MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, August 7, 2019
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 7, 2019. 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, Chair James Jalenak
Monice Hagler Cliff Henderson
Nancy Willis Brittney Rowe (via phone)
The following Director was absent:
Dr. Manoj Jain
Also present were:
Staff members Martin Edwards, Jr., and Stephanie Wright; Charles E. Carpenter and Corbin I. Carpenter, General Counsel, and Cheryl Hearn, Assistant City Attorney.
Also, in attendance were Derrick Neal with Superior Community Capital, Chris Clarke with Clarke Investments, and Chuck and Karen Parker with Chuck Parker, LLC representing Kimball Cabana Apartments and Oakshire Apartments; Rose Eaton with Fallbrook Multifamily and Lillian Gilmore with Reno and Cavanaugh representing Windsor Pointe Apartments.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Vice Chair, Monice Hagler.
Approval of Minutes
Nancy Willis moved for approval of the Minutes of the July 10, 2019 Regular Meeting. Cliff Henderson seconded, and the motion passed unanimously.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended June 30, 2019. A discussion of the financials was completed and
Buckner Wellford moved for acceptance of the Finance Committee Report for June 30, 2019, and properly seconded by James Jalenak, the motion passed unanimously.
Dan Reid entered the meeting and assumed the role as Chair of the meeting.
Charles Carpenter presented the legal report, as follows:
1. For the Board’s information, Carpenter reported there was one new claim received for the period, being two materialmen’s liens filed against Cedar Run Apartments. Carpenter reported that this PILOT lessee is represented by Al Bright, Esq. Carpenter has been communicating with Attorney Bright on the issue and it is currently under investigation. Carpenter also reminded the Board that Cedar Run received a refinancing approval of its PILOT in April of 2019, however, the transaction has not closed. This is the first time that the Board has encountered a refinancing that has not closed in a short period of time. Typically, refinancing transactions close within several weeks following the receipt of Board approval. Carpenter communicated that if this refinancing is not closed within a six (6) month period following the approval, representatives of the property should be required to appear before the Board and the refinancing request should be subject to being re-underwritten because there could have been a material change in circumstances. Carpenter reported that Attorney Bright had advised that there are negotiations ongoing with the proposed lender. Carpenter stated that this matter had been discussed with Martin Edwards, Jr. in regard to the six- month approval period, to which Edwards agreed was an acceptable time frame and consistent with related board policies. Carpenter stated that the six-month timeframe would expire in October. If this transaction is not closed by then, the Board may be asked to address the matter from a policy standpoint.
2. For informational purposes, Carpenter provided an update on Uptown 2 bond and PILOT approvals. Carpenter reported that the working group for the financing is in full gear led by Pete Ezell, Esq. in the Nashville office of Baker Donelson. The developer, Elmington Capital, based in Nashville plans to come before the Board for its final bond resolution in October 2019. The initial term of the current bond inducement expires at the Board’s October meeting and may be subject to a closing extension fee depending on the timing of the closing. Carpenter advised Uptown 2 representatives of the precedent that the Board has established providing in such cases that if a final bond resolution is approved in the sixth month of the inducement period and the transaction is closed before the Board’s next regular meeting, then an extension fee will not be assessed. Uptown 2 representatives plan to move forward to take advantage of this precedent. In addition, Carpenter also provided an update on Forum Flats’ major fire damage sustained at the property. Elmington Capital has been working with the insurance company and they are substantially completed with their negotiations. Demolition has been completed on certain parts of the fire damaged premises and the remaining parts of the fire damaged premises are still in negotiation as to whether it will be considered a total loss or treated as a rehabilitation claim under their policy. Elmington has contracted to rehabilitate the damaged units that have been adjusted and once it resolves the status of the remaining units with its insurance company, it plans to immediately restore the remaining units. As to the bonds that the Board has outstanding, the current plan it to redeem the bonds at the mandatory tender date, which means that they will likely have to come back and apply for new bonds. Martin Edwards stated that he had also spoken with John Shephard of Elmington Capital, who had provided him with a similar update for Forum Flats.
