MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, June 5, 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, May 29, 2024, and posted on the Board’s website at: www.memphishehf.com. The published meeting time was 12:00 Noon. The meeting was held in the conference room in the Board offices, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chairman Monice Hagler, Secretary
Buckner Wellford James Jalenak (Zoom)
Cliff Henderson Katie Shotts (Zoom)
Howard Eddings, Jr Vincent Sawyer
Staff and others attending: Trey McKnight, Stephanie Bryant, Bryce Miller, 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.
Also participating in person and/or via remote Zoom virtual platform were
Tom Louth of Kutak Rock LLC, Joy Skidmore of The Annex Group, Ketan Chokshi and Robert Larkins of Loop Capital, Blair Tavennar and Nick Waugh of Madrone Community Development Foundation, Brooks Smith of Bradley Arant Law Firm, Steve Lackey of the University of Memphis all appearing in connection with the University of Memphis Park Avenue Campus Student Housing Project; Brian Myers of Richmond Asset Management, Henry Zuckerberg of JDF,LLC representing The Richmond Group Affordable Housing, a limited partner and Phillip White with SPM Property Management all appearing in connection with Memphis Towers Apartments; Michael Pico, Patricia Richmond, and Renee Weiss of Millennia Housing and Kent Mehring and Adam Gutteridge of WNC, Inc., a limited partner, all representing Cavalier Court and Gospel Gardens; Tie Lasater and Meliea Ware of Key City Capital representing Grahamwood Place Apartments and Pinebrook Pointe Apartments; Mark Jobe of Glankler Brown, PLLC and David Shores of Multi-South Management Services, LLC representing New Horizon Apartments; Philip Balderston, Tameca Parker, Brett Goldenhorn, Stephanie Reed and Pauline Olden of Odin Properties and David Upton representing Creekside Meadows (Bent Tree) and Mill Creek Apartments; Joseph Stebbins representing Kimball Cabana Apartments and Oakshire Downs Apartments and Townhomes; Frank Stockdale Carney of Evans Petree, PC and Mendel Fischer, Shrage Marasow and Neil Knopf representing Bridgeport Manor; Archie Willis of ComCap Partners and Roshun Austin of The Works representing Northside Square Apartments and Peach Tree Senior Housing; Alex Uhlmann, Joyce Warren, Helen Evans, Andrea Smith, and Mauri Pinekrey of the Memphis Tenants Union; Jacob Steimer of MLK50; Geoff Hanson; Izabella Arsenault; Shiela Jordan Cunningham; Mike Humes; and several members of the public were also present.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Daniel T. Reid, Chairman.
Chairman Reid stated that in compliance with the Open Meetings Law codified in Section 8-44-101 to 8-44-108 inclusive of the Tennessee Code Annotated, as amended, The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee is holding its regular meeting on Wednesday, June 5, 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.
Tom Louth, Joy Skidmore, Robert Larkins, Blair Tavennar, Brooks Smith and Steve Lackey entered the meeting.
Brian Myers, Henry Zuckerberg, and Phillip White entered the meeting.
Alex Uhlmann, Joyce Warren, Helen Evans, Andrea Smith, and Mauri Pinekrey entered the meeting.
Chairman Reid introduced Trey McKnight as the new Executive Director for the Board, as a part of the planned succession with the departure of Martin Edwards, Jr. And invited McKnight to give a brief overview of his background. McKnight thanked Chairman Reid and stated that he has been doing economic development for the last fifteen (15) years. McKnight thanked the entire Board for this opportunity and stated he is looking forward to working with everyone. Reid stated the Board has added another staff member and asked Stephanie Bryant to introduce her. Bryant introduced Nikki Abraham, who joined the HEHF staff as the new PILOT Lease File Auditor, a new position and responsibility taken on from an internal compliance standpoint. Bryant welcomed Abraham to the team.
Chairman Reid stated there would be a deviation is today’s agenda, and the Board would consider Action Item number seven (7) first and will then proceed with the regular scheduled agenda.
7. Final Bond Resolution for Madrone CDF PropCo LLC (University of Memphis Park Avenue Campus Student Housing Project)
Charles Carpenter introduced this agenda item, thanking the Chairman Reid for the modification of the agenda, as a number of professionals have come into Memphis from various parts of the country to work on this very important financing for the University of Memphis and have varying flight schedules. Carpenter stated this transaction is a public private partnership with a national 501(c)3 entity that is joining with the University of Memphis to bring some new student housing to our community. Carpenter turned the meeting over to representatives in attendance to introduce themselves and provide additional comments. Robert Larkins began, stating he is a managing director with Loop Capital Markets, the underwriter for the issue, which is expected to be complete in July 2024. Larkins stated his team is looking to finalize all the documents and is very excited about the project. Blair Tavennar introduced himself as the Chief Operating Officer for Madrone Community Development Foundation, which will be the conduit owner of the property and working closely with the University of Memphis to build this project to fruition. Steve Lackey introduced himself as the Assistant Vice President of Accounting and Financial Reporting for the University of Memphis. Lackey thanked the Board for its support of this project. Joy Skidmore of The Annex Group introduced herself, stating her team is the developer, general contractor, and facilities manager for the project. Tom Louth of Kutak Rock introduced himself as the bond counsel for the transaction. Brooks Smith of Bradley Arant Law Firm introduced himself as Tennessee counsel to Madrone Community Development Foundation based in the Nashville, TN office.
Carpenter thanked all representatives in attendance and stated this is a very distinguished working group and this is a complex transaction because as the University of Memphis is a state school, the State of Tennessee is involved through the Tennessee Building Commission and there are other approvals required through the State Attorney General’s office. Carpenter stated the group has worked diligently to move the project to this point, and the project will be new construction with an additional phase anticipated. Carpenter stated that student housing lags way behind many other forms of housing and this is a national issues that is becoming more vital. Carpenter stated this will be a 501(c)3 financing through a public offering led by Loop Capital Markets as the underwriter for the bonds. The terms have been structured, and Carpenter’s firm has been involved with the working group, reviewing and commenting on all important documentation from the Board’s standpoint. Carpenter stated documents are in substantially final form and his firm recommends approval of this final bond resolution.
Monice Hagler asked for clarification on the number of beds this project would provide, to which representatives confirmed the project would provide five hundred forty-three (543) beds. Buckner Wellford stated that at the Board’s May 8, 2024 Board Meeting, there was a comment that this type of approach had previously been used for student housing at the University of Tennessee, to which Carpenter confirmed. Wellford stated he is in favor of doing something that would promote the University of Memphis, and he knows there are students that need affordable housing, but this seems to fall outside of the Board’s core function. Wellford asked, as this is the forefront of this, if there is enough information about how this has worked at the University of Tennessee and how is has operated in practice and asked if other public institutions in the state of Tennessee are seriously looking at this. Carpenter responded by first stating that this would not be considered affordable housing, but student housing. Under the affordable housing authorization that the Board has, the Board would typically work with Tennessee Housing Development Agency (THDA) and bonds would be issued under different provisions of the Internal Revenue Code where there would be income restrictions and other requirements. Carpenter explained that this transaction will be a 501(c)3 financing, issued under a different section of the Internal Revenue Code and does not have the same types of restrictions and requirements that affordable housing does. Carpenter stated the Board can facilitate this type of financing under its state authorization. Carpenter explained that this type of 501(c)3 financing has been used throughout the country very successfully and is currently being used in Tennessee, with the University of Tennessee being the first institution to take advantage of this structure. Carpenter advised that Tennessee State University in Nashville is pursuing this financing structure currently, and his firm is working with the Metro Nashville Industrial Development Board to help facilitate that financing. Carpenter advised the Board that this University of Memphis Student Housing Project is the first time this 501(c)3 concept has been used in Memphis, but his firm has previously worked with Rhodes College and Memphis University School with tax exempt financing to help capital improvements on their campuses. Wellford stated that although education is included in the name of the Board, it usually does not deal with that, but he sees that it is an appropriate vehicle. After further discussion,
Cliff Henderson moved to approve the Final Bond Resolution for Madrone CDF PropCo LLC (University of Memphis Park Avenue Campus Student Housing Project). Vincent Sawyer seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Tom Louth, Joy Skidmore, Robert Larkins, Blair Tavennar, Brooks Smith and Steve Lackey left the meeting.
Michael Pico, Patricia Richmond, Adam Gutteridge, and Kent Mehring entered the meeting.
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.
There was no Public Comment.
Approval of Minutes
Monice Hagler moved for approval of the Minutes of the May 8, 2024 Regular Meeting, which was seconded by Cliff Henderson and the motion passed unanimously after proper roll call vote of the Board members.
