MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, February 7, 2024
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee (the “Board”) was held pursuant to public notice published in The Daily News on Wednesday, January 31, 2024, and posted on the Board’s website at: www.memphishehf.com. The published meeting time was 12:00 Noon. The meeting was held in the conference room in the Board offices, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chairman Monice Hagler, Secretary
Buckner Wellford James Jalenak (Zoom)
Cliff Henderson Katie Shotts
Howard Eddings (Zoom)
Staff and others attending: Stephanie Bryant, Bryce Miller and JP Townsend; Charles E. Carpenter and Corbin I. Carpenter, General Counsel; Katrina Shephard (Zoom), legal assistant to General Counsel; Cheryl Hearn, Deputy City Attorney.
Also participating in person and/or via remote Zoom virtual platform were Alex Uhlmann, Caroline Francisco, Devin McGrath, Peter VanCanneyt, and Paige Lemen of the Memphis Tenants Union; Becky Scott, Johnny Sampson, James McNabb, Joyce Warren, Andrea Smith, William Tuggle, Peggy Wilkins, Johnnie Mae Lee, Helen Evans, all residents of Memphis Towers; Dannie Gatewood, a member of the public; Chynna Carr and Brianna Washington, residents of Gospel Gardens; Marilyn Brien, Ericka Douglas, and Austin Harrison of Memphis Interfaith Coalition for Action & Hope (MICAH); Tony Eskridge of Poor People’s Campaign (PPC); Jamie Johnson of Memphis Public Interest Law Center; Suzanne Cohen of The MEP Project; Shirley Bondon of Black Clergy Collaborative of Memphis; Tom Mignogna of Millennia Housing Development, Ltd; Brian Myers, Pam Bower and Matt Daniels of The Richmond Group Affordable Housing and Joanne Flanagan of JDF,LLC representing Memphis Towers; Frank Stockdale Carney and Elizabeth Friary of Evans Petree, PC and Tie Lasater of Key City Capital representing Grahamwood Place Apartments and Pinebrook Pointe Apartments; Thomas Robinson of Alco Management, Inc., representing Pershing Park Apartments; Luretha Phillips, Kelitia Dickson, Kevin Pilak, and Moshe Cole of Memphis Housing Authority (MHA) and Jennifer Croxton and Joy Miller of Knight Development representing MH Strategies II, LP; David Shores of Multi-South Management Services, LLC and Devid Shemano representing Country View Apartments; Frank Stockdale Carney and Elizabeth Friary of Evans Petree, PC and Mendel Fischer and Neil Knopf representing Eden Pointe 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; Mark Jobe of Glankler Brown, PLLC, Aaron Goodfellow of Rhodium Capital and David Upton representing New Horizon Apartments; Zaneta Lowe and Tyler K. Chow of WREG News Channel 3; Kate Bieri of Fox 13 News; and several members of the public were also present.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Daniel T. Reid, Chairman.
Chairman Reid stated that in compliance with the Open Meetings Law codified in Section 8-44-101 to 8-44-108 inclusive of the Tennessee Code Annotated, as amended, The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee is holding its regular meeting on Wednesday, February 7, 2024 @ Noon as an open public meeting in its conference room located at 65 Union Avenue, Suite 1120, Memphis, Tennessee 38103.
Chairman Reid stated supplemental Board meeting materials could be accessed on the Board’s website: www.memphishehf.com and reminded all attendees participating via remote access to enter their name and affiliated entities into the Zoom platform for record keeping purposes.
Public Comment
Chairman Daniel Reid opened the floor for public comment and advised that all comments should be limited to two (2) minutes per speaker.
1. Alex Uhlmann said that during the Board’s last meeting, the Board said it would take up the issue of Memphis Towers in the meeting today, and he wonders why that is not on the agenda today.
Charles Carpenter responded that the recent agenda listings for Memphis Towers have been status updates, and since the Board’s December 6, 2023 Board meeting, Memphis Towers has been issued a legal notice of default by the Board, and because of that fact, the Board does not need a status update. Carpenter stated that a legal default follows a different process where the legal representatives of the Board and Millennia Properties become directly involved and all communications are required to be placed in writing until there is either a satisfactory cure plan approved or a determination is made that the default cannot be cured.
Uhlmann stated that it is encouraging that there has been some action taken on this issue. Uhlmann stated his name for the record and that he is a Memphis resident. Uhlmann said he looks forward to hearing more about the process details and believes it is important for everyone to know. Uhlmann stated that many folks in attendance are invested in this issue, and they are encouraged that the Board is taking steps to deal with it. Uhlmann said the process for that must be clear. Uhlmann said he has been talking about this issue for a long time and thinks 2024 is the perfect time to start dealing with it. Uhlmann stated that the Board will hear other comments about issues that continue at Memphis Towers, and they want to make sure that this process is done in the best way and in a way that leads to better living conditions for the people who are living there. Uhlmann stated that these issues are happening at Memphis Towers, but also happening at the other properties. Uhlmann stated that there will be tenants from Gospel Gardens here today to testify, and the Board has heard previously from tenants at Hope Heights. Uhlmann stated that they know about issues at Serenity Towers, that is no longer a Board property, but is also owned by Millennia and has had a number of different issues. Uhlmann stated that he is encouraged that the Board is taking some action steps on this, but he needs to make sure that this process continues and is as transparent as possible so that the community can be sure that elderly and disabled residents, people’s relatives, community members, are living in the best situation possible, especially when those properties are getting tax breaks.