Note: Board member, Buckner Wellford stated for the record that he will be recusing himself from any action involving these two properties, as they are represented by an attorney of his employer, Baker Donelson.
3. Carpenter reported that his firm had closed the Pershing Park Apartment PILOT term extension. All Pershing Park documents have been recorded. Carpenter also reported that the New Horizon Apartments PILOT Term extension had been substantially closed with the remaining issue for New Horizon involving the paying agent, US Bank National Association, finalizing its interpretation of the PILOT Lease Agreement concerning whether part of the New Horizon premises is located in a flood plain zone. Factually, there are a total of seventy-five buildings at New Horizon and two of the buildings are located in the flood plain zone. Carpenter’s firm has been working with the paying agent and lender to clarify the issue. It is the Board’s lease agreement, and it is clearly stated in the lease; however, the Board’s position has always been to follow the position of the lender, and if the lender is comfortable with the PILOT Lessee not carrying flood insurance, then the Board will be in agreement. Carpenter’s firm has just recently come to this agreement with the New Horizon lender, and the paperwork is being prepared in order to complete the closing of the PILOT term extension. All fees have been paid, but the documents for New Horizon have not been recorded due to this issue. Carpenter reminded the Board that previously, his firm only recorded the PILOT Lease and the Quit Claim deed, but not the PILOT Agreement. Because of past issues with the City and County taxing authorities, the PILOT agreement will also be recorded of public record moving forward. This will help to streamline the process with post-closing activities with the Assessor, City and County taxing authorities.
4. For informational purposes, Carpenter updated the Board on the Jehl Cooperage property. His firm has finalized all of the agreements with EnSafe, Downtown Memphis Commission (DMC), and the Board. The funds from the Board have been transferred to the DMC. EnSafe is now onsite and testing has begun. EnSafe will return to the site on August 19, 2019 to complete their testing. Carpenter will be receiving updated reports from this testing. The Environmental Court is well engaged in this process, and the Board has been represented in this court by Corbin Carpenter and all matters have progressed well. Corbin Carpenter stated that the next update due to the environmental Court judge will take place on August 22, 2019 at 10:00am. It is the goal that the initial assessments of the property will determine if an acceptable remediation plan can be determined. Carpenter will keep everyone advised. Carpenter stated that his firm is also working with the Tennessee Department of Environmental Conservation on this project. Buckner Wellford asked about ownership of the property. Carpenter responded that the property remains privately owned by descendants of the Jehl family, however, it is currently under the jurisdiction of the Environmental Court, and if the property can be rehabilitated then the property would go through some sort of foreclosure or judicial declaration to clean up all of the liens and encumbrances from the property and then it would be offered for sale. Cliff Henderson asked where the two hundred thousand-dollar ($200,000) grant provided by the Board ranks with the liens on the property, to which Carpenter stated the Board’s grant would have a priority status as provided in the Order entered in the Environmental Court. Carpenter also stated that is has also been made perfectly clear to all parties that the grant provided was a one-time advancement by the Board and that the Board would not be considering future advances to the project.
5. Carpenter reported that his firm has made substantial progress on the closing of the Clearbrook Apartments PILOT and has documents prepared for the Board Chairman’s signature today. Carpenter also stated that because this will be the first of the new twenty (20) year allowable PILOT term, the closing fee will be two percent (2%) of the total development cost as opposed to the original closing fee of one percent (1%) for a ten (10) year term. To that note, Carpenter mentioned that because New Horizon was granted a fifteen (15) year “High Impact” PILOT term extension, that the closing fee would reflect and one- and one-half percent (1.5%) closing fee payable to the Board.
6. Lastly, Carpenter reported that the Jamesbridge PILOT refinancing has been closed.
The above concluded the legal report and there was a brief question and answer session with members of the Board.