Attorney’s Report
Charles Carpenter presented the legal report, as follows:
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 properties:
a. Eric Garner vs. New Horizon Apartments alleging wrongful death of a visitor to the property, which took place in September 2023. Carpenter advised that his firm has reviewed the lawsuit and preliminarily responded to Plaintiff’s counsel that the Board should be dismissed from the lawsuit due to its statutory immunity. Carpenter also advised that he has been in communication with the PILOT Lessee and its legal counsel, to ensure that the lawsuit has been referred over to the insurance company that would be covering the property as well as complying with the request to maintain any records and prevent any spoilage of any evidence. 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 holds the title to the property and is performing a public function for the City of Memphis.
b. The second lawsuit deals with John Madison Exum Towers PILOT property, a senior facility, and deals with a slip and fall that was alleged to have occurred in April 2024. Carpenter advised that his firm has taken the same actions and notified the Plaintiff’s counsel of the immunity under state law for the Board in its role as administrator of the PILOT program. Carpenter stated his firm will continue to monitor the issue until the Board has been dismissed from any further consideration and keep the Board advised.
2. Carpenter continued by reporting three (3) recent successful Bond Remarketing activities as follows:
a. Tillman Cove Bond Remarketing;
b. Oakshire Downs Bond Remarketing;
c. Kimball Cabana Bonds Remarketing.
Carpenter stated the Tillman Cove project is a new construction project with an established developer and the Community Development Corporation in the Binghampton area. Carpenter advised there will be a ribbon cutting later in the month of June 2023 for this project.
Carpenter advised that with the Oakshire Downs and Kimball Cabana bond remarketing, both projects have bonds issued through this Board, but the construction and rehabilitation has not been completed for either project. Carpenter reserved additional comments for action items.
3. Carpenter reported that THDA has issued notice of the round one award recipients of 4% tax credits and Pershing Park Apartments was included in round one and have received an allocation of 4% tax credits. Carpenter stated his firm will be working with the ALCO team and professional working group to facilitate the closing of bonds for this project.
4. Finally, Carpenter reported Housing and Urban Development (HUD) annually releases income limits throughout the United States. For the Memphis, TN area and the surrounding areas in Arkansas and Mississippi, the fiscal year 2024 income limits are as follows:
a. The median family income for the Memphis area is $85, 200 for a family of four (4); 80% of those income limits would be $68,160 and would be considered low income; 50% of those income limits would be $42,600 and would be considered very low income. Extremely low income would be $31,200.
b. For comparison, the median family income for Davidson, Murfreesboro and Franklin County in Nashville, TN is $106,900; 80% of those income limits would be $85,520 and would be considered low income; 50% of those income limits would be $53,450 and would be considered very low income. Extremely low income would be $32,050.
Carpenter stated that as the Board was reminded at the May 8, 2024 Board meeting, the allocation of low income housing tax credits by THDA in the three grand divisions is vitally important, very competitive and is based on the prior year’s results. For example, in Middle Tennessee, because income rates are higher and the income limits factor into what the rental rates are that would be paid by HUD for those properties in that area, it becomes more attractive to developers. Carpenter stated the challenge for West Tennessee having the lowest median income statewide, most developers are looking at other parts of the State and West Tennessee will need to look at other ways of attracting and maintaining quality developers in West Tennessee.
Chairman Reid asked concerning the wrongful death lawsuit filed against New Horizon Apartments, what the statute of limitations is for a wrongful death lawsuit in the State of Tennessee. Carpenter responded that it is one (1) year. Chairman Reid asked if it is normal to wait until the end of that term. Carpenter explained that each situation is different and there are many legal realities to work through in these situations. For example, family relations must be worked through to determine who has the legal right to bring a cause of action, discussions with lawyers, investigations, etc., so it is not unusual to take a while to get to this stage of the proceedings. Carpenter stated there are other cases when lawsuits are brought right away, so it depends on the facts and circumstances.
Trey McKnight asked for clarification that New Horizon is the only responsible party. Carpenter explained that under state law, to facilitate the administration of the PILOT program the deed to the property is transferred to the Board for purposes of taking the property off of the tax rolls. As such, the Board is sued because it is listed in public records as the owner of the property. Carpenter stated that as the Board the Board is performing a public function on behalf of the City of Memphis, it is protected under the state law that removes any legal, financial or personal liability to the Board or any Board members while serving in the public function. McKnight asked for clarity that all Board members are indemnified, to which Carpenter stated that is correct.
There being no further questions or comments, the Legal Report was concluded.
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 Richmond Asset Management Group and turned the meeting over to Myers for introductions of other representatives in attendance and for further comment. Myers introduced Henry Zuckerberg, stating he is part of Richmond Asset Management Group and has been at the property since Richmond Asset Management took control of the property approximately eight (8) weeks ago. Phillip White introduced himself as the Director of Facilities for Southeastern Property Management (SPM). Myers stated SPM was approved by HUD and took over daily management of Memphis Towers on May 1, 2024. Carpenter advised representatives that the Board would require a copy of the management agreement for its records. Carpenter reminded the Board that during the May 8, 2024 status update, representatives provided an update on construction, release of the lien, and other activities, including common areas, and stated that a main concern for the Board is the completion of Tower B and where things stand with receiving the Certificate of Occupancy. Carpenter asked representatives to begin with an update of Tower B and continue by providing an update on what has occurred at the property since the Board’s May 7, 2024 Board meeting.
Myers stated the approvals have been received from all inspections for Tower B except for electrical, there was one last item found during an inspection on June 4, 2024, the electrical contractor is making those repairs today and ownership fully expects a full Certificate of Occupancy by Thursday, June 6, 2024 for Tower B. Myers stated that all work that was part of the original scope of work of the contract has been completed. Myers stated Memphis Towers is under a separate contract and scope of work for the common areas and is expected to be completed in all common areas in approximately ninety (90) days.
Myers asked Zuckerberg to provide the Board with an update on plans for leasing. Zuckerberg stated management is gearing up right now to reinstate a proper marketing plan for the final tower and hoping to have the remaining ninety-six (96) units leased in the next couple of months. Myers supplemented Zuckerberg’s comments by stating that SPM is working up a marketing plan to broadcast a digital marketing campaign to make sure the community is aware of the approximately one hundred (100) Section 8 units that are available. Myers stated that a handful of those available units are pre-leased, and there are other files that the management company must work through, as there is a compliance process that must be followed to demonstrate that eligibility. Myers stated he anticipated the process to take ninety (90) to one hundred twenty (120) days to complete the lease-up of Tower B.
Carpenter asked, aside from Tower B, what is the current occupancy rate. Myers stated that all but five (5) units are spoken for. Carpenter asked if Myers anticipates any other challenges, either from a construction or a permitting standpoint, or anything that would delay the plan that has been outlined. Myers responded nothing above and beyond the normal permitting process, as most of the work is done aside from common areas. Carpenter asked if there is a backlog of regular repair and maintenance requests and asked if management has been able to keep up with those requests from tenants. Myers responded there is not a backlog and stated that he believes management has done a good job in answering things in a timely manner.
Myers respectfully requested that the Board consider at its July 10, 2024 Board meeting lifting the legal default on Memphis Towers. Myers stated that ownership has satisfied all the defaults and acted in good faith. Carpenter stated that the Board’s policies and procedures require a minimum seventy-five percent (75%) occupancy, which is based on the total project. Carpenter stated that when the Tower B units come online, the Board will monitor that to make sure that occupancy meets that minimum requirement. Carpenter reminded the Board and representatives that following the May 8, 2024 Board meeting, it was anticipated the Memphis Towers would receive the Certificate of Occupancy for Tower B within two weeks of that meeting, but as of today’s meeting, it has not been obtained. Carpenter thanked representatives for their dedication, stating that the Board has been pleased with the way Richmond Group has come in and taken over the project and shifted the trend and moving it in the proper direction and the Board is very supportive of that. Carpenter stated with all of that said, the Board does not want to be overbearing either, so it will consider the request at the Board’s July 10, 2024 Board meeting. Myers stated that with the PILOT Default in place, his group is unable to convert to permanent financing, which is costing the project $135,000 a month in extension fees, of which over $1 million in extension fees has already been accrued, so the sooner the permanent loan can be closed, that will resolve that problem. Carpenter stated this is good information for the Board to know because it has not been made aware of all those challenges and the Board strives to be fair and equitable. Carpenter stated that as Myers is balancing his obligations, the Board is doing the same and he is sure all can work together productively. Myers stated he appreciated Carpenter’s comments and stated that he would like to think the occupancy rate might be treated differently than a stabilized property that had a drop in occupancy and no longer meets that standard.
Buckner Wellford asked Memphis Towers representatives if they had received the tenant benefit breakdown and scope of work that was supposed to be done that was part of the original grant of the PILOT that has been discussed in previous meetings. Myers responded yes, and that all that work that was promised had been completed. Wellford asked for written documentation that states each of the tenant benefit breakdowns promised as part of the original grant of the PILOT have been accomplished. Myers agreed to provide that. After consensus, representatives are to appear before the Board at the July 10, 2024 Board meeting for a status update.
