parts of thermostats. Pico stated he will have an update to the Board by the next Board meeting and hopes to have a signed contract and progress on the caging of those air conditioners instead of just speaking to an ambiguous quote today. Pico stated that is a promise he will make to the Board today. Gutteridge stated the proposed sale is to take place in the fourth quarter of this year 2024 and that WNC is pouring resources into these two properties.
Brian Myers entered the meeting.
Carpenter asked for the Board’s internal monitors to report on their observations of the projects. Bryce Miller stated he and internal monitor JP Townsend have both visited each project several times throughout the month. Beginning with observations at Cavalier Court, Miller stated he has noticed some work being done with the graffiti and some of the windows of the down units being boarded up, but there has been no movement on the burned units. Miller stated that the representatives report to the Board has highlighted monitor’s largest concern with both Cavalier Court and Gospel Gardens, which is security. Miller stated there is very little security at either of these properties, but Cavalier Court’s security is more concerning, as there is not enough security and condensers are being stolen. Miller stated Gospel Gardens does have some cameras as well as a license plate reader. Miller reported that both he and Townsend have observed on several occasions close to two dozen vehicles parked across the street, which is obviously an effort to avoid the license plate reader and is a huge concern. Miller stated with serious security concerns at both properties, how will security be addressed moving forward.
Patricia Richmond stated she agrees with Miller and stated there needs to be a security contract in place. Richmond stated that in addition to the cameras at Gospel Gardens, they do have a towing contract, but because this area is outside of the fence line and across the street, the towing company will not tow from that area because it is within city limits, so towing only takes place within the constraints of the property. Richmond stated the cameras at Gospel Gardens are not monitored 24/7, and only when they have incidents. Richmond stated there needs to be a deeper conversation on how to address the cars sitting across the street, of which some look to be abandoned.
Carpenter stated with these things being considered, the question becomes what sort of security is there for walking traffic for people parking across the street and accessing the property and walking right in and how that issue is being addressed. Richmond stated that is something Millennia is looking to implement. Richmond stated in previous portfolios she has had, that there were armed security officers, and it seems more effective because they have the authority to arrest, and they can control foot traffic, so that would be one part. Richmond stated the second part would be to implement some type of in-house rule where a curfew is put in place and not allow people to sit in their vehicles, which would deter the foot traffic. Richmond stated she has only been with Millennia for sixty (60) days, but she is working on it and those are some things she has identified since she has been at both properties, and she has seen been effective in previous portfolios like Cavalier Court and Gospel Gardens.
JP Townsend stated he has been inspecting these properties for a while now and Cavalier Court is visibly not as in good repair as Gospel Gardens, but there have been damages that he has observed for almost a year at Gospel Gardens that have not been addressed until this week, including some of the boarded-up windows, to which he has observed no movement in a very long time. Townsend stated many of the units were exposed and open to anyone, on the first floor, and have gone through several different seasons, and were not addressed until this week. Pico responded that since he has come in and taken over oversight through Richmond, focus has been placed on securing the sites as well as addressing the burned building, which was left open, but construction is resuming on that. Pico stated this issue was addressed in Millennia’s response to the Notice of Show Cause, that in the past month and a half, and since Richmond has been on Board, Millennia has power washed both Cavalier Court and Gospel Gardens, cleaned up community spaces, and secured a consistent landscaping company. Pico stated Millennia’s response included benchmarks and dates that will be monitored from both a corporate perspective and perspective on the ground to ensure that each of those line items are addressed and the goal of this is to enhance the lives of the residents as well as ensure their safety.
Townsend reported on stated Tenant Benefits for these properties, stating the playgrounds at Cavalier Court are in complete disrepair, the playground equipment is rusted old metal jungle gyms that have not been taken care of, all the ball fields for basketball are overgrown and in disrepair, and he believes that this could be a liability, but is also a huge safety concern for any children on these properties. As to Gospel Gardens, Townsend stated there is a nice community common area space, but there was a damaged fence that was only just addressed that has been damaged and open for quite a while. Townsend asked if there has ever been any consideration for putting in a gate at Cavalier Court and securing the property. Pico responded by stating that Millennia will address the playground equipment and the basketball court is being addressed right now with new painted backboards and new nets, and Millennia is looking at how to address the asphalt and actual court itself, as it needs work. Miller stated that the basketball courts and playground equipment were part of Millennia’s original stated Tenant Benefits as part of the original PILOT application, which was implemented in 2018 and now years later, these items have yet to be addressed. Pico stated there has been temporary fencing put up as the order is being placed for the new wrought iron to replace it because there are too many entrance spaces, particularly as Gospel Gardens, where aesthetically it is located at the front of the property.