2. Becky Scott introduced herself as a resident of Memphis Towers since September 2022. Scott stated that she is also encouraged to learn that there has been some action taken against Memphis Towers and she hopes that this will ultimately lead to full accountability for them and for the Board. Scott said she will speak briefly on two issues she hopes the Board will consider when determining the future of its financial relationship with Memphis Towers and all other Millennia properties. Scott stated that the first issue is security. Scott stated that tenants theoretically have controlled access to the building with key cards, but that controlled access becomes moot when the door is either constantly unlocked or held open, allowing anyone to enter the building at any time of the day or night. Scott stated that she personally does not feel safe leaving her apartments between the hours of 6:00 pm and 9:00 am because of the number of sexual assaults that have been attempted, some successfully, some unsuccessfully. Scott stated that she does not feel safe in her own home, and she does not think any human being should feel this way. Scott stated that the other issue is pests in the building. Scott stated that she has not seen a pest control agent in a very, very long time and after a horrific summer last year with them, tenants have bed bugs in the building again. Scott stated that she would like to emphasize that by continuing to give tax breaks to Millennia, that is incentivizing Millennia on the dime of the taxpayers of the City of Memphis to continue to neglect both their tenants and their buildings.
3. Johnny Sampson introduced himself, stating that he has been paying his rent for two years and cannot live in his own apartment because of bed bugs. Sampson stated that his apartment is infested with bed bugs, causing him to be hospitalized for nine days because of infection caused by bed bug bites. Sampson stated that this problem continues to cause him physical and medical stress and stated by both his primary doctor, his therapist, and emergency care that the bed bugs are confined to his groin area.
4. James McNabb stated that he is a resident of Memphis Towers and has been a resident there since last year, McNabb stated he does not feel safe in his own building when he walks out the door, and that he always has something on him to protect him from anybody that walks in there. McNabb stated that two females have been raped in that building and there are homeless people that come up in the building that like to rob people, and he does not feel safe in his building. McNabb stated that is the reason why he keeps a weapon on him at all times for his safety. McNabb stated that tenants need security in that building.
5. Joyce Warren stated that she has lived in Memphis Towers for ten years. Warren stated that in the last seven years, it has gone down and tenants are not safe there, not healthy there, and tenants have no power there and Millennia needs to be stopped. Warren stated that if the Board is giving Millennia money, then it is helping Millennia destroy other people.
6. Andrea Smith introduced herself as a resident of Memphis Towers and stated she has lived there for five years. Smith stated that she is here today talking about the safety issues because the front door has been broken since Thursday night, February 1, 2024, and has not been fixed. Smith stated that anyone can walk up to it and the door opens right up, and a person does not have to use a key card or anything. Smith stated that she has heard people on her floor walking, messing with her doorknob, and tenants need someone there at all times to protect them, security guards and all, because she does not feel safe at all.
7. Caroline Francisco introduces herself as an organizer with the Memphis Tenants Union. Francisco stated that this has been brought to the Board’s attention already, but she just wanted to get it on the meeting record. Francisco stated that all the tenant leaders from Memphis Towers and other Millennia properties here in Memphis that are here today, not only have they been organizing together, but they also have the backing of organizations across the city, across the state, and across the country. Francisco stated that she sees it in front of several Board members, but Memphis Towers tenant leaders have written a letter to the Board including the demand that Memphis Towers tax break is revoked, but that letter has been signed by thirteen coalition members, and all their logos are listed. Francisco stated again that the Board has the letter, and they are happy to provide copies to anyone else who would like them. Francisco stated that she wants to remind the Board that all eyes are on the Board right now to see how it takes its next steps. Francisco stated that city, state, and federal, all eyes are around the Board, and she hopes the Board makes the right decision.
8. William Tuggle stated that he has been a Memphis Towers resident for two years. Tuggle stated that his concern is that tenants need a licensed, certified security company, not anyone hired off the streets that has nothing to do with security and no way of knowing how to achieve it. Tuggle stated that the second thing is maintenance. Tuggle stated that Memphis Towers has not had a steady maintenance crew in five or six months, and nothing is being fixed. Tuggle stated that another thing is elevators and that sometimes they work, but at least one of them breaks down twice a week. Tuggle stated that also exterminators have not been there in a month, he has roaches, and he has asked management when the exterminator is going to come, and asked for a date so that he could be there to let them in. Tuggle stated that management could not give him a date because they have not paid them. Tuggle stated that they owe the elevator company and they have not paid them, and who knows about the construction crew, because they cannot even finish the B Tower because they have not paid them. Tuggle stated that there are lines on the building. Tuggle stated to the Board not to give them anymore tax breaks because they do not deserve them, and all that tenants are asking for are simple things. Tuggle stated that management should not have to tell a tenant to go buy a can of bug spray and spray the apartment themselves, because the landlord is supposed to do that. Tuggle stated that they have been coming here for months and it seems like the Board is ignoring them, and asked what it takes when you see all these properties with Millennia have all these kinds of issues. Tuggle told the Board that while they are asking, do their job and the ball is in the Board’s court.