Brian Myers, Henry Zuckerberg, and Phillip White 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 invited representatives in attendance to introduce themselves to the Board. Kent Mehring introduced himself and Adam Gutteridge of WNC, the investment limited partner for both Cavalier Court and Gospel Gardens. Michael Pico introduced himself as the Chief Operating Officer of Millennia Housing Management and introduced his colleague Patricia Richmond, new regional manager for Millennia Housing Management dedicated to the Memphis area. Carpenter stated that because all legal documents involving Cavalier Court and Gospel Gardens PILOTs are entered into between the Board and Millennia Housing Management, he would ask that representatives for Millennia provide an update first, then the Board would provide the opportunity for WNC representatives to provide an update.
Micheal Pico began, stating he recently took on the role of Chief Operating Officer for Millennia Housing Management in April 2024 and upon taking the role, one of the first areas of focus has been Memphis and the stabilization of Cavalier Court and Gospel Gardens. Pico reported executive leadership changes over the portfolio by placing Alan Weckerly, who used to oversee this portfolio prior to COVID, in place, and Patricia Richmond. Pico stated that stabilization plans include plans for both what needs to be done at the property, occupancy, and restoring contracts with vendors such as trash pickups which are now on Mondays, Wednesdays, and Fridays. Pico reported several roll up bins that are being moved onto the properties because there is a lot of bulk trash items built up at each property. Pico stated Millennia is addressing landscaping by reengaging with vendors to get consistent landscaping service. Millennia expects an estimate today for both properties on landscaping needs. Pico stated he has reviewed past notes of outstanding maintenance needs for both properties as to the action items that needed to be fixed and he has focused on curb appeal, getting ahead of graffiti, looking at potholes, securing the resources to address vacant units both in unit turns as well as securing them until that they can be restored online for leasing. Pico reported he and Richmond have put together a plan to present to Millennia in Cleveland, OH on Monday, June 10, 2024 to obtain funding to achieve 90% occupancy at both properties, as well as securing funds to satisfy outstanding vendor claims.
Kent Mehring stated that 90% occupancy has been achieved at Gospel Gardens, but asked if Pico would like to speak toward the HUD Housing Assistance Payment (HAP) contract that was delayed approximately three (3) months that really held back the ability to turn units for leasing. Pico agreed, stating the HAP payment is based on the recertification rate and both properties were lower than 90% recertification, delaying the HAP payments. Pico reported those recertification rates were brought into compliance, allowing both properties to get the HAP payments, which is now funneling money back into the properties and making is possible to get essential services back to provide safe and sanitary housing, and to bring the properties forward. Pico stated the focus is consistency on these items. Mehring stated the delayed HAP payments were over $250,000 in delayed revenue, which is why there were delays in executing on the expense side.
Carpenter asked representatives to advise the Board of the status between Millennia and WNC concerning operations of these two (2) properties, as the Board has just discussed the previous property, Memphis Towers, which was a Millennia owned property that the limited partner came in and took control of day-to-day operations. Mehring stated one of the reasons for the staffing changes and allocation of resources is due to WNC putting pressure on Millennia, as WNC has guarantees that the company can exercise with Millennia, which it has been doing. Mehring stated that since WNC has seen operations move in a more positive direction and allocation of resources to those assets, WNC has held off on stepping in, but it has been actively involved. One of the benefits of this has been very favorable HUD Inspire, formally called REAC scores, on Cavalier Court and Hope Heights, of which Hope Heights is not part of this discussion. Mehring stated WNC has advanced over $350,000 to these assets for deficit funding to cure monetary default on the PILOT as well.
Further, Mehring reported WNC has been in discussions with local property management companies, and they have identified one they believe will be effective. Mehring stated that the overall execution and action plan is to bring in a replacement general partner to replace Millennia. Mehring stated WNC is in negotiations with a possible buyer in which WNC has partnered with this group on several partnerships and they are one of the top four affordable housing owner operators in the country. Mehring stated he is unable to identify the group publicly until a purchase sale agreement is signed, but the execution is expected within thirty (30) days. Mehring stated WNC is focused on keeping Millennia accountable and putting pressure on them expecting another group to replace Millennia on seven assets WNC owns with Millennia. Mehring stated this action plan is subject to approvals by HUD and others, and he projects closing to take place between August and November 2024.
Mehring stated his biggest concern, like The Richmond Group with Memphis Towers, is WNC is still under the bridge loan terms with the lender, who is working with them on extensions, but as long as the legal defaults remain in place from the Board on Cavalier Court and Gospel Gardens, the lender is not extending. Mehring reported advancing millions of dollars to pay down the loan, but stated WNC is committed to both projects and is focused on the overall objective to get the property stabilized and bring in a replacement partner. Mehring stated the more immediate concern is that while the potential replacement partner has conducted due diligence, a PILOT legal default could cause the deal to collapse, because these properties effectively do not work without the PILOT. Mehring requested that the Board consider lifting the PILOT Legal Default status for both Cavalier Court and Gospel Gardens with the promise of a new party coming in, or to defer to the Board’s July 10, 2024 Board meeting, when he would be able to share more information concerning the potential replacement partner.
Adam Gutteridge reiterated Mehring's comments, stating the potential replacement partner is one of the largest affordable housing groups in the country and when these properties were put out to market, there were not many bids for the Memphis based assets. Gutteridge echoed Mehring in stating WNC is now very involved and playing a shadow role in looking for a new management company and the potential replacement partner has its own national management company, but there is also a potential to work with a local company. Gutteridge stated that if the PILOT Legal Default is lifted, the sale of the assets could take place, and then WNC would come in with a capitalized General Partner that is going to want to see the properties succeed. Mehring stated that whenever there is a looming replacement of an owner operator, third party management companies are leery to step in because they know it is likely short term and there would be an expense of a lot of resources for nothing. Mehring stated there are requirements available that would keep a management company in place for a longer period, and WNC has done that at other troubled assets, but it is more of a challenge in this case.
Carpenter stated it is very helpful to understand where things stand, and the Board understands how complex these financial structures can be with the different entities involved. Carpenter stated that each entity has its own policies, procedures and guidelines that it must follow, and the Board is one of those, and if minimum standards are not met, these factors trigger how PILOT properties get into default status in the first place, and that is not an overnight occurrence, but based on many notices, site visits, communications, and when all else fails, then the PILOT property goes into a legal default status. Carpenter stated the Board does not have a magic wand to turn off a legal default, but it also will work cooperatively with representatives to come into compliance so that the property can be elevated from default status.
Carpenter asked the Board’s Compliance Coordinator, Bryce Miller, to provide a report on the Board’s internal monitoring observations of both properties. Miller stated that he visited both properties on June 4, 2024, as well as received pictures this morning that show a lot of landscaping that is in the process of being completed. Miller reported more movement at Gospel Gardens observed than Cavalier Court. Miller began with Gospel Gardens and reported observing some repairs made to gutters and siding, but issues with broken windows, damage to the perimeter iron fence near the front of the property. Miller stated the excess trash on site appears to have been remedied, with individuals onsite picking up trash and working. Moving to Cavalier Court, Miller reported several burnt out units to which no improvement has been observed in several months. Miller reported observing less graffiti than at prior visits, but some remains. Miller reported both properties appear to be trending in the right direction, but stated Gospel Gardens seems to be doing better than Cavalier Court.
Mehring stated that Gospel Gardens really benefited from the delayed HAP payments that were received, but he agreed with Miller’s report regarding Cavalier Court, stating he drove the properties himself this morning and was not pleased with what is going on at Cavalier Court and has had a very direct conversation with Pico concerning this. Mehring stated the burnt units are in various stages of repair, and he is aware the work needs to be completed, and his team is identifying potential sources of funds to address that because those units need to be placed in service before year end or the property will lose those credits, which is what WNC is investing in. Mehring stated all parties are aware of this, but there is no action plan at this moment. Miller asked if Mehring would provide an estimated timeline of when some of the burnt units would be completed. Mehring stated that he is identifying costs associated with each and WNC can advance money for the lesser costs, but the larger impact item, roughly $600,000, will be applied to the overall purchase price for the potential replacement partner to tackle. Mehring stated WNC is working with the potential replacement partner and WNC advancing money prior to them stepping in and working lockstep with then to get this resolved, his team is aware of the issue, and it also affects occupancy.
