MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, August 9, 2017
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice on Wednesday, August 9, 2017. The published meeting time was 12:00 Noon. The meeting was held at the Board office, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chairman James Jalenak
Monice Hagler Dr. Manoj Jain
Nancy Willis James Maclin
The following Directors were absent:
Carolyn Head Ashley Foxx Buckner Wellford
Also present were:
Staff members Martin Edwards, Jr., Lauren Magallanes and Amber Hayes were in attendance. Charles E. Carpenter, General Counsel, and Corbin I. Carpenter were also in attendance. Cheryl Hearn, Assistant City Attorney, was present as well.
Additionally, the following guests were present:
Representing Highland Creek: Barry Cohen, Hunter Humphreys and David Upton
Representing Forum Flats: Ted Fellman, John Shepard, Jennifer Lowrie and Bob Coleman
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Chairman, Daniel T. Reid.
Approval of Minutes
James Jalenak moved for approval of the Minutes for July 12, 2017. Monice Hagler seconded and the motion passed unanimously.
Due to Monice Hagler recusing herself from an agenda item, Chairman Reid appointed Nancy Willis, as Assistant Secretary of the Board.
Daniel T. Reid announced that Carolyn Head, Board Treasurer, had submitted her resignation to the Board due to accepting the Senior Vice President/CFO position at Lewis University in Romeoville, IL. The resignation was accepted, Ms. Head’s valuable contributions were duly acknowledged and the Board expressed their best wishes in her future endeavors.
Finance Committee Report
In the absence of Carolyn Head, Daniel T. Reid presented the financial results for the month ended June 30, 2017. After a complete discussion of the financials:
James Maclin moved for acceptance of the Finance Committee Report for June 30, 2017, and properly seconded by Nancy Willis, the motion passed unanimously.
Charles Carpenter stated there have been no new claims since the previous Board meeting.
Carpenter further reported:
1. The John Madison Exum Towers materialman’s lien was successfully resolved and paid in full.
2. The claim noted at the previous meeting, Clementine Collier (represented by the Tennessee Human Rights Group) vs. Wesley Housing (Highland Meadows) was successfully resolved.
3. Alco property Saint’s Court Code Enforcement violations issue with fire damaged units. The units are being repaired. Code Enforcement is continuing to monitor the situation.
4. Regarding issues at Eden at Watersedge, Martin Edwards, Jr. will discuss this further in the PILOT report. We will discuss the Environmental Court proceeding for this case during the PILOT report.
Carpenter then provided an update regarding the status of the Memorandum of Understanding (“MOU”) with the Downtown Memphis Commission (“DMC”) regarding PILOT properties located in the Central Business Improvement District (“CBID”) that were subject to, and/or being accessed, CBID taxes. The MOU has been approved by the DMC Board of Directors and provides all existing PILOT properties currently located in the CBID will be grandfathered into the MOU and will not pay taxes. Further, under the MOU, all new PILOT properties will be exempted and not pay CBID taxes. In consideration of the above, all new PILOT properties in the CBID must undergo the approval of the DMC’s Design Review Board for consistency of design and construction. DMC having completed it approval, it is now time for the Board to approve the MOU. After a complete discussion of the matter:
James Jalenak moved for acceptance of the Memorandum of Understanding with the Downtown Memphis Commission for PILOT properties in the Central Business Improvement District. Nancy Willis seconded and the motion passed unanimously.
Carpenter further reported that the Alco Eastern Creek Apartments PILOT closed on July 13, 2017.
Next, Carpenter provided background information to the Board regarding the IRS audit of the Serenity Towers bond transaction, where the borrower being GMF, hired the law firm of Jones Walker, Indianapolis, Indiana law firm to serve as tax counsel, and to represent GMF before the IRS, which matter was successfully concluded. The primary attorney at Jones Walker, Ron Bell, has changed law firms and is now requesting the Board approve transferal of the GMF files to his new firm. Although there are no current developments or new developments anticipated in this matter, due to Bell’s familiarity with the case, it is recommended that the transfer be approved. After a complete discussion of the foregoing,
Monice Hagler moved for approval of the transfer of the Serenity Towers bond transaction IRS audit files to Ron Bell at the new law firm. James Maclin seconded and the motion passed unanimously.
Continuing, Carpenter reported that the GMF-Goodwill Village PILOT expired as of July 31, 2017. This was a 10-year PILOT. Carpenter has spoken with their attorney to make sure everyone was on the same page. Carpenter’s office has drafted the Notice of Termination as well as the Quit Claim Deed, which will be executed by Chairman Reid, filed and distributed to the Assessor and the City and County tax authorities for current market assessment and restoration of the property to the tax rolls.
Also, Carpenter reported that (i) Mason Village PILOT and Bond are ready to be closed. The final bond resolution is on the agenda for today’s Board meeting and (ii) Forum Flats bond is ready to be closed and its final bond resolution is on the agenda for today’s Board meeting.
Finally, Carpenter reported that the termination of the Highland Creek PILOT due to noncompliance is on the agenda for today’s Board meeting.
The above concluded the legal report and there being no further concerns or questions, the legal report was completed.