9. Dannie Gatewood introduced himself, stating that he is just now finding out the scope of what is going on, but he is present today to represent his daughter, who is a tenant at Gospel Gardens. Gatewood stated that his daughter is afraid to talk, so he is present today as a concerned father. Gatewood stated that his daughter could move home, and they were appreciative when the apartment she is living in was renovated, and it was affordable for her, and she has been living there for a few years now. Gatewood stated that when his daughter first moved in, the place was great, and things were being fixed, and tenants were required to abide by certain rules, so there was not a bad element there. Gatewood stated that over a couple of years, things have changed, and things have been run down, broken down, and not fixed. Gatewood stated that the crime element came in and people were not being removed according to the lease agreement. Gatewood stated that police were called, and nothing was happening, so his daughter went to management and after she went to management, retaliation started. Gatewood stated that his daughter’s apartment was recently shot into and there are bullet holes in her door. Gatewood stated that his daughter had been told by others in the community that live in the apartment complex that it was in retaliation for her speaking out. Gatewood stated that he is present today for his daughter and noted that she could move, but she should not have to. Gatewood said he does not know the power of this Board or the scope of Millennia, but when his daughter called him, he got his shotgun and drove to her house as fast as possible. Gatewood stated that he is a concerned father and if the Board can do anything, he just wanted to let the Board know what is going on. Gatewood stated that he will protect his daughter, and he has been in Memphis for 48 years, his entire life, and has no plan to leave. Gatewood again said he does not know what the Board can do, but he does know that the apartments were in good working order when his daughter moved in, and management was on top of things at first, and then things started slipping and now there is an element there that is taking over the apartment complex. Gatewood stated again that his daughter could move home, but she should not have to.
10. Chynna Carr introduced herself, stating that her father is here with her today because she has been afraid to talk. Carr stated that since she has been living at Gospel Gardens, it was fine for the first two years, but now it is going downhill. Carr stated that her apartment has been shot into, her car has been broken into twice, drug dealers are living under her, and she should not have to be afraid to go to sleep at night or have to go to her father, auntie, or cousin’s house just to get a peaceful sleep. Carr said she has been sick lately, so sometimes she must be home, bedridden, and is afraid for her own safety. Carr stated that there is no security, and she can smell drugs coming through the vents, and some of the lights do not work, and it is just not a safe place for anyone to be staying.
11. Brianna Washington introduced herself, stating that Chynna Carr is her sister and they both live in the same apartment as Gospel Gardens, and there have been horrible issues, they cannot stay there, and it is horrible conditions. Washington stated that management knows about the drug dealing and about everything, and management told her to her face to stop talking and if she would stop talking, the owners of the apartment would not retaliate against her. Washington stated that Millennia knows about the drug dealing happening and they tell her to just deal with it, and it should not have to be that way. Washington said the first two years were great, and they had everything they needed, and then this last year and a half has been horrible. Washington stated that she stays out of her apartment as much as she can because these things are not just happening at night but are also happening during the day. Washington stated that she has two bullet holes in her door and in her wall, and that when she leaves for work at 5:30 am, there is shooting, and she has to run back into her apartment and will be late to work because she is afraid that a bullet is going to hit her when she is trying to go to work every day. Washington stated that it is just horrible, and she does not know what else to do, because she has talked to Millennia, but they are not listening, no one is listening, and it is like they just want them to be harmed. Washington stated that she hopes the Board can listen to tenants and see that they need some help.
Chairman Reid thanked everyone for their comments.
Alex Uhlmann continued to comment, to which Chairman Reid stated that he was provided two (2) minutes to make his public comment, which he used, and he must move on to any further comments and Board business.
Chairman Dan Reid thanked everyone for their public comments and expressed his appreciation for everyone being here to voice their concerns.
There were no further questions or comments.
Approval of Minutes
Katie Shotts moved for approval of the Minutes of the December 6, 2023 Regular Meeting, which was seconded by Cliff Henderson and the motion passed unanimously after proper roll call vote of the Board members.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended November 30, 2023. After discussion,
Monice Hagler moved for acceptance of the Finance Committee Report for the month ended November 30, 2023, properly seconded by Katie Shotts, and the motion passed unanimously after a proper roll call vote of the Board members.
Cliff Henderson presented the financial results for the month ended December 31, 2023. After discussion,
Monice Hagler moved for acceptance of the Finance Committee Report for the month ended December 31, 2023, properly seconded by James Jalenak, and the motion passed unanimously after a proper roll call vote of the Board members.
Attorney’s Report
Charles Carpenter presented the legal report, as follows:
1. Carpenter began by stating that an official legal notice of default has been filed against Memphis Towers for many of the issues that the Memphis Tenants Union has been complaining about to the Board in addition to other non-compliance matters. Pursuant to the notice requirements in the PILOT documents, Carpenter reported that his firm provided notice to Millennia properties as well as an additional asset management, USA Memphis Towers, LLC c/o The Richmond Group Affordable Housing based in Greenwich, CT. Carpenter reported that his firm was contacted by legal counsel and the president of The Richmond Group Affordable Housing. Carpenter introduced Joann Flanagan as the attorney and Brian Myers as the President. Carpenter invited representatives in to introduce themselves.
Brian Myers, Joanne Flanagan, Pam Bower, and Matt Daniels entered the meeting.