Gutteridge stated that the replacement of Millennia with this new potential replacement partner would be like a magic wand, because although these are each separate partnerships, they are WNC credits, so WNC is going to quantify what needs to be done to get this right and things are in a hopeful direction. Corbin Carpenter asked for clarity on the potential replacement partner and whether they self-manage or whether they have management components with their company. Gutteridge stated they do have management components, but they may elect to have a local presence. Corbin Carpenter stated that onsite property management has been one of the primary issues with these two properties, and if representatives would request favorable consideration from the Board, onsite property management selection should be a priority. Mehring stated he interacts with the potential replacement partner on a regular basis because WNC has other assets with them, and they are already staffing up and getting ahead of this, which is something that Millennia never did effectively.
Cliff Henderson asked what needs to be done for the potential replacement partner to take possession in quarter three or quarter four 2024, because he hears that the default will need to be lifted. Charles Carpenter stated that everything has a process and once a purchase sale agreement is entered into, that would officially start the process, HUD would require notice, the Board would require notice, a timeframe must be put into place, insurance claims must be addressed, and any other diligence items that may be required as far as the proposed replacement partner is concerned. Carpenter stated while this will take some time and there is a process in place. Henderson asked if current ownership is required to close on the property before the default is lifted. Carpenter stated that is correct, but it could happen contemporaneously. Carpenter explained that there is a diligence period so that the purchaser can confirm everything that has been represented is as it has been represented to be. Carpenter stated the Board has seen this before when there has been a purchase contract in place for other projects and at the end of the day, it did not go through because things were not as anticipated, so there is good faith involved, including checks and balances, and the Board would just need to see the full package put together to make an intelligent decision from a business standpoint as to what would be in the best interest. Henderson asked if it is correct to assume the Board would not be able to decide on the default until one to two months after closing. Carpenter stated the Board has not been provided enough information from representatives to make a determination and recommended the Board defer both properties to the July 10, 2024 Board meeting to see if some of the proposals have taken place and if there has been any resolution or not. Carpenter stated to representatives that in the interim, representatives should keep the Board and legal counsel apprised of what is going on and not wait until next month to provide updates, as that is not helpful. Carpenter stated it would be helpful to be included in in the discussions and be updated on the status of things as they happen so that legal counsel and staff can share that information with the Board, and they are not overwhelmed with information at the last minute.
Mehring stated he will follow up on that request and asked if there is any precedent for some conditional scenario where the potential replacement partner could step in with certain conditions being met within a certain timeline? Mehring, further mentioned the group is willing to take on risk, but this proposal requires the proposed purchaser to acquire two partnerships where currently Millennia has unlimited guarantees, and that exposure with pending PILOT defaults maybe too much, and may cause the purchaser to pass, which is the last thing he wants to do is lose them as a replacement general partner. Carpenter stated the Board hears his concerns loud and clear, and the last thing the Board wants is to create a situation where there is no sustainability with these projects because they provide homes for a lot of residents in the community. Carpenter stated the Board realizes that substantial dollars have already been invested into these assets, and the way to put the property in the best light is to share information timely with the Board as we all go forward so the Board can understand exactly where the merits are and focus on doing completing the transfer.
Carpenter stated the Board is here to facilitate, but it also has minimum standards in accordance with its policies and procedures. Mehring asked for confirmation on where updated should be sent. Carpenter advised all updates should be emailed to Stephanie Bryant with Charles Carpenter and Corbin Carpenter copied on the correspondence, and Bryant would share updates with Board members on a timely basis and Carpenter would facilitate whatever is necessary to ensure full understanding and ensure everyone is on the same page.
Monice Hagler asked representatives what the occupancy rate is at both properties. Mehring reported that occupancy is at approximately 90% at Gospel Gardens, and with the receipt of the HAP payments, they should be able to turn units and improve that rate swiftly. Mehring reported Cavalier Court’s occupancy as hovering around 85%, stating that it needs to improve, and it is all about allocating resources, and now that the Board is involved, there will be more attention to that. Corbin Carpenter asked representatives if all past due PILOT payments have been paid and brought up to date, to which Mehring replied they have. Hagler stated representatives must be concerned about the benefits to the tenants agreed to as part of the PILOT as conditions for the Board to move forward. Stephanie Bryant asked if Mehring and his group are aware of the Tenant Benefits that were committed to as part of the PILOT for each project. Mehring stated he is only aware of the set aside requirement and tax credit requirements. Carpenter stated the Board will provide that information to representatives. Bryant also requested that the Board staff be provided with current rent rolls for each property prior to the July 10, 2024 Board meeting. Gutteridge stated this is a priority for WNC and they have never had a default and loss of tax credits since the inception of the tax credit program, so this is a top priority. Pico expressed his thanks to the Board, stating that he is aware there has been a lot of promises made over time, but the Board has Millennia’s dedication and attention to correct this and move forward for a smooth transition to the potential replacement partner, but aside from that, just to do the right thing and he is confident that he has a team in place to get them where they need to be. After consensus, representatives are to appear before the Board at the July 10, 2024 Board meeting for a status update.
Michael Pico, Patricia Richmond, Adam Gutteridge, and Kent Mehring left the meeting.
Alex Uhlmann, Joyce Warren, Helen Evans, Andrea Smith, and Mauri Pinekrey left the meeting.
d. Grahamwood Place
e. Pinebrook Pointe
Tie Lassater and Meliea Ware 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 he has provided current rent rolls to Board staff prior to today’s Board meeting. Lasater reported that Pinebrook Pointe has surpassed the Board’s minimum occupancy requirement of 75% and has achieved 76% occupancy and trending toward 80%. Lasater reported that there were some external issues of concern, fifty (50) items, three items being duplicates, so forty-six (46) of the forty-seven (47) concerns have been addressed. Lasater reported some items being finished now include operational entrance gates at the property's entry. Sky Cops have been installed as a temporary measure to assist while the entry gates are being repaired, as the Sky Cop cameras record the license plates while vehicles enter and exit the property and reports that information directly to the Memphis Police Department, alerting them of any vehicle onsite that has been associated with a crime or associated with a driver that has an outstanding warrant. Lasater reported ownership is considering a number of options for gates, but they anticipate changing the style of the gate from a sliding gate to a swinging gate, which will take some work, but is something being considered. The last two items in process are erosion control and sidewalks around the property. Lasater reported that work on these items should begin within the next month and once those items are finalized, that will address everything associated with the property's external and physical appearance.
Lasater reported Grahamwood has achieved 73% occupancy and there are twenty-two (22) units the construction team has finished renovating, these units were vacant when current ownership acquired the property, and appliances have now been delivered, but they require an electrical inspection from Memphis Light Gas and Water (MLGW), to turn electricity on to those units, but those units are pre-leased and awaiting MLGW and City inspections. These inspections are expected to be completed and tenants moving into those units in the next two (2) weeks, which will increase occupancy to nearly 80% at Grahamwood. Lasater reported there are some smaller items outstanding there including the pool appearing cloudy. Lasater reported the property has endured some plumbing issues from freezing temperatures this past winter, and required the pool pump to be replaced, and that has been completed, and now all filters need to be replaced, and that is expected to be complete within the week. Lasater stated his team has reached out to the city to inspect and release both pools at both properties for usage for summer, and as soon as filters are replaced, everything will be ready to go.
Carpenter asked for confirmation on how occupancy is being calculated whether based on available rent-ready units or total number of units. Lasater responded it is based on the total number of units, as that is what the current lender requires, as does the Board. Carpenter stated that Lasater has indicated in prior reports to the Board that his group has a portfolio of properties, of which Grahamwood Place and Pinebrook Pointe are included, that are looking to September as a conversion date for the permanent financing, and Lasater confirmed that.
Carpenter asked Bryce Miller to provide an update to the Board of internal monitor’s observations. Miller stated he can confirm Lasater’s report, stating there was excess trash at Pinebrook Pointe during his inspection on June 4, 2024, but there was also a team member working on picking up trash onsite. Miller reported that Grahamwood has been in compliance from a structural and external standpoint, aside from occupancy requirements, and Pinebrook is moving in the right direction. Miller asked Lasater if there is a timeline for completion of the burnt units. Lasater responded that the construction team was there this morning, had removed Boards and performing a lot of cleanups and measuring for a lumber order, so it is under way. Lasater reported that Fannie Mae will not move forward with the planned refinancing until the units are sheet rocked and he must move as quickly as possible to meet the September deadline put in place by the lender. Lasater reported his team did get its first insurance draw release to get things started, which is why work began this week. Miller stated an issue that had been observed was securing those burnt units, but from internal monitor’s last few inspections, that has not been an issue that was observed, boards seem to be in place, and everything seems to be inaccessible to the public. Lasater stated he authorized the boards to be removed this week for work to begin, but construction crews are replacing the boards each evening.