Martin Edwards, Jr. advised that staff is nearly complete with formatting and will soon provide quarterly occupancy information for each PILOT property, as well as, average tenant income collectively, for each property.
Edwards then discussed and answered questions regarding the following matters:
This property was mentioned at the last meeting to be added to the Board’s watch list due to Ledford’s inspection report that numerous deficiencies needed to be cured. Edwards has inspected the property personally on several occasions including yesterday and took photographs. The changes in the property have been remarkable. The property looks very clean.
The owners changed resident managers in early July. Martin walked the property with her and picked-up a new rent roll. She is in the process of writing a review for the Board listing deficiencies that have been repaired and what still needs to be repaired. Based on all of the above, Martin recommends that this property be removed from the watch list, and the recommendation was accepted.
As discussed in the June Board meeting, this complex had a fire in December 2016 that destroyed 12 units. The PILOT property had no lender, so the owner sought permission from the Board to demolish the 12 units and not rebuild. The owner is still awaiting Board approval. Per deliberation of the PILOT Committee and staff, it was recommended that Attorney Carpenter draft a letter to the owner approving the demolition of the 12 units, on the condition that insurance funds will be used for rehab of the remaining units and approved tenant benefits. Monice Hagler asked if there are specific tenant benefits they will use the funds toward. Edwards responded that the property came into the program before specific tenant benefits were requested, however, approved tenant benefits will be determined as a part of this approval.
Daniel T. Reid, Corbin I. Carpenter and Edwards met with property owner Rev. Richard Hamlet (GMF), his attorney Chris Lamberson and property manager Jera Moran at the HEHF Board office on July 13, 2017. Rev. Hamlet promised to have all repairs completed in the next three months. Edwards visited the property yesterday and no repairs have started yet. Edwards recommends if there is no marked change between now and the September 6, 2017 Board meeting that we should meet with them again. Reid stated he would like to meet with them again before the September Board meeting just to let them know we are monitoring the progress. James Jalenak asked about insurance proceeds. Reid stated that GMF has stated they are having issues with settling with the insurance company. We don’t know what the amount of the check is or if or when they are going to receive it. Martin stressed that he has inspected the property multiple times over the past several months and many issues have not been cured for months. Jalenak wanted to know if we are named on their insurance policy. Charles Carpenter confirmed that we are. Carpenter stated we can contact in the insurance company, but that is not a usual practice for the Board. He said it is not uncommon for insurance companies to simply not want to make the payout.
Eden at Watersedge
This PILOT property has recently been in Environmental Court and subjected to widespread media attention due to tenants suffering excessive air conditioning outages. Edwards has been responding to the media requests and has been in touch with Memphis Code Enforcement. Edwards stated that in his opinion, the owner is making a good faith effort to address all issues. Corbin I. Carpenter attended the hearing at Environmental Court held earlier today and reported the results of today’s hearing to the PILOT Committee, as well as to the full board. The attorney for Eden presented a preventative maintenance plan. The next court date is scheduled for September 13, 2017.
Renaissance at Steele and South City
Finally, Edwards provided general information on PILOTs anticipated with Renaissance at Steele and South City, which are joint ventures of public private partnerships. Archie Willis and Roshun Austin are involved with the projects.
CONSIDERATION OF PILOT TERMINATION FOR HIGHLAND CREEK
Highland Creek representatives Barry Cohen (owner), Hunter Humphreys (attorney), and David Upton (agent) entered the meeting.
Hunter Humphreys provided a package to the Board prior to the meeting containing the owner’s plan for dealing with the lack of construction, low occupancy and general failure of complying with PILOT requirements. Humphreys discussed additional issues that arose after purchase of property in 2011, renovations that have been completed, and the personal funds that Cohen has invested into renovation of the property, which have well exceeded the original estimates. They also discussed the ongoing discussions with THDA regarding the pending bond and tax credit allocations. Based on the information provided and the presentation given by Humphreys and Barry Cohen, they requested the Board to allow additional time to finalize the THDA bond and tax credit commitments because if the PILOT is immediately terminated, the result would create a material default with THDA and the project would be doomed. They further reported that the THDA allocations expire at the end of the year. Cohen requested an extension from THDA beyond year’s end, which was denied. Cohen is still optimistic that the project will receive a tax credit commitment and be able to close its 9% tax credits prior to year’s end, at which time the bonds could be closed and funds available to complete the construction on a major scale. In the meantime, Cohen proposed an alternate plan to comply with the IRS requirements for receiving the THDA tax credits. Additionally, Cohen has applied for a construction loan. It is anticipated to close in the next 60-90 days. The owner is requesting the Board give the project until the end of the year to correct the construction and occupancy issues. Humphreys suggested they come back on a monthly basis until the end of the year and give updates to the Board. Charles Carpenter suggested terminating the PILOT and coming back at a future date to request a new 10-year PILOT once the THDA tax credit issue is settled/restructured and the construction loan is in place. The biggest Board concern is tenant benefits are not being met. Cohen said he is open to that idea, but he is concerned about how that will affect the THDA credits. Daniel Reid thanked the group for their input and told them the Board will follow-up with them after additional Board discussion.