Gutteridge stated that the long-term plan is to get Millennia out and get the new buyer in. Gutteridge stated he has noticed many of these same issues that have been identified by Miller and Townsend and they are going to try and get all those things addressed, and what the Board may have seen in Millennia’s response letter is like someone preparing their house for sale and Millennia is finally stepping up and these items are being addressed and will continue to be addressed, and he is just asking for more time in order to get this transaction complete because there is no transfer of getting money out without the PILOT because the deal will fail at that point. Pico stated that on the visit with the buyer, they are so used to working in this space, there was almost no stone left unturned and Pico stated he has been performing the buyer visits through almost one hundred properties throughout the portfolio and in each of them, they went into what would be considered the worst units, mechanical rooms, playgrounds, and they are aware, as well as being well capitalized to say how they would address each item.
Carpenter stated that as some representatives have indicated that they are new to these properties, the Board is not new to dealing with Millennia and Millennia has no credibility with this Board, and that is based on their actions or lack of action. Carpenter stated that representatives saying there is a new person that is going to run in and solve all these problems, but it may be several months before something can be closed and that is not persuasive either because the Board is dealing with long standing problems that are still not being addressed. Carpenter stated his firm also received notice from the Environmental Court that there are multiple violations that will be in court later this month, and he has attempted, through the Board, in every way to impress how urgent this matter is, but the Board continues to receive the same responses. Carpenter stated the Board tries to balance things and does not want to terminate a PILOT and frustrate tens of millions of dollars that have been invested, but at the same time, the Board must follow its policies and procedures and it is not being done. For these two properties to get to a point where another owner can come before this Board and request approval for a PILOT Transfer, things are going to have to be put in place on a timely basis. In considering the Environmental Court hearing later this month and with the understanding that there will be forthcoming an executed purchase sale agreement that will be shared by the end of July 2024, Carpenter recommended to reset this matter to the August 7, 2024 Board meeting, still with the Show Cause being in place and determine at that time if these points can be property addressed so that the Board could take some definitive action at that time.
Vincent Sawyer asked representatives about the likelihood of the sale and asked if there are any contingencies that may be of concern. Gutteridge responded that Millennia’s owner, Frank Sinito, has been working on this sale for the last ninety to one hundred twenty (90-120) days and working on all the due diligence, and although the LOI reads like a fully executed purchase sale agreement, it is not and there are always contingencies. Gutteridge stated that he will apprise the Board personally if anything changes, but that WNC and the Board are on the same page and just want to get this deal completed because it is the only exit. Cliff Henderson asked if WNC is willing to address all these concerns that have been stated, especially those that are more pressing with security and safety issues, if the sale falls through. Gutteridge responded yes, and that WNC has already put out money from the fund and that is why the delegation agreement was drafted, to ensure things are completed. Pico expressed his appreciation for everyone’s comments and stated he is aware that the Board has been made a lot of promises over the years, but the Board has Millennia’s commitment to steer this in the right direction, whether it is for the sale or just to do right by the residents themselves. Gutteridge stated that WNC has never lost a deal, and this is a fifty (50) year company, and the Board has his full attention, and the funds will follow. After consensus, representatives are to appear before the Board at the August 7, 2024 Board meeting for a status update.
Michael Pico, Patricia Richmond and Adam Gutteridge left the meeting.
Brian Myers and Henry Zuckerberg left the meeting.
d. Grahamwood Place
e. Pinebrook Pointe
Tie Lassater entered 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 turned the meeting over to Lasater to provide an update on what has been taking place since the last report to the Board. Lasater thanked Carpenter and stated there are twenty-four (24) units at Grahamwood Place that are waiting on electrical inspections from Memphis Light, Gas & Water Division (MLGW), and of those units, fourteen (14) units have been claimed and tenants will be promptly moving in, which will push occupancy from sixty-six percent (66%) to seventy-two percent (72%). Lasater reported the pool at Grahamwood Place has been fixed and is being refilled today and will be active and ready for use quickly. Lasater reported a construction crew on site that is working through ten (10) unit renovations, and those units will be ready for electrical inspection within a week, and units are being turned as quickly as possible.