Buckner Wellford stated that the PILOT Term Extension for Pinebrook Pointe was granted by the Board in 2021 and the property was at 94% occupancy in the first quarter of 2021 and that decreased to 65% in quarter 1 of 2024. Wellford stated that a number of improvements were to be made, including 100% roof replacement, which was included for both Pinebrook Pointe and Grahamwood Place, exterior paint, dumpster enclosures, parking lot striping and sealing, and LED exterior wall packs. Lasater confirmed that all items have been completed, and additional lighting was added and upgraded above and beyond the initial planned LED wall packs. Wellford stated that basically the same items were committed to for Grahamwood Place, including upgrades of exterior amenities including pergolas, picnic tables, and playgrounds, and asked if all these items have also been completed at Grahamwood Place, to which Lasater responded yes.
Carpenter stated based on the reports provided, including the Board’s internal monitors observations, the properties are improving and there is a lot of incentive on behalf of the development team to complete the requirements to reach the minimum standards. Carpenter recommended representatives reappear at the Board’s July 10, 2024 Board meeting to provide a status update at that time. After consensus, representatives are to appear before the Board at the July 10, 2024 Board meeting for a status update.
Tie Lassater and Meliea Ware left the meeting.
f. New Horizon
David Shores and Mark Jobe entered the meeting.
Carpenter introduced this agenda item and presented representatives in attendance: Mark Jobe, legal counsel to the current developer and David Shores of Multi-South Management Services, LLC, the Chancery Court appointed receiver appointed by Chancellor Melanie Taylor Jefferson. Carpenter advised that the Board is familiar with this property and has been involved with it for years and asked Jobe to update the Board on where things are from his last report to the Board. Jobe stated that Shores and his group have been managing the property and his client has been hands off and cooperating as requested. As to a potential purchase and sale, Jobe stated his client is pursuing that as aggressively as they can within the confines of the court order, and at this point there is not a purchase and sale agreement in place. Jobe advised that there have been initial negotiations with some local folks, but certainly not ready to present as part of a transfer application, and Jobe is unsure if he would be the representative that would submit such application on behalf of a buyer, but right now there is no pending transaction. Jobe stated that his client is under court order to allow the receiver to manage the property and is trying to find a buyer and a deal that would be acceptable to the receiver and ultimately the lender. Jobe stated that it is his understanding that David Shores’ group is doing a good job from a management perspective and his client certainly hopes that the PILOT stays in place and hopes there is no action today.
David Shores reported that forty-six (46) additional evictions have taken place and occupancy is now down to four hundred one (401) occupied units with a few units that have been leased and applications pending. Shores stated one of the problems that management is experiencing is that it will not accept residents that cannot provide a reasonable landlord reference, proof of income, and pass a criminal background check, among other things. Shores stated the property has been run as a second chance property for years and folks that are coming in to apply turn around when they are told they cannot have an eviction on their record from last month, for example. Shores reported there are four (4) staff office employees and seven (7) maintenance employees, and management is in the process of hiring a groundskeeper, as both groundskeepers that were employed previously did not qualify for hiring when Multi-South Management Services, LLC took over. Shores reported there are still roof leaks, with additional leaks discovered, some solved, and management is solving others. To the best of their knowledge, all water and sewer leaks have been repaired, so there is no running water on the ground. Shores is working with KeyBank, the mortgage holder, on a lighting and landscaping plan, it is an expensive plan, and KeyBank is trying to get their head around what needs to be done and what management believes will be effective. Shores reported the security team has arrested sixty-eight (68) people trying to get onto the property in the last month with active warrants and turned them over to Memphis Police Department (MPD) and several squatters have been arrested for trespassing and removed from the property, so the security team is doing exactly what management needed them to do. Shores stated the property is much quieter and calmer today and the residents have noticed the change and there has been a change in the last thirty (30) days.
Carpenter asked about KeyBank and what its near-term approach is to this property, because as Shores reported, the property is less than fifty percent (50%) occupied, there are a few units that are rent-ready, but as discussed, this is not a quick fix. Shores stated there are three aspects of KeyBank’s near-term approach, one being every time management has asked for funds, KeyBank has done so. Shores stated his team has had a lot of conversations with KeyBank about what his team believes needs to be done to get the property secure, which includes lighting, landscape cleanup, and that sort of items that will create a more secure and a safer environment than it was. Shores reported KeyBank has been provided with a lot of information about what building issues there are that need to be resolved, including roof replacement on several buildings, and the cost associated with those issues. Shores stated the third part is what KeyBank’s long-range plan is, and he does not know that. Shores reported providing KeyBank with a budget to operate the property through the end of the year 2024 and a fair amount of income is going to security, and they see that and recognize that, but it is staggering number when his team tells KeyBank how much they expect will need to be send for management to operate the property each month. Shores believes KeyBank is trying to get their head around it and gather enough information, of which he believes they now have, to push this up the chain and get some direction about what they want to do. Shores stated his group has submitted one offer to KeyBank from a local brokerage outfit, but it is more of a bite than they would want to take, but he is not certain. Shores stated he has not received feedback from either the potential buyer, or KeyBank since submitting the proposal.
Carpenter stated that the Board has heard for years from the layout of the property that the size is just almost unwieldy and asked based on the occupancy and the location of the occupied units, is there any possibility of combining the occupied units into one area while the other area is closed off. Shores stated that the central section, the Kings Gate section, is the one with the largest three-bedroom units and the only four-bedroom unit and those are in high demand and the ones that can be made rentable are occupied already. Shores stated there is the Mill Branch side that faces Mill Branch, which is reasonably well occupied, but those are all one-bedroom and two-bedroom units. The Casazza Creek portion is the most eastern portion of the property, and it is all one-bedroom units and is fairly well occupied. Shores stated that if they could push all the occupied units together into one section, and close off the rest, it would be very efficient for management and the lender and the owner, but they have looked at it from several different angles and have not been able to figure out how to make it work, particularly from a security standpoint.
Carpenter stated the challenge the Board is facing is that this property does not comply with the Board’s policies and procedures, and the Board has previously extended consideration because at one point there was a viable buyer, representations had been made, and there was some momentum that had built up, but that all went away and when the dust settled, this property was in far worse condition than it had been, and that is where it is now. Carpenter stated again that the project does not comply, and the only consideration from the Board is that there is a receivership pending and an active lender that is pumping resources into the property, and the experience of Multi-South Management Services, LLC. Carpenter recommended to the Board that this matter be passed to the Board’s July 10, 2024 Board meeting to allow his firm to communicate with the Chancery Court and legal counsel for KeyBank and let them know that the recommendation is that the PILOT be terminated at the next Board meeting and for them to show cause why it should not be terminated and present that in writing for the Board’s consideration. Otherwise, Carpenter stated the Board will have no choice but to move forward with termination.
Cliff Henderson stated he does not believe thirty (30) days is enough time and he would recommend deferring action to the Board’s August 7, 2024 Board meeting, Henderson stated that KeyBank is a regional institution and he would like to see Board legal counsel provide notice to KeyBank and allow sixty (60) days for them to respond with a plan. Monice Hagler asked if there has been any attempt to contact the City’s Housing and Community Development (HCD), or other entities that could provide tenants that meet the requirements that Multi-South Management, LLC has imposed. Shores responded there are some MHA Section 8 voucher holders there, but in the last thirty (30) days, his team has been in triage trying to do things like fix water leaks and get security under control, and now are making headway, so there have not reached out yet to HCD, but would be glad to. Buckner Wellford asked for clarity on HCD. Hagler stated HCD has properties that they may be trying to condemn, which will require relocation of residents within the City of Memphis. Vincent Sawyer asked how the sixty-eight (68) individuals with active warrants were handed over to MPD. Shores stated that the security company has a formal relationship with MPD and when they call, MPD is onsite within minutes. Sawyer asked whether the security team or MPD makes the arrest, to which Shores stated the security team makes the arrest and have that power from MPD.
Howard Eddings, Jr asked if the property does not qualify for the Board’s PILOT program and the Board allows representatives more time, is there another governing body that says you are not able to give more time or does the Board act on this since this project does not qualify. Carpenter stated it is a delicate balance, but the Board has discretion that is to be exercised on a reasonable basis and the challenge is there are four hundred (400) families there, but there is a heavy crime element and heavy deterioration of the property and substantial dollars have gone into this project. Carpenter stated four hundred (400) families is a lot, but that is not even fifty percent (50%) of the capacity that this project has and how does the Board justify giving more time, as this project has been a part of the PILOT program for a number of years and it has always been a challenge, but it is in a location where a lot of families live and affordable housing is needed. Carpenter stated there is always something ongoing at this property and they do good as far as tenant benefits and so forth, but it is just so massive that ownership has not been able to get it fully engaged.