PILOT COMMITTEE REPORT
Martin Edwards, Jr. advised that the PILOT Committee did meet earlier and considered various matters, but he would reserve his comments under the heading of Action Items on the Board’s agenda. Edwards also provided an update on Sunrise Terrace, which received approval of PILOT refinancing in June 2019. Edwards stated that he has made several site inspections and the no work has commenced; however, Edwards received a complete renovation budget and timeline of work to be completed on this project and work is scheduled to commence immediately. Edwards reminded the Board that this project is located next to Bent Tree Apartments, another PILOT property. Edwards stated that the refinancing of Sunrise Terrace was to resolve the issue of work that needed to be completed and he believes it will, but this property will continue to be under strict observation to ensure that the work that has been promised by the PILOT Lessee is carried out. Edwards also reported that he received a phone call from John Lawrence with EDGE regarding the possibility of new ownership of Eastwood Park, a previous PILOT lessee, which the Board terminated its PILOT in December 2018 for non-compliance. Edwards anticipates that if the purchase of Eastwood Park is successful, the new ownership will be moving forward with a new PILOT application to the Board.
BOND INDUCEMENT RESOLUTION FOR KIMBALL CABANA APARTMENTS
Chris Clarke, Derrick Neal, Chuck Parker, and Karen Parker entered the meeting.
Chris Clarke introduced himself and stated that he has been hired as a financial and development consultant on both Kimball Cabana Apartments and Oakshire Apartments projects. Clarke explained that he has been working in this arena for over twenty-five years and works as a development consultant all around the country providing structuring of debt and equity for multifamily properties. Chuck Parker introduced himself, stating that he has been overseeing Kimball Cabana and Oakshire Apartments for the last eighteen (18) months. Derrick Neal introduced himself with Superior Community Capital Corporation. Neal explained that he was asked to be part of these projects by Chuck Parker. Parker and Neal have experience working together on other projects in the Memphis area, including another PILOT project known as Lamar Crossing. Martin Edwards, Jr. asked that the representatives provide an explanation on how these two properties have been pulled together. Clarke explained that with the current interest rate environment, the plan is to seek private placement funding rather than seeking financing go through HUD. Clarke also stated that this group will be using LEDIC Management for as site mangers for both properties. Edwards explained that these properties are close to other current PILOT properties, such as Pendleton Place, and the rehabilitation of these properties would be wonderful for the community. Clarke also added that each property will be seeking 4% low income housing tax credits through THDA.
There being no further questions or comments,
Monice Hagler moved to approve the BOND INDUCEMENT RESOLUTION FOR KIMBALL CABANA APARTMENTS. Brittney Rowe seconded, and the motion passes unanimously.
BOND INDUCEMENT RESOLUTION FOR OAKSHIRE APARTMENTS
Thereupon, the Board considered the Oakshire Apartments Bond application, as it is being represented by the same principals and professionals sponsoring the Kimball Cabana Apartments. There being no further questions or comment,
Cliff Henderson moved to approve the BOND INDUCEMENT RESOLUTION FOR OAKSHIRE APARTMENTS. Nancy Willis seconded, and the motion passed unanimously.
Chris Clarke, Derrick Neal, Chuck Parker, and Karen Parker left the meeting.
AFFORDABLE MULTIFAMILY PILOT TERM EXTENSION APPLICATION FOR WINDSOR POINTE APARTMENTS
Rose Eaton and Lillian Gilmer entered the meeting.
Rose Eaton began by introducing herself as a representative of the owner. Lillian Gilmore, Esq. introduced herself as an attorney with Reno and Cavanaugh, Nashville office, which is the law firm that represents Fallbrook Multifamily, the owners of Windsor Pointe Apartments. Martin Edwards, Jr. began by stating that Windsor Pointe is a unique property to the PILOT program because it is comprised of fifty (50) single family homes. Edwards also passed around photos to the Board members from a site visit to the property, to display the uniqueness of the property. Lillian Gilmer seconded Edward’s comments as to the uniqueness of the property and stated that the PILOT was applied in 2012 and is due to expire in 2022. Gilmore explained that this PILOT property allows low income residents the opportunity to live in a single-family home. Gilmore stated that the property is very popular and is one hundred percent (100%) occupied, with a waitlist as well. Lillian Gilmore explained some background as to the ownership of the property and explained that Fallbrook Multifamily desires to put permanent financing on the property, which will only be possible with a longer PILOT term and that is the reason for the early request of the PILOT term extension. If granted the PILOT term extension, Windsor Pointe would be able to continue to provide tenant benefits such as landscaping to all the homes, maintenance of all washers and dryers in every unit, maintenance of the neighborhood splash pad, in addition to the benefit of being able to offer single family homes to low income residents should the PILOT term extension be approved. In addition to the aforementioned tenant benefits, Windsor Pointe also offers home ownership classes, financial budgeting classes, health benefit services, childcare benefits and referral programs, a summer food program, a youth program, and a computer education program. There was a brief discussion of the property. Charles Carpenter added that this project clearly fits within the mission of the Board from a legal standpoint. There being no further questions or comments,
Monice Hagler moved to approve AFFORDABLE MULTIFAMILY PILOT TERM EXTENSION APPLICATION FOR WINDSOR POINTE APARTMENTS for a ten (10) year extended PILOT term. James Jalenak seconded, and the motion passed unanimously.