Bryce Miller reported internal monitors have observed Grahamwood Place maintaining a status quo that past few months, there have been a few windows observed that need repair and Board staff has contacted MLGW concerning the hole that is in the back of the property and still working through that. Lasater stated ownership may need to fix that, as they did another hole that was discussed with MLGW. Miller reported that MLGW advised the hole was caused by a leak with the property and not an MLGW leak, so there is some back and forth with MLGW right now. Lasater stated that would be new news to ownership, as they were unaware that it was anything to do with the property because MLGW came out to the property and fixed the leak without notifying representatives they were coming. Miller reported he and Townsend observed the pool being worked on during their visits to the property this month. Townsend stated the pool was still being drained, and there have been continual issues with the fencing, but it appears to be more of a neighbor issue resulting from tenants on the property. Overall, Townsend stated Grahamwood Place has continued with the status quo and is in compliance, aside from the occupancy level at the property. Miller agreed, stating occupancy is the main outstanding compliance issue with Grahamwood Place, but stated he and Townsend have both observed an increase onsite. Lasater stated occupancy has increased from just fifty-one percent (51%) in December 2023 to currently sixty-six percent (66%) and has reached as high as seventy-two percent (72%) at a point since December 2023. Lasater stated there is a lot of traffic onsite, but the units are not finished. Miller stated he observes workers onsite during each visit to the property. Carpenter asked what the delay has been with getting units rent ready. Lasater responded that units are rent ready with the exception of MLGW coming out and green tagging the electricity. Carpenter asked Stephanie Bryant if she received a rent roll from the PILOT Lessee, to which she responded she did.
Lasater began his report on Pinebrook, stating occupancy is currently at seventy-one percent (71%), with nine (9) more units in the same situation of waiting on MLGW to inspect the electricity to release those units. Lasater reported he expects another unit to be available in the coming days that will also be awaiting electrical inspection only, and construction crews are working on another ten (10) units. Lasater reported receiving bids for the fire damages units, and at the time of the last report to the Board at the June 5, 2024 Board meeting, those fire damaged units were being cleaned out and they are now ready for full blown construction on all three (3) fire damaged areas. Lasater reported the pool at Pinebrook Pointe is up and running and several pool parties have already been held at the property. Lasater reported the pool parties did invite a crime issue with people that were not tenants showing up to the property, security cameras caught them, and they were asked to leave. However, they did come back later and shot guns inside the property, but the security cameras got the license plates of three (3) vehicles involved, a police report has been filed, and the police are investigating that incident, which occurred Monday, July 8, 2024. Lasater reported there are new construction crews onsite, including a crew that will begin construction of some new retaining walls and things like that for preservation of the property.
Lasater stated there are one hundred seventy-six (176) units (of two hundred forty-eight (248) total units) leased, with nine (9) additional units pre-leased, which will push occupancy to just over seventy-five percent (75%), once those units are occupied. Lasater reported a new contract with a tow company that is coming in. Lasater stated Pinebrook has an ongoing issue with a bunch of cars that are on-functioning, so there will be a tow company what is going to begin coming in and monitoring that. The tow company will also be bringing in cameras throughout the property, instead of using the current cameras just at the entrance, and these new cameras will also come with a surveillance fee that does daily surveillance, which will be good for the property and the tenants. Carpenter asked Lasater what the impediment is for the inspection on the electricity inspections. Lasater responded there is no impediment on their part, and he is unsure what the issue is from MLGW’s perspective, but he would imagine it would be a staffing issue, but either way, they are slow to deal with. Trey McKnight asked Lasater to get in contact with him via email, as he has contacts with MLGW that he will reach out to get the ball rolling regarding getting those things inspected.
Miller stated he recently went through the list of tenant benefits that were committed to by the PILOT Lessee, and there are several items he has not observed beginning with the parking lots. Miller stated it appears the parking lots were restriped at some point but has not been done in quite some time. Lasater stated the parking lot was repaired and restriped approximately two (2) years ago, and with winter storms, it has deteriorated again, but that is part of the new contract with the towing company is parking lot repairs and restriping. Lasater stated that he is unsure of the exact frequency, but he believes the tow company performs this service on the property every other year moving forward, and if it is needed inside that time frame, that would be an extra charge.
Miller asked about outdoor kitchens listed on the tenant benefits and asked if there are any. Lasater responded there is a grill and two park like tables. Miller asked if this is close to the playground, but Lasater said it is between the playground and the pool. Miller referenced erosion control, stating Lasater has touched on that already in his report. Lasater stated this is being done and ownership is putting in a couple of new retaining walls. Miller asked about the business center that is referenced in the property’s tenant benefits, asking if there is a business center located on the property with computers for residents to use. Lasater stated there are two computers and a large roundtable in a waiting room inside the office, which serves that purpose. Miller stated there was a significant amount of trash on the property during his inspection yesterday, to which Lasater stated he would deal with.