Carpenter stated the sheer number of sixty-eight (68) individuals arrested on the property in a thirty (30) day period lets you know this problem has been rampant for so long and is not a safe environment. Shores stated that the security team is stopping every person that is coming into the property, scanning each person’s license and asking where they are going, if the individual stated they are going to their house, the security team is checking the address and confirming it with the rent rolls and all persons listed. Shores stated that arrests are trending down each week because he believes the message is getting out, but there is no doubt the property has a history of crime. Eddings asked if the Board uses its discretion to extend, what concrete plan could be put into place or what measurable action would make a difference. Shores stated it is all about getting money from KeyBank to repair the property because the units and buildings need improvements, including roofs, windows, etc., so if KeyBank commits the money, Shores believes the property can be restored but it is going to take money to do it. Shores stated that, as discussed with Carpenter, it may be better for a new buyer to start over with a new PILOT because it would provide long term opportunity for a new owner to get the advantage of the tax incentive. Shores thanked Henderson for recommending sixty (60) days because between now and the next Board meeting is the Independence Day Holiday. Henderson stated KeyBank has had possession since May 1, 2024 and sixty (60) days from today would give KeyBank enough time to come back with a response or plan, and in considering the entity and the size of the entity, sixty (60) days would be appropriate to allow for an appropriate response. Carpenter stated he would have no objection to that recommendation. Hagler agreed.
Corbin Carpenter asked Henderson if he would like legal counsel to include in communicate KeyBank any requirement of a construction timeline or other deliverables. Henderson stated that based on what is being reported, it seems KeyBank is gathering information and processing and he would like to know whether KeyBank intends to continue funding the project, security, and property improvements. Henderson stated if KeyBank is willing to do that for the next six (6) months to build the property back up and market it, he would most likely support that, but if KeyBank is not willing to do that, or at minimum, fund the project to the end of the year 2024, then the Board would need to know that as well to determine how to move forward. Hagler agreed, stating the PILOT would likely self-terminate at that point. Carpenter stated that with the number of repairs needed, the property would qualify for a new PILOT under new ownership if the current PILOT were terminated. Carpenter stated that the Board action is two-fold, as it has been involved with the property for so long, it has an obligation to the families that are there, so that there is some public acknowledgment of what the Board’s involvement is going to be so that the families there can take whatever steps they need to take to protect themselves and their families. Secondly, Carpenter stated that if there is a show-cause to this point that there is some plan that is backed by resources and expertise to make it work, the Board would not want to hold that up. Carpenter stated it should be one way or the other and the Board cannot continue down the path that it has been going down with this property because at some point, it does not make business sense to keep going when funding has run out and the project does not qualify. Henderson agreed, stating that the terminating the PILOT is an something the Board needs to consider, but if that is the decision, the Board needs to make that decision respectfully considering those families that live at the property and are trying to do the right thing and try to provide notice so that they have the ability to transition. After consensus, representatives are to appear before the Board at the August 7, 2024 Board meeting for a status update.
David Shores and Mark Jobe left the meeting.
g. Creekside Meadows (Bent Tree)
h. Mill Creek Apartments
Phil Balderston and David Upton entered the meeting.
David Upton began by stating there has been ongoing work at Creekside Meadows and most of that work done was a commitment to the Board as a condition of both the approved refinancing and the PILOT Term Extension consideration. Upton reported that repaving of the parking lot was completed approximately two (2) months ago and looks fantastic, the painting is approximately fifty percent (50%) complete, and all other items that were committed to have been completed. Upton turned the meeting over to Balderston for additional comments. Balderston stated that about a year and a half ago, his team set out to take Creekside Apartments to the next level and transform the complex into something that his team would consider a nice affordable housing complex and something the Board and his team could be proud of. Millions of dollars in capital improvements have been spent during this process, work is substantially complete, and occupancy is in the mid-ninetieth percentile and the complex looks beautiful. Balderston stated there are small items that must continue and are expected to be the case over the next ten (10) years, but today, his team is very happy with the complex.
Bryce Miller, HEHF Compliance Coordinator, reported his observations of the complex, stating it looks fantastic. Miller reported damage to one of the gates, but repair was made and stated the property has been transformed and once painting is complete, the property would be almost unrecognizable in comparison to older pictures. Upton stated that when the PILOT Lessee came in and the Board approved and allowed the refinancing to go forward, with the contingency that repairs be made to both Creekside Meadows and Mill Creek Apartments, the PILOT Lessee provided pictures of what they anticipated Creekside Meadows to look like following these changes and it is all coming together. Upton stated the painting of the brick buildings was performed first, and some painting remains on some of the other buildings with a mix of materials, but management has received good feedback from residents, and they are delighted.
Upton handed out information to the Board that was a recap of what was committed to be done at each property and how far along each item is. Carpenter stated that the Board is very familiar with these properties and for the purposes of the Board, in looking at these projects that are in legal default status, his firm would encourage the Board to consider removing Creekside Meadows and Mill Creek Apartments from the legal default status and once that is done, both projects can be considered in the action items for each PILOT Term Extension Application. There being no further questions or comments,
Cliff Henderson moved to release Creekside Meadows from Legal Default status. Buckner Wellford seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Chairman Reid stated for the record that Creekside Meadows (formerly known as Bent Tree) is now released from Legal Default. There being no further questions or comments,
Cliff Henderson moved to release Mill Creek Apartments from Legal Default status. Buckner Wellford seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Chairman Reid stated for the record that Mill Creek Apartments is now released from Legal Default.
2. Affordable Multifamily PILOT Term Extension Application for Bent Tree LLC (d/b/a Creekside Meadows) (Deferred from the October 4, 2023, November 1, 2023, December 6, 2023, February 7, 2024 and March 6, 2024 Board Meetings)
Charles Carpenter introduced this agenda item stating that the original PILOT Term for Creekside Meadows expired in October 2023, and if approved by the Board today, this PILOT Term Extension would be a continuation of the PILOT Term without interruption from October 2023 for an additional ten (10) year period pursuant to the Board’s policies and procedures. Carpenter confirmed that the PILOT Lessee would close on this PILOT Term Extension and the pending closing of the PILOT refinancing previously approved by the Board. Both closings will take place contemporaneously. Monice Hagler asked for confirmation of the PILOT Term Expiration, is this application is approved today, to which Corbin Capenter stated the expiration would take place on October 28, 2033. There being no further questions or comments,
Monice Hagler moved to approve the Affordable Multifamily PILOT Term Extension Application for Bent Tree LLC (d/b/a Creekside Meadows) without interruption. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Carpenter stated that his firm has been on communications with the Shelby County Assessor, the Shelby County Trustee, and the City Treasurer regarding this PILOT Term and all parties are prepared to close these transactions now that there has been Board approval.
3. Affordable Multifamily PILOT Term Extension Application for Mill Creek Apts LP (d/b/a Mill Creek Apartments)
Cliff Henderson stated to representatives that he did not believe representatives would make it to this point when this process began, but now that it has made it to this point, he appreciates the dedication that Phil Balderston and his team have shown throughout the process, and we should all celebrate this moment. There being no further questions or comments,
Cliff Henderson moved to approve the Affordable Multifamily PILOT Term Extension Application for Mill Creek Apts LP (d/b/a Mill Creek Apartments). Buckner Wellford seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Stephanie Bryant stated on behalf of the HEHF staff that as the staff has dealt with this for a very long time, we are all very proud of what this PILOT Lessee has accomplished and congratulated the Odin Properties team on a job well done. Following Bryant’s comment, there were many congratulatory comments made to the Odin Properties team.
Phil Balderston and David Upton left the meeting.
4. 5th PILOT Closing Extension for Kimball Cabana, LP (d/b/a Kimball Cabana Apartments)
Joseph Stebbins entered the meeting.
Carpenter introduced this agenda item stating that action item number four (4) and action item number five (5) can be discussed together, as it is the same development team. Carpenter advised this is an out of state developer based in Utah that came into Tennessee, and he believes this is their first venture in Tennessee. Carpenter reminded the Board that it has approved bonds for these projects and PILOTs, and as Carpenter indicated in the legal report earlier, the remarketing of these bonds was successfully completed this week, for the second time.
Carpenter introduced Joseph Stebbins as the representative in attendance for these two agenda items. Carpenter advised the Board that the original development team that applied for the PILOT in 2021 have since been dismissed and currently there is a new development team that has been assembled with more experienced Tennessee developers who are working diligently. Carpenter stated his firm is participating in ongoing calls with the new development team and they are providing updates on what is taking place, the plans are going forward, with activities moving in a favorable direction and there is momentum to bring this transaction to a successful closing, but additional time is needed. Carpenter stated this is the fifth extension request for both projects and turned the meeting over to Stebbins for further comments.