Rose Eaton and Lillian Gilmer left the meeting.
AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR ASHTON HILLS APARTMENTS
Martin Edwards, Jr. began by stating that Ashton Hills is an apartment complex located in the north part of the city. Edwards explained that this property exterior looks good but needs major interior renovation. The property is adjoining Raleigh Egypt School. The property is currently owned by the lender, which foreclosed on the property. This is a two hundred (200) unit property. Edwards explained that he is most impressed with the cleanliness and condition of the property under the circumstances. There being no further questions or comments,
James Jalenak moved to approve the AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR ASHTON HILLS APARTMENTS for a twenty (20) year PILOT term. Monice Hagler seconded, and the motion passed unanimously.
Buckner Wellford asked that now that the Board has approved a new PILOT for a twenty (20) year term, according to the Board’s new guidelines, what happens at the ten (10) year mark? Charles Carpenter responded that a schedule has been created by his office, showing the gradual increase in PILOT payments that will start following the initial ten (10) year term of the PILOT wherein the PILOT payments will increase annually by ten (10%) percent in an effort to assist properties in transitioning back on to the tax rolls at the end of the PILOT term.
AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR TWIN OAKS APARTMENTS
Martin Edwards, Jr. began by stating the Twin Oaks is located off Winchester Road. The ownership will be the same as Clearbrook Village Apartments, which is a property that was approved for a PILOT in June 2019. This property is two hundred fifty- three (253) units with ninety three percent (93%) occupancy. Edwards stated that the property is in good condition but does need rehabilitation. There being no further questions or comments,
Buckner Wellford moved to approve AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR TWIN OAKS APARTMENTS for a twenty (20) year pilot term. Cliff Henderson seconded, and the motion passed unanimously.
Executive Director Report
Martin Edwards, Jr. reported that Paul Young with the City of Memphis, Division of Housing and Community Development had requested him to provide information to present to the Memphis City Council, outlining information on the Board’s mission, scope of duties and its history. Young received this request from City Council to present this information from this Board, as well as all other entities involved in housing around the City. This information was presented on August 6, 2019 to the Housing Community Development Committee of City Council. Edwards prepared the Board’s information and submitted it to Young for presentation to the City Council committee meeting. In brief summary, the Board has approved in excess of ninety-two million dollars in new capital investment into the City of Memphis in 2019. This has also created a great number of jobs and a great number of units in affordable housing. This information will be updated with today’s meeting approvals and submitted to the Mayor’s office. Edwards mentioned that he would like to next look at capital investments versus tax dollar reduction through the PILOT program and will be working on that with Board staff. There was a brief discussion of this among the Board.
The above concluded the Executive Director Report.
Charles Carpenter referenced the Board’s next meeting as scheduled for September 11, 2019. Carpenter stated that he and Corbin Carpenter will both be attending the National Association of Bond Lawyers in Chicago at that time and would be unable to attend. Carpenter requested that the Board consider another date that would be satisfactory. After discussion, it was determined that the next Board meeting would be rescheduled to Wednesday, September 18, 2019.
There was no public comment.
It was announced that the next scheduled meeting of the Board will be held on Wednesday, September 18, 2019 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:22 p.m.