Highland Creek representatives exited.
The Board members agreed the work that has been completed is very good; however, there is a significant amount of work left to be completed. Monice Hagler stated she is not as committed today as she was at the last Board meeting to terminating the PILOT after hearing from the representatives. She recommended tabling the issue for 60 days and having them submit a report in 30 days to either Martin Edwards or the Board regarding the items that have been completed, then come back before the Board in 60 days. Edwards recommended giving them to the end of the year. Hagler stated by October there should be a definitive plan. James Jalenak recommended giving them approximately 90 days (November 1) to have one rent ready unit finished in every unit. James Maclin stated they should be able to make significant progress in 30 days, for example, 60 completed units in 30 days, then 90 completed units in 60 days, etc.
Monice Hagler questioned why Cohen had units ready, but not put on the market for rent. Edwards stated he did not know other than the fact that some of the buildings aren’t accessible due to absence of driveways and walkways. Maclin estimated he is spending at least $30,000 per unit. Staff will decide the deliverables at the end of 30 days and the end of 60 days. The 60-day report will need to be made in person by representatives of Highland Creek.
Monice Hagler moved for the approval of TABLING HIGHLAND CREEK PILOT TERMINATION (BASED ON CONTIGENCIES TO BE DETERMINED BY STAFF). James Maclin seconded and the motion passed unanimously.
CONSIDERATION OF THE FINAL BOND RESOLUTION FOR FORUM FLATS, LP
Forum Flats representatives Ted Fellman, Jon Shepard, Jennifer Lowrie and Bob Coleman entered the meeting. After discussion of the project, Charles Carpenter advised that all conditions had been met for approval of the final bond resolution for Forum Flats, LP.
Nancy Willis moved for the approval of the FINAL BOND RESOLUTION FOR FORUM FLATS, LP. James Maclin seconded and the motion passed unanimously.
CONSIDERATION OF THE FINAL BOND RESOLUTION FOR MASON HOUSING PARTNERS, LP
Monice Hagler is recused.
Charles Carpenter refreshed the Board on the procedural and factual information on the project development with THDA increasing the volume cap for bond and tax allocations, advised that all conditions for approval had been met and recommended approval for the final bond resolution for Mason Housing Partners, LP.
James Jalenak moved for the approval of the FINAL BOND RESOLUTION FOR MASON HOUSING PARTNERS, LP. James Maclin seconded and the motion passed unanimously.
CONSIDERATION OF PILOT REFINANCING FOR HIGHLAND MEADOWS
Martin Edwards stated the owner of Highland Meadows is paying off the current loan and establishing a new loan. Edwards stated this is a great property and the debt coverage ratio is strong. Edwards strongly recommended approval for the PILOT refinancing for Highland Meadows:
James Maclin moved for the approval of the PILOT REFINANCING FOR HIGHLAND MEADOWS. Nancy Willis seconded and the motion passed unanimously.
CONSIDERATION OF THE PILOT TRANSFER APPLICATION FOR THE COVES AT YALE
Martin Edwards advised of his inspection of the property, including its current condition and that the owner will come before the Board with a refinancing application at a later date. Edwards then recommended approval for the PILOT transfer application for The Coves at Yale.
Monice Hagler moved for the approval of the PILOT TRANSFER APPLICATION FOR THE COVES AT YALE. James Jalenak seconded and the motion passed unanimously.
CONSIDERATION FOR PILOT TRANSFER APPLICATION RATIFICATION FOR OAKSHIRE
Charles Carpenter reminded the Board this issue was already voted on unanimously, via written consent, of each board member and today’s consideration was merely to ratify the board’s informal action for the record.
James Jalenak moved for the approval of RATIFICATION OF BOARD ACTION APPROVING THE PILOT TRANSFER FOR OAKSHIRE APARTMENTS. James Maclin seconded and the motion passed unanimously.
EXECUTIVE DIRECTOR REPORT
HEHF “Autopsy” Numbers
Martin Edwards reported that Amber Hayes has been working on additional data and occupancy numbers, and stated we now know the average tenant income for the PILOT tenant portfolio is $18,670. Further, that 2nd Quarter 2017 occupancy numbers are in and are being analyzed. This information will allow the Board to be more stringent on matching quarterly compliance reports to Ledford’s reports. It’s important for us to know if the units are “rent ready” vs. not “rent ready”. It’s also important to get this information from the property managers. Dr. Manoj Jain echoed Edwards’ concern regarding occupancy and asked how many tenants we currently have for all properties. Based on the numbers Hayes worked on in May, the number is approximately 38,600.
PILOT Property Owners Meeting
Edwards stated this would happen sometime before the end of the year. James Jalenak suggested when we get our new Board member (replacement for Carolyn Head), we rent a bus and tour our PILOT properties. Daniel Reid suggested we have a Board retreat soon and the bus tour could be part of it.
Edwards reiterated the importance of occupancy. He suggested if the property is below 70% occupancy that Staff will investigate further.
There being no public comment, it was announced that the next scheduled meeting of the Board will be held on Wednesday, September 6, 2017 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:57 p.m.