Stebbins stated to the Board that he has been working in affordable housing since 1998 and further stating the original team did not have much experience with affordable housing management or development. Stebbins stated the new team has reviewed everything, brought the contractor back onsite, as the bids the team had seemed low, given the physical condition and size of these projects. Stebbins explained that the new team got updated plans and new bids from Patton Taylor, but Patton Taylor advised the team that they would be unable to bond it because they had expended its current bonding capacity, which is not a surprise, because bonding companies are now more stringent. Stebbins reported the team has started with a new contractor that thoroughly inspected the projects in January, February and March 2024 and provided new bids that have been confirmed. Stebbins stated that Kimball Cabana is now in a position where these bids are in budget and financeable, and the team is going to go back to THDA for additional credits and it is in a preferred census track which has the additional basis boost, which will help the project.
Stebbins stated the original phase of Oakshire Apartments was built in 1962 and is in considerably worse shape than the architect originally indicated and approximately thirty percent (30%) of the framing in that section will need to be replaced. Stebbins reported the team is working with the contractor to come up with a plan, which may involve going into two phases because the original phase has been vacant for at least ten (10) years. The other section of the property, Stebbins reported, was built fifteen (15) years later and is in much better shape and is mostly occupied. Stebbins stated the idea is to do an occupied rehab there on about one third of the site and do an internal relocation, then finish that section and move to the second phase of Oakshire. Stebbins stated the new team is diligently moving forward and anticipates closing the PILOT transaction on Kimball Cabana in approximately one hundred twenty (120) days, as it is just a matter of finalizing the permitting.
Carpenter advised that, if approved, the closing extension would be for a six (6) month period, and the Board would like to know that there are assurances that these transactions will be able to be closed within that period and things can be moved forward. Stebbins stated he thinks that will happen for Kimball Cabana, but Oakshire Downs would need to be adjusted to get there and may take eight (8) or nine (9) months considering price changes and interest rate changes. Carpenter reminded the Board that Kimball Cabana and Oakshire Downs are both separate bond financings. Carpenter asked for confirmation that Stebbins has some level of assurance that Kimball Cabana can be closed within the next six (6) months, to which Stebbins agreed.
Carpenter asked if Stebbins would outline to the Board from his standpoint what would be involved in phasing Oakshire Downs. Stebbins stated there would be a process to change the unit count to the lower unit count for the new section and he has already received pricing from the contractor on that phase and if he can get everything necessary from THDA in time, that phase could close on a similar timeline to Kimball Cabana. Stebbins stated the second phase would require the team to return to THDA for additional allocation and would be treated as a separate project. Stebbins stated that he would like to move some of the units forward and return that housing stock to the public rather than drag everything down by trying to get the whole thing done at once. Carpenter stated that based on the underwriting, it has all been done based on the PILOT being in place and if the PILOT closing is not extended, Carpenter asked if that would have an adverse impact on the ability to move forward with these projects. Stebbins responded yes, stating that financing is difficult all around and all the numbers are already set and any bit of unknown in a project pushes it to the bottom of the stack of financing, so the more items that can be and pins put in, the better for any project.
Corbin Carpenter asked Stebbins if the team is trying to get additional volume cap for Oakshire Downs only. Stebbins replied that the team will need additional volume cap for both projects. Corbin Carpenter asked if the team plans to apply for additional volume cap in THDA’s round two 2024, to which Stebbins responded yes. Corbin Carpenter asked if Stebbins’ team has received any preliminary feedback from THDA. Stebbins stated THDA is frustrated, as is the team, trying to develop stuff, but they have been very cooperative and want to get things moving. Howard Eddings, Jr asked what is being done at these properties in the interim to make them safer. Stebbins stated security has been increased at Oakshire Downs, but Kimball Cabana had more physical issues identified, along with major water issues onsite over the winter that had to be dealt with. Stebbins reported that the interiors at Kimball Cabana were in better condition than he anticipated, so focusing on security and heavy maintenance where they can while tenants are in place. Stebbins stated the previous development team was focused on unit turns and increasing occupancy, and the new development team has shifted focus to get the transactions closed, then begin rehab on a section and move people internally. Eddings asked if there is an option to relocate people that are living on the property now, as he knows Kimball Cabana very well, as he sees it every day, and it does not look habitable. Stebbins stated units toward the front are in particularly rough shape and units toward the back are in better condition. Stebbins reiterated the focus is to get these transactions closed, and then focus on rehabilitation and starting construction.
Buckner Wellford asked what was said at the time of the fourth closing extensions for these projects. Carpenter stated there were similar discussions, and the new development team was on board, and as Stebbins indicated, much of the work had to be redone as far as the construction costing and some additional details. Stebbins indicated the biggest issue was the team was still working with Patton and Taylor and had anticipated them closing the construction contract in late December 2023 or early January 2024, but they basically pulled out because they had reached their bonding capacity. Once that happened, Stebbins explained the development team had to start rebidding and reworking with a new group. Wellford asked what the practical impact of denying the extension would be in addition to reapplying. Carpenter stated there would be a timeframe associated with reapplication, but the biggest impact would be the lenders and the direction that they are going in now would have to start over because the projects have been underwritten with the PILOT benefit in place. If the PILOT closing is not extended, then the projects would start over at square one with their lending and their financial performance. Chairman Reid stated that as far as the underwriting and would automatically put the projects in default. Stebbins stated it would delay the projects approximately eighteen (18) months. Stephanie Bryant clarified for Wellford and the Board’s consideration that these projects are being considered for a PILOT Closing Extension, meaning the projects have not been an active participant in the Board’s PILOT program, but the projects were approved for a PILOT and the transaction has not closed in order for the PILOT to be applied to the property. Bryant further stated these considerations are not adding additional years to the PILOT Term. Wellford stated the Board is constantly faced with difficult choices and both properties are in terrible condition and asked what the occupancy rate is at each property. Stebbins stated occupancy at Kimball Cabana is very low and ownership is not reoccupying as tenant move out. Wellford stated that the PILOT Application Summary from 2020 includes no detail hardly, the sources and uses table only states uses as the total development cost, and there is usually much more detail provided. Wellford stated that according to this information provided to the Board today, it is being reported that things for at least one of the properties are going to need to be substantially reconfigured anyway. Wellford stated the Board has stale applications where circumstances have changes, not just the financing environment, but the circumstances as to what is needed and what is appropriate, as well as going back to Tenant Benefit breakdowns that are vaguely defined and are three (3) years old for properties that look horrible. Wellford stated he may be the outlier here, but he is very uncomfortable, and he feels the Board needs to have a better system in place when we get to the fourth and fifth closing extensions for PILOT closings, as he does not feel that is a good way to run the program. Wellford stated that with that, he will respectfully oppose these extensions.
Chairman Reid stated that the Board has only had a handful of fifth closing extensions, and they were for very good cause shown because the Board did not want to set a precedent of that, and he does not know if there has ever been a sixth closing extension. Carpenter stated there has only been one sixth closing extension, which was a public private partnership with Memphis Housing Authority and was a completely different circumstance. Carpenter stated this is a private developer that has had a lot of challenges and the only thing the Board can keep in mind to balance this is there is a tremendous need in the areas where each property is located. Once the projects are developed, they would be very helpful, but the question is will they be developed. Stebbins stated that is why he is here and conceded that the original applications are not the best and the original development group had the best of intentions but had no experience. Stebbins stated that he would hate to do anything that would put these properties in further jeopardy and that is why he is pushing so hard to get Kimball Cabana done and closed and find a way to get positive movement both for the tenants and for the areas where each project is located. Stebbins stated if the development team starts from scratch, the cost per unit will go even higher. Costs for Kimball Cabana are $105,000 a door, and at Oakshire, with the second phase, the development team expects $120,000 a door, and the other phases will be between $60,000 and $70,000 a door. Wellford asked if these are separate financings, to which Stebbins stated yes. Wellford stated that if one project is more likely to move forward than the other, then he would consider breaking them up, but he is unsure if that is the case.
Corbin Carpenter advised the Board that the PILOT Applications were submitted contemporaneously with the Bond Applications in 2021, which is why the Board sees the high costs in the Tenant Benefits Breakdown and his firm has already expressed to the developer that they would have to resubmit a restated sources and uses and restated tenant benefits prior to finalization of the PILOT documentation. Since the remarketing of the bonds took place last week, Corbin Carpenter advised that all the working group are working diligently to try to move this forward and it is not at a standstill and the projects do still have life. Monice Hagler asked if these projects would be voted on separately, to which Corbin Carpenter replied yes. Carpenter added that both projects have tax exempt bonds outstanding and have been successfully remarketed, so to Corbin Carpenter’s point, there is momentum and active work is ongoing and all of these factors should be considered as good cause shown for this extraordinary extension, and there is no penalty or downside from the Board’s standpoint in granting the extension, and it will aid in pumping continued momentum into these two projects. Carpenter stated the benefit of granting the extension substantially outweighs any disadvantage or negative aspect and would serve as a last chance opportunity for the developer to make it work or not, and if they cannot, the projects would be before the Board in six (6) months. Carpenter stated that based on the totality of circumstances these projects do meet the standard for this extraordinary request and his firm would encourage the Board to look at each project favorably.