Miller stated the tenant benefits have listed that there is security the drives through the property at night and asked Lasater to explain the security onsite. Lasater stated that it is not something that happens non-stop but is performed in cycles and on different schedules so that it cannot be tracked. Lasater stated the security company monitors multiple sites that are owned by Key City Capital, which owns Grahamwood Place and Pinebrook Pointe. Miller asked about the status of the gates. Lasater responded he would get a clear answer on that, but he knows that there was a group that came in and looked at it, but it will more than likely need to be replaced. Lasater stated he has a business partner that has a property like Pinebrook Pointe and they put in a man booth and a drop-down gate and the man booth is manned eight to twelve (8-12) hours per day, and the person checks who is coming in and out of the property, so there has been consideration of that same idea as well. Miller made recommendations on gates he has observed that have worked well on other properties.
Miller asked Townsend if he had any additional comment. Townsend stated he will exclude anything that deals with fire damage. Townsend stated there is still soffit and fascia damage that is hanging off the building and has been in that condition for quite some time. Townsend stated there are still conjunction boxes with wiring hanging out from the cable lines that go through some of the buildings. Lasater stated that a bunch of those were cut out and now they do not know who is left, but someone came in and put new wiring in what was cut out, which means they are active, so he does not have a solution there yet. Miller stated there is an area where the conduit piping is falling off the building. Townsend agreed, stating there are a lot of hanging wires and nothing has been done for a while, and he has observed this issue on other properties, and it can be fixed.
Carpenter asked Lasater to provide a status update concerning September 2024 as the date discussed for the portfolio refinancing. Lasater stated he is still moving forward, and it is in the lender's hands right now and still looking to a September 2024 refinancing. Carpenter stated that the Board wants to help the PILOT Lessee get there, but at the same time, as previously indicated, with the fire damaged units and some other things, the financing has not been a problem and ownership has the resources to do these things, it is just a matter of getting there. Carpenter stated it is taking an inordinate amount of time to get these things up to date, and that is the challenge. Carpenter stated the Board is aware of September 2024 being the goal, but the make-ready units and getting the points that the Board’s internal monitors are talking about are things that must be done. Carpenter stated the Board appreciated the progress that has been made, particularly since Lasater has personally gotten involved, but these items still need to get done from a compliance standpoint.
Carpenter recommended representatives reappear at the Board’s August 7, 2024 Board meeting to provide a status update at that time. Miller stated that he would also like to conduct an onsite walkthrough of the properties prior to the Board’s August 7, 2024 Board meeting, to which Lasater agreed. After consensus, representatives are to appear before the Board at the August 7, 2024 Board meeting for a status update.
Shirley Bondon left the meeting.
Tie Lassater left the meeting.
Howard Eddings entered the meeting.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended May 31, 2024. After discussion,
Vincent Sawyer moved for acceptance of the Finance Committee Report for the month ended May 31, 2024, properly seconded by Howard Eddings, and the motion passed unanimously after a proper roll call vote of the Board members.
Review of Audit for FYE December 31, 2023
Curtis Carpenter and Christopher Hearn entered the meeting.
Chris Hearn and Curtis Carpenter of Banks, Finley, White & Co., CPAs, independent auditors for the corporation were introduced. Thereupon, the annual audit report for period ending December 31, 2023 was provided to the Board. Chris Hearn and Curtis Carpenter presented the audit and the management report to the Board and confirmed that the auditing firm had issued a clean opinion with no findings, being the highest assurance that could be granted by the auditors. After the presentation and a brief question and answer session ensued.
Let the record reflect that Vincent Sawyer recused himself from the Board vote.
There being no other questions or comments,
Cliff Henderson moved to approve acceptance of the INDEPENDENT FINANCIAL AUDIT OF THE BOARD FOR PERIOD ENDING DECEMBER 31, 2023. Howard Eddings seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Curtis Carpenter and Christopher Hearn left the meeting.
New Business
Carpenter stated there is a video clip that was distributed by Tennessee Housing Development Agency (THDA) as part of its latest newsletter regarding Memphis and some of the work that has been done that this Board has been vitally involved in. Carpenter stated he believes it is important to let the Board know the impact of the decisions it makes around the table and get the opportunity to see it. The video deals with the South City development, which is the old Foote Homes. Due to the format of the video, it was unable to be shown to the Board at the meeting, but Stephanie Bryant advised she would send the video to the Board following today’s meeting.
Carpenter also reminded the Board of previous discussions concerning an Annual PILOT Lessee meeting and advised that his firm has been working with Board staff on putting that together and will have more to share in the coming months but is being tentatively scheduled for quarter one of 2025.
There were no other questions or comments.
Chairman Reid stated that the next meeting of the Board is scheduled for Wednesday, August 7, 2024 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 01:35 p.m.