Brian Myers introduced himself as the President of Richmond Asset Management. Myers stated that his company is an investor in Memphis Towers and an interested party in what happens to that property. Joanne Flanagan introduced herself as general counsel for Richmond Asset Management. Pam Bower and Matt Daniels also introduced themselves as representatives present for Richmond Asset Management. Carpenter thanked representatives for being here today and stated that these matters are complex and there are various legal covenants that are involved and not only with the PILOT, but with the financing, the bonds, and other capital investments that were involved in financing the project. Carpenter stated that the legal notice of default has triggered a lot of activity and the asset management company, through its limited partnership and other legal documents, are also involved. The Board has been informed that Richmond Asset Management has also filed a legal notice of default regarding the violation of certain covenants in its legal documents and the representatives are here today to introduce themselves to the Board and to do a site visit and tour the property, which is the major asset of record. Carpenter clarified that Memphis Towers is the only Millennia property owned locally that Richmond Asset Management is involved with so the other properties that are participating in the PILOT program are not a part Richmond Asset Management’s portfolio.
Carpenter stated that under the PILOT documentation, there is a 30-day cure period for the stated deficiencies to be resolved or to have a satisfactory arrangement made with the Board to allow the default to be cured. Carpenter stated that if the cure agreement is not completed withing the 30-day cure period, then the Board has other options available to it, including terminating the PILOT. Carpenter stated that Millennia is still within the 30-day period now, Millennia has responded in writing, and that response is currently being reviewed, but it does not address all the issues that the Board has cited. Carpenter turned the meeting over to Richmond Asset Management representatives for further comment.
Myers thanked the Board for their time and stated that Richmond Asset Management received a copy of the legal notice of default, and it only reinforced their view with respect to the management of this property. Myers stated that without getting into too much detail, that typically his company is an investor in the property and are typically passive as a limited partner and they do not control the management. But, Myers stated, Richmond Asset Management has certain rights under their agreements where if the general partner or developer of the property is not living up to certain obligations, Richmond Asset Management has the right under that agreement to remove and replace the general partner with someone else. Myers stated that his company is having ongoing discussions that he believes will ultimately result in the change of ownership and control of the property from Millennia to a qualified operator, which based on what he has heard from tenants and the Board, sounds like something most folks want. Myers stated that the process will take some time to get there and will depend on whether Richmond Asset Management will have to go through legal proceedings or whether they can cooperatively work through that process. Myers stated that he is hopeful that he can achieve this in a cooperative way and bring another controlling partner in and that is the goal. Myers stated that there are a lot of financial problems, among other things, and he is outraged by some of the things he has heard here today. Myers stated that his company will do everything it can as a limited partner in the interim to put whatever pressure it can to make sure these issues get resolved. Myers stated that the financial issues include development cost overruns that are unfunded, that must figure out how to get funded, and Richmond Asset Management is willing to fix the problems and have the resources to help, but they need a path to do that. Myers stated that he must make sure that his company can get to a place where the PILOT is reinstated, because without the PILOT being valid and ongoing, the building just cannot operate, and he cannot put money in to fix the problems unless he knows that there is a path to getting the PILOT reinstated, which he would expect to be a combination of their transfer of ownership and the Board’s cooperation to allow Richmond Asset Management a little bit more time to affect all these changes and maybe a clear path to reinstating the PILOT, as it is critical to the long term success. Myers stated the PILOT saves the property money and that the rent is really the only money these properties have, and it must pay its bills, which includes staffing, insurance of the building, utilities, and real estate taxes. Myers stated that if the PILOT goes away, there is not enough money to pay all those bills and ultimately that has a negative impact on the investment itself and the residents of the property as well. Myers stated that he thinks it is in everyone’s best interest to work together, and it sounds like everyone wants the same thing. Myers stated that he would like to have a separate conversation to talk about how everyone can work together to achieve what he thinks is everyone’s objective.
Joanne Flanagan commented that part of the problem is the Board has been given a lot of promises that have never come to fruition, and even though they have time limits, they also have notice periods that they must comply with under their documents. Flanagan stated that it does not mean that they do not intend to immediately start to show some good faith efforts to address some of the problems, even if Richmond Asset Management is not in control, they would still be willing to do that and they are discussing what to do that now.
Carpenter thanked representatives for their comments and stated that based on the call between his firm and Richmond Asset Management representatives earlier in the week, this is one of the things that everyone is hoping to accomplish because it is a complex process and there are a lot of parties involved, some active and some silent, and some have limited roles. Carpenter stated that the goal and mission of this Board is to provide benefits of safe and sanitary housing for the participants in the PIOT program, so based on that, the Board is willing to work cooperatively with all parties, but time is of the essence. Carpenter stated that a plan would need to be put together immediately that would be acceptable to the Board to allow things to go forward, while acknowledging the legal rights of the various parties in the different forums that may be pursued, and it would be great to do it on a cooperative basis. Carpenter stated that the Board would cooperate and address matters as they develop. Carpenter stated that tenants are here in attendance at today’s meeting and if representatives have heard their public statements, they should feel free to talk with them or get their information and his office will stand by for any further discussions on the Memphis Towers default.
Cliff Henderson asked if the default with Richmond Asset Management was financial. Flanagan stated that the default notice issued by Richmond Asset Management to Millennia Housing is a combination of numerous things, including but not limited to the condition of the building, failure to complete within a certain amount of time, the fact that the PILOT has been issued a default, and other items. The Board thanked representatives for their comments.
Brian Myers, Joanne Flanagan, Pam Bower, and Matt Daniels left the meeting.
Members of the Memphis Tenants Union left the meeting.
Members of the media left the meeting.
2. Carpenter reminded the Board of two (2) material Notices of Default that were filed in October 2023 that remain in default for the following PILOT properties:
a. Pinebrook Pointe: Notice of Default was issued on October 10, 2023
b. Grahamwood Place: Notice of Default was issued on October 27, 2023
Carpenter stated that internal and external compliance monitors have been to both properties and turned the meeting over to Bryce Miller for further comment on property conditions observed. Miller stated that ownership has done everything that has been asked of them structurally, but he is aware that the occupancy is below the Board’s occupancy requirements. Apart from the occupancy level, Grahamwood has cured all other deficiencies, Miller reported. Miller stated that compliance staff has observed little to no movement at the Pinebrook property, and conditions have worsened over the past four to six months. Miller stated that he has been made aware that a new management team has been brought on at both Grahamwood and Pinebrook, and it was reported at the Board’s December 6, 2023 Board meeting that ownership would initially have more focus on Grahamwood than Pinebrook.
Carpenter stated that each of these two properties, are well beyond the thirty (30) day cure period, and even though there have been some beneficial improvements at Grahamwood, the occupancy is still less than the minimum seventy-five percent (75%) occupancy required under the Board’s policies and procedures and as the Board has made clear over and over, if a project does not achieve the minimum occupancy, then it cannot deliver the tenant benefits, which is a central part of the Board’s PILOT program. With the consideration of new management in place and a final effort to rehabilitate these two properties and cure deficiencies, Carpenter recommended that the Board consider deferring formal action to the March 6, 2024 Board meeting. Carpenter stated that Board staff would give further written direction to the PILOT Lessee and if they do not have a written plan that would be acceptable to the Board by the March 6, 2024 Board meeting, that the Board would consider termination of each of the PILOTs. Cliff Henderson asked how long Grahamwood has been under the seventy-five percent (75%) occupancy requirement, and if it has happened recently or for an extended period. Board staff responded that Grahamwood has been under seventy-five percent (75%) occupancy for the entire year of 2023: Quarter 1 2023, 59% occupied; Quarter 2 2023, 54% occupied; Quarter 3 2023, 55% occupied; Quarter 4 2023, 59 % occupied. Staff reported that Pinebrook occupancy is in a similar pattern for 2023: Quarter 1 2023, 65% occupied; Quarter 2 2023, 63% occupied; Quarter 3 2023, 58% occupied; Quarter 4 2023, 61 % occupied. Representatives present for Grahamwood and Pinebrook were invited to enter the Board meeting to provide an update to the Board at this time.
Tie Lasater entered the meeting.
Tie Lasater began by stating that he provided a written update to the Board prior to today’s meeting as it pertains to each of the properties. Lasater stated that there has been significant development at Grahamwood, slower development at Pinebrook, but overall good development at each one. Lasater stated that there have been some setbacks that ownership is working on. Lasater stated that the big issues at Grahamwood were the windows, the doors, some potholes in the parking lot, and fence work. Lasater reported that the original fence work has been rectified and remedied, but in doing so, there are several broken 4x4 fence posts that hold the fence up that work is beginning on. Lasater reported that those fence posts are embedded in pavement and concrete, so that will be a significant overhaul. Lasater reported that there is a wall that divides the Grahamwood parking lot with a strip center parking lot that will be significant concrete work, and the fence vendor will be working on that. Lasater reported a piece of metal fencing issue on the further east end of the property where Grahamwood has a roll off dumpster. Lasater reported that there has been an ongoing homeless issue and people dumping trash and tires through the hole in the fence. Lasater reported that they have all the metal parts and a welder coming the week of February 7, 2024 to start welding that fence and completely redoing the fence, which will take time. Lasater anticipates that the project will be complete within the next week. Lasater reported that all issues with the chain link fence on the back of the property have been handled. Lasater said the main issue has been constant broken windows due to many homeless people coming in and out of the property through those fences, and his expectation is that those will be fixed in the next two weeks. Lasater reported that twenty-two (22) broken windows have been replaced and now they have another five or six as of today that will need to be replaced, and the glass has been ordered from a local glass vendor for those and will be replaced as soon as the glass arrives.
Carpenter asked Miller if there is any disagreement with the overview received from Lasater concerning Grahamwood. Miller stated that there was no disagreement. Carpenter stated that the real concern for the Board is the occupancy of the property, and under the Board’s policies and procedures, there is a minimum seventy-five percent (75%) occupancy requirement. Carpenter stated that the Board has just gone over for the past year and occupancy has been well below that requirement and is vitally interested in how ownership proposes to increase occupancy to the minimum level required going forward within a short period of time. Lasater stated that ownership does have a timeline with their lender by September 2024, to get to the permanent financing, the lender requires ninety percent (90%) occupancy.
Lasater reported that thirty-eight percent (38%) of the units are vacant and uninhabitable as they stand, and when ownership bought the property back in 2021, ownership knew there was a significant issue with the units and habitability of the units as they were, so ownership is doing a significant construction overhaul to those units. Lasater reported that of the 244 units at Grahamwood, there are approximately 87 units that need $5,000 plus in repairs, and ownership is in the process of doing that right now. Lasater stated that work is being performed on eight to ten units at a time in a two-to-three-week period and seeing a two to three percent week over week increase in occupancy. Lasater reported occupancy at sixty-four percent (64%) as of today’s meeting. Lasater stated that the goal with his company and with the lender is that by the end of July or early August 2024, to be at ninety percent (90%) occupancy, but he cannot say that the property will be there in the next thirty to sixty (30-60) days, but certainly by the end of summer 2024. Lasater stated that his company has four (4) other properties in this portfolio that are not in the PILOT program in addition to Grahamwood and Pinebrook, and the company has the same process that is being enacted across the entire portfolio.
Carpenter asked if the properties have a reserve fund, or how the company is funding these renovations. Lasater replied that the properties have capital reserves as well as loan reserves with the bridge loan that is in place now, and he estimated there is approximately $900,000 remaining from a total $14 million construction project across all six assets. Carpenter asked if funds are available, why is it taking so long to rehab the units and stated that this could be a critical element that could terminate the PILOT in and of itself, because if there are not tenants there to provide the tenant benefits, which is the cornerstone of the PILOT program, then we are not meeting the goals as far as the mission of the Board. Carpenter said the Board would need a written plan committed within the next two (2) weeks. Lasater replied that he has a written plan and can provide that to the Board as early as this afternoon. Carpenter said that would be fine and stated that this is a critical issue. Lasater added that part of the interior delays was that all roofs had to be replaced first on every single building at Grahamwood before interior renovations could begin because there were so many roof leaks on the property when his company acquired it.
Carpenter asked Lasater to provide an update of Pinebrook Apartments. Lasater stated that the big issue at Pinebrook is the burned units, which have all been cleaned out and the roll off dumpsters have been removed. Lasater stated that there are twenty-two (22) burned units from three (3) different fires, one that occurred prior to acquisition, and two since acquisition. Lasater reported that insurance adjusters were on the property approximately two weeks ago, and ownership is expecting an update on what to expect from insurance proceeds, which should be in the range of $2,000,000 that would be used to rebuild the units. Lasater stated that in the rear of the property, there was an exterior gray water plumbing leak from a cleanout that was in the parking lot, and that has been rectified and cleaned. Lasater stated that there were a couple of doors that had been Plexi glassed, and the plexiglass has been taken out and the actual doors came in, which were on back order, and those have come in and been replaced, and windows have been replaced. Lasater reported that there are still some outstanding items, including gutter downspouts that need to be replaced across the property, and exterior breaker panels that needed to be address. Lasater reported that Memphis Light, Gas, and Water needed viable access to those, so locks are not permitted, but ownership has used all-purpose weather zip-ties to close those. Lasater stated that significant trash was building up in and around the dumpsters, and ownership has increased pick-up capacity from two times a week to now three times per week at both Grahamwood and Pinebrook. Lasater said the same thing applied to this property regarding occupancy and that both Grahamwood and Pinebrook were the biggest problems when they were acquired and had the least occupancy when they were acquired but required the most work. Lasater stated that ownership had a three (3) year business plan to get to ninety percent (90%) occupancy across the entire portfolio and they are about twenty-two (22) months into that three (3) year plan, so by September 2024, ownership has to achieve that for the refinance plan to achieve ninety percent (90%) occupancy, which is above the seventy-five percent (75%) occupancy requirement of the Board.
Carpenter asked who currently managed the properties. Lasater responded that Key City Management manages the property now, and they also managed the properties when his company acquired them. Cliff Henderson asked Lasater if he became more involved with the property following the receipt of the legal notice of default to these two properties. Lasater replied yes, around October or November of 2023. Henderson stated that it seemed like there were some things missed and Lasater stepped up. Lasater replied that is correct, and there was a business partner that was involved that has since been bought out and is no longer involved in the company. Henderson asked if that is part of the explanation of what the Board saw last year. Lasater stated that he is not going to blame it on someone else, as ultimately it is his responsibility, but yes, there was a significant drop in the ball that was going on and a number of notifications that went to the previous business partner that did not make it to himself or general counsel. Henderson asked if Lasater relocated to Memphis, to which Lasater replied that he did not relocate, but he has been in Memphis twice a month since October 2023. Carpenter recommended that Miller communicate with the PILOT Lessee prior to the next Board meeting to ensure the Board has a full understanding of what is going on because it is at a critical point where ownership could lose the PILOT for each property. Carpenter asked Lasater if it was still the plan to focus on Grahamwood first before shifting focus to Pinebrook. Lasater responded no. Carpenter stated that there needs to be increased interchange between now and the next Board meeting because there was an earlier recommendation that the Board make a determination at its March 6, 2024 Board meeting as to whether the property was in compliance or not and if it was not, one of the options that the Board would have is the termination of the PILOT. Carpenter stressed that there needs to be a sense of urgency. Lasater stated that he felt he made it clear at the Board’s December 6, 2023 meeting that neither property would be able to achieve the minimum occupancy requirement of seventy-five percent (75%) by this meeting today, and he is a little surprised by that being brought up here today. Lasater stated that he knew neither property would be to seventy-five percent (75%) occupancy by this February meeting, and it would be pushing it to expect that occupancy rate by the March 6, 2024 meeting as well, but ownership is moving toward that as quickly as possible. Carpenter stated that this is the factual information that the Board needs to make a determination of what is in the best interests of the tenant and compliance with the PILOT program policies and procedures. Representatives are to return to provide an update to the Board at the March 6, 2024 Board meeting.
3. Carpenter reported that the interim PILOT Refinancing of Creekside Meadows (Bent Tree) has closed, and the PILOT Lessee will provide a status update during the Action Items portion of the agenda and Carpenter reserved additional comments for that time.
4. Carpenter reported receipt of Notice of non-payment for two (2) PILOT properties:
a. Notice of Non-payment from Sherwin Williams filed against Cedarwood Apartments for approximately $17,000
b. Notice of Non-payment from Billd Exchange filed against Tillman Cove for approximately $35,000
5. Carpenter reported a successful closing in the month of December 2023 for the following:
a. The Coves at Yale ten (10) year PILOT Term Extension
b. Greenbriar Apartments Bond and PILOT closings
6. Carpenter reported receipt of a Notice of Partial Redemption for Pedcor Investments for Ashland Lakes Apartments Bonds.
7. Carpenter reported that there is new legislation in 2024 dealing with the 50% test, reducing that amount to a 30% test. This requires under the Internal Revenue Code that the developers spend 50% or more of the tax-exempt proceeds on the project. Carpenter stated that because of the supply chain issues, cost escalation, and inflation, that has been a problem, and the Board has had developers come back before the Board for supplemental bond issuances in order to meet the 50% test. Carpenter stated that his firm will keep the Board advised of the developments of this legislation and keep the Board advised.
8. Carpenter reported that his firm continues to monitor PILOT properties that are in Environmental Court.
9. Carpenter said his firm and Board staff have also had a comprehensive discussion with Safeways to see how the Board’s PILOT program and the services that Safeways offers may be compatible and work together.
10. Carpenter reported that his firm has been interacting with the new administration and dealing with City Council appointments and reappointments.
11. Finally, Carpenter reported that his firm and staff have been in ongoing discussions regarding an Annual PILOT Lessee Orientation and Mandatory Meeting so that all PILOT Lessees and applicants are aware of the requirements of the PILOT program and various reporting requirements at the state level, local level, and from the Board standpoint.
There being no further questions or comments, the Legal Report was concluded.
Action Items-
1. Bond Inducement Resolution for APP Pershing Partners, LLLP (d/b/a Pershing Park Apartments)
Thomas Robinson entered the meeting.
Charles Carpenter introduced this agenda item and Thomas Robinson as the representative of Alco Management Inc. present for this agenda item. Carpenter stated that Alco Management, Inc. is an esteemed local developer, and they currently have a number of properties in the Board’s PILOT program, as well as properties that the Board has issued bonds for, and Alco Management, Inc. has done a great job with their development and management. Carpenter stated that Pershing Park has previously been in the Board’s PILOT program and the Board has issued bonds for this development before, and Alco Management, Inc. is looking to do a substantial rehabilitation of approximately one hundred sixty (160) units and will continue to have a lot of affordability there, as well as various tenant benefits. Carpenter turned the meeting over the Robinson for any additional comments. Robinson thanked the Board and stated that Alco Management, Inc. did close Greenbriar Apartments Bond and PILOT transactions in December 2023 and the Alco team appreciates that partnership and working with the Board. Robinson stated that the proposal for Pershing Park is like the Greenbriar transaction, and Alco is looking to do a significant rehabilitation of the property, and the property is 100% affordable, and Alco will extend all of the affordability commitments and really double down on what has been done for a long time, which is trying to provide good quality housing that is affordable for residents in that neighborhood. Robinson stated that Alco believes this project fits with the Board’s missions and if approved, Alco will move to apply to Tennessee Housing Development Agency (THDA) for Low Income Housing Tax Credits (LIHTC) and work through what is a five to six (5-6) month process. If successful, Robinson stated that Alco will move to a closing and has also applied for a PILOT from the Board for Pershing Park that is due to be considered at the Board’s March 6, 2024 Board meeting. Carpenter stated that Alco is experienced and well established in the community, providing good work, and the application complies with the Board’s policies and procedures and recommended the Board look favorably at the application. There being no further questions or comments,
Buckner Wellford moved to approve the Bond Inducement Resolution for APP Pershing Partners, LLLP (d/b/a Pershing Park Apartments). Katie Shotts seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Thomas Robinson left the meeting.
Jennifer Croxton, Joy Miller, Luretha Phillips, Kelita Dickson, Moshe Cole and Kevin Pilate entered the meeting.
2. 8th PILOT Closing Extension for MH Strategies II, LP (Borda Towers and Venson Center)
Charles Carpenter welcomed representatives attending for this agenda item and turned over the meeting to them for introduction to the Board. Luretha Phillips introduced herself as the Director of Development with Memphis Housing Authority (MHA), and stated she is attending today with additional staff from MHA. Jennifer Croxton introduced herself as the Director of Development for Knight Development, who is the master developer for MHA. Kalisha Dixon introduced herself as the Director of Capital Improvements for MHA. Joy Miller introduced herself as an additional employee in training with Knight Development. Carpenter welcomed all representatives present, stating that the Board has an extraordinary request today for an 8th PILOT Closing Extension. Carpenter provided background information, stating that this is a public private partnership between MHA and Knight Development and this project encompassed four (4) towers with MHA. Carpenter reminded the Board that the original application came before the Board in 2020 for bonds and PILOTs. Carpenter stated this working group has successfully completed one of the first Rental Assistance Demonstration (RAD) projects in the country. RAD is a program Housing and Urban Development (HUD) had offered that was a tremendous benefit for public housing because it was able to unlock the equity that Housing Authorities had accumulated in those assets, that allowed leveraging to receive funding to finance substantial rehabilitation. Previously, the model was that HUD would provide a certain amount of dollars per year to complete repairs and maintenance, and there was no way to leverage those dollars to do a substantial rehabilitation. Within this process, Carpenter reported that two (2) of the four (4) towers have been successfully closed with bonds and PILOTs, and they are moving forward. Carpenter said that for these two (2) properties, the bond financing has been completed, but not the PILOTs, and the developer has encountered issues that he will let representatives provide details for the Board. Carpenter stated that staff wanted to be sure that all good cause is documented in the record, because the Board is establishing a precedent, but being sure that the good cause is satisfied so that if the Board comes to this point in the future, there would be some guidance and documentation of record as to why the Board took the steps that it did. Carpenter turned the meeting over to representatives for additional comments.
Luretha Phillips distributed handout information for the Board of the project and what has taken place with the progression of the project up to this point. Phillips stated that MHA started this process in 2018 to redevelop their portfolio, Knight Development was selected during that time, and all partners have been brought into the process and MHA immediately moved forward with notifying residents. Phillips explained that with the HUD process, MHA must notify residents and conduct several resident-driven meetings, meet with partners and bring in all the financing. Phillips stated that this project has faced both financial and environmental challenges at the Borda Towers side. Phillips said the working team has been through the closing process and is currently in the rehabilitation process for the College Park project and Askew and Uptown projects. Phillips stated that application to THDA was denied in 2020. Croxton clarifies that the applications were submitted differently than how the transactions were being closed, because the properties had to be separated out for financial feasibility. Croxton said the original applications were submitted to THDA under a special request, and THDA did not have enough volume cap to approve those applications. Croxton stated that in 2021, the development team began breaking the applications down to smaller projects and for the first two (2) sets, being the (i) Askew-Uptown project and (ii) College Park Project, both the bond and PILOT transactions were closed in December 2021 and are currently under construction. Croxton stated that the next two projects were Barry Towers and Jefferson Towers, and for those projects, both bond and PILOTs have also been closed. Croxton stated that the project before the Board today, Borda Towers and Venson Center, has four hundred twenty-one (421) units, and has had bumps in the road. Croxton stated that in November 2022, the development team had an FHA concept call and FHA was ready to move forward and allowed the development team to submit an application, and the FHA lender asked the development team to withdraw that application, because it was found that there was a possible soil contamination that needed more inspection. Croxton explained that those inspections did come back and that there is no risk or hazard quotient below TDEC’s issuance for vapor mitigation. Croxton reported that the developer was working with TDEC from January 2023 to October 2023 and finished up in October 2023 with the notice of land use restrictions being filed.
Kalisha Dickson stated to the Board that Borda Towers specifically was severely impacted by the December 2022 freeze event with several burst pipes in the mechanical closet, and on nearly all thirteen (13) floors, which resulted in massive flooding throughout the building. Dickson said about one hundred (100) families were relocated out of the building, and it has been vacant for about a year and a half now. Dickson stated that the insurance company and FEMA were involved, as Memphis was declared a disaster area, so the developer was able to apply for funds to help rebuild this project at Borda Towers. Dickson stated that MHA then had to develop an agreement with Knight Development and their contractor to start demolition after the insurance was approved. Dickson said phase one demolition was completed, which included the first six (6) floors and phase two is about to start. Dickson stated that during phase one demolition, mold and asbestos containing materials were removed and they are getting ready to do a second round of abatement and removal before the putback. Dickson stated that the flood event has taken a year and a half to get to where the project is today, and it is still in progress. Croxton stated that in January 2024, there was a joint inspection with HUD, lenders, MHA, Knight Development, and the general contractor. Croxton stated that HUD was nervous about doing the FHA loan and wanted to see for themselves what work goes toward HUD, FHA, multifamily, and what work goes toward the insurance scope to be sure both of those scopes of work were separated out and the development team has gotten to that point. Croxton stated that the development team intends to start with phase two of the insurance work in the next week, March 1, 2024, the development team intends to submit their application to FHA multifamily, and April 16, 2024, the team hopes to have a firm commitment as well as the RCC May 1, 2024, and submit everything to legal for a tentative closing date of June 17, 2024. Croxton stated that the development team has been and continues to move forward, despite the challenges. Croxton advised that Borda Towers is completely vacant due to the flooding and damage, and Venson Center is ninety-three percent (93%) occupied, and the population of these towers are disabled and seniors, which is a vulnerable population, and we must take care of seniors and disabled. Croxton stated that Borda Towers is losing its rental income due to vacancy, so the development team is working to get those units back online for both the income and to have suitable decent living. Croxton stated that this development team is committed to closing this project to serve the residents and the community need for safe, affordable housing. Katie Shotts asked if the buildings suffered any damage from the recent freeze event in December 2023, to which Dickson responded they did not.
Carpenter stated that this working group has been very diligent in staying on top of things and there are working group meetings once per week each Tuesday morning to give status updates. Carpenter stated that with the involvement of various government agencies at the federal and state level, it does take time to work through and based on his firm’s involvement since 2020 with this project, and the effort and progress that has been made, albeit slowly, on this last phase, he believes that this still fits within the Board’s mission, policies and procedures, and would recommend the Board have a favorable consideration of the unprecedented 8th PILOT closing extension request. Buckner Wellford asked if the Board has granted the same timeframe extension each time, for a six (6) month period. Carpenter confirmed that it is correct. Wellford stated that maybe the mistake was granting this many extensions during what seems to have been protracted issues, guaranteed to take more than six (6) months to resolve, given the environmental remediation issues and working those out.
Wellford asked for clarification on what the consequence is of denying a PILOT closing extension, aside from an additional application fee, and if there is a time frame associated with that. Carpenter responded that if the closing extension is not approved, then the applicant would start