Bryant stated that as these applications were submitted prior to the Board’s revised Policies and Procedures and applications put in place in 2022, the Board could consider requiring the developer to resubmit updated applications for each project for the Board’s records as a part of its consideration of these extensions, if approved. Bryant stated this requirement would update the HEHF staff, as staff has not been provided any updated documentation for these projects since application in 2021 and would be important to have as a condition for any approval that is considered at this point. Chairman Reid agreed, and Wellford stated that is the type of proactive approach that the Board should have had already. Wellford stated that the Board starts to get traction when the owners of these projects begin to realize that the Board is serious about maintaining the PILOT status and although this is not terminating a PILOT, it sends the message when the Board puts its foot down on something.
Katie Shotts left the meeting.
There being no further questions or comments,
Monice Hagler moved to approve the 5th PILOT Closing Extension for Kimball Cabana, LP (d/b/a Kimball Cabana Apartments) subject to receiving an updated application for the project. Cliff Henderson seconded, and the motion passed by majority after proper roll call vote of the Board members. Buckner Wellford and Howard Eddings, Jr opposed.
Chairman Reid stated for representatives of Kimball Cabana and Oakshire Downs to note that there has not been a sixth PILOT Closing Extension for a project like these ever delivered, and to please keep that in mind as they move forward.
5. 5th PILOT Closing Extension for Oakshire Apartments, LP (d/b/a Oakshire Downs Apartments and Townhomes)
There being no further questions or comments,
Cliff Henderson moved to approve the 5th PILOT Closing Extension for Oakshire Apartments, LP (d/b/a Oakshire Downs Apartments and Townhomes) subject to receiving an updated application for the project. Monice Hagler seconded, and the motion passed by majority after proper roll call vote of the Board members. Buckner Wellford and Howard Eddings, Jr opposed.
Joseph Stebbins left the meeting.
6. 2nd PILOT Refinancing Closing Extension for Cambridge Development Holdings, LLC (d/b/a Bridgeport Manor Apartments)
Frank Stockdale Carney and Neil Knopf entered the meeting.
Vincent Sawyer left the meeting.
Corbin Carpenter introduced this agenda item, stating that the Bridgeport Manor PILOT was implemented in 2023 as a new twenty (20) year term PILOT. Corbin Carpenter stated this PILOT property is owned by Mendel Fischer and Shrage Marasow, who currently have five (5) projects in the Board’s PILOT program, and they are represented by Frank Stockdale Carney. Corbin Carpenter advised that most of the work for the refinancing has been completed and late in the first quarter 2024, it was delayed. Corbin Carpenter turned the meeting over to Carney for further comments on why the Board should consider this six (6) month closing extension. Carney stated that ownership was hoping the transaction would close this month and was prepared to do so and underwriting wanted to delay seeing if they could take advantage of some of the benefits that they were expecting in the capital markets. Carney explained that ownership has no control over underwriting and everything is in place and prepared to close as soon as underwriting moves forward to do so. Corbin Carpenter asked if the lender was awaiting the upcoming meeting of the Federal Open Market Committee (FMOC) in a few weeks. Carney stated he believes that is the case to see if there is any movement in interest rates. There being no further questions or comments’
Cliff Henderson moved to approve the 2nd PILOT Refinancing Closing Extension for Cambridge Development Holdings, LLC (d/b/a Bridgeport Manor Apartments). Monice Hagler seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Frank Stockdale Carney and Neil Knopf entered the meeting.
7. Final Bond Resolution for Madrone CDF PropCo LLC (University of Memphis Park Avenue Campus Student Housing Project)
This agenda item was addressed by the Board earlier in the meeting.
Vincent Sawyer entered the meeting.
8. 1st PILOT Closing Extension for Northside Square, Inc (d/b/a Northside Square Apartments)
Archie Willis and Roshun Austin entered the meeting.
Charles Carpenter introduced this agenda item, stating everything is in place for this application and introduced Archie Willis and Roshun Austin in attendance for this agenda item, as well as agenda item number nine (9). Carpenter stated his firm has been working cooperatively with the development team in moving this project forward and the transaction is close to being finalized. Carpenter turned the meeting over to Willis and Austin for further comments. Willis stated the developer has closed the commercial phase of the project and is moving forward. Willis stated that the development team recognized that the construction estimates the team had were almost a year old and they asked the contractor to provide revised estimates to ensure no unforeseen changes, and the new estimates came in slightly lower, within a few dollars, but not higher, which is what is typically expected when a project goes through a rebid in today’s construction environment. Willis said the development team’s consultant is reviewing the cost to confirm everything is good and able to move forward. Willis stated the goal of the development team is to close by the end of July 2024, but it could be August 2024. Carpenter stated the developer has a very strong team and strong tenant benefits and this request complies with the Board’s policies and procedures and would recommend approval.
Let the record reflect that Monice Hagler and Vincent Sawyer recused themselves from the Board vote.
There being no further questions or comments,
Buckner Wellford moved to approve the 1st PILOT Closing Extension for Northside Square, Inc (d/b/a Northside Square Apartments). Howard Eddings, Jr seconded, and the motion passed unanimously after proper roll call vote of the Board members.
9. Affordable Multifamily PILOT Application for Peach Tree Senior, LP (d/b/a Peach Tree Senior Housing)
Charles Carpenter introduced this agenda item, stating it is a senior housing facility that will be new construction and has significant tenant benefits, which include utilities in the rents for this project. Carpenter advised the Board that his firm participated with HEHF staff in the PILOT Application Submittal conference with the developer and the project is impressive. Carpenter turned the meeting over to Roshun Austin for further comment. Austin stated this project will be built across from an existing PILOT project, Renaissance at Steele, which has one hundred forty-six (146) family units and is at the intersection of Steele and Dellwood. Austin stated this project just continues the benefits to tenants across the developer’s spaces in south Memphis and Frazier neighborhood. Austin also stated the project has a HAP contract, so residents would have assistance through that HUD contract. Carpenter stated the information is included in the submitted materials but asked Austin if she would share with the Board the proposed rents. Austin stated all units would be one-bedroom and two-bedroom units and rents would range from $700-$850 and units will be offered to seniors at 50% Area Median Income (AMI) and 60% AMI.
Buckner Wellford asked for clarification on the “Estimated Rent Savings (20 Years)” of over four million dollars listed on the Tenant Benefit Breakdown for the project. Archie Willis stated the development team takes what the market rents would be for that neighborhood, look at the PILOT put in place and consider income and rent restrictions, and do a simple calculation based on current rents versus market rents and just extrapolate it. Willis stated the team does not use any kind of inflation factor to get a higher number, just simple math to show the impact of having lower rents over the term of the PILOT. Wellford stated this is a very helpful statistic. Willis stated on timing, this project is on a similar timeline as Northside Square, and the development team is hoping to close this project in early August 2024 and just waiting on the contractor to provide the final bids. Willis stated the subcontractor bids were due Friday, May 31, 2024, and the contractor needs approximately three (3) weeks to convert that into guaranteed maximum price, and the development team expects that mid- to late-June 2024. Willis stated the development team already has a reasonable expectation of those costs based on preliminary cost projections, and they hope that is confirmed. All other funding is in place, including an award of a Housing Trust Fund Grant from THDA of $600,000, which will put additional funds into the project that will help some of the costs. Austin stated the project was awarded those funds last week. Corbin Carpenter asked for clarification of Pinnacle Bank and their involvement in the transaction, to which Austin stated Pinnacle Bank is the investor in the permanent financing for the project. Corbin Carpenter asked for confirmation on the planned management company for the project. Austin stated Northern, Inc. will be the manager of the project. Austin stated this development team has a long history with Northern, Inc. and the company manages several other properties including one in south Memphis and Renaissance at Steele, which will be located across the street from this project. Austin stated Northern, Inc. is operated by Debra Edwards and the company has a lot of experience in managing tax credit projects as well as low-income housing projects across the city. Howard Eddings, Jr asked since the project is renting to residents at 60% and 50% AMI, what is the likelihood of renting to residents at 80% AMI, to which representatives stated they would not consider, as this project has tax credit limits it must abide by, and each tenant will be receiving rental assistance.
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 the Affordable Multifamily PILOT Application for Peach Tree Senior, LP (d/b/a Peach Tree Senior Housing). Buckner Wellford seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Archie Willis and Roshun Austin left the meeting.
Buckner Wellford left the meeting.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended April 30, 2024. After discussion,
Monice Hagler moved for acceptance of the Finance Committee Report for the month ended April 30, 2024, properly seconded by James Jalenak, 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, July 10, 2024 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 02:38 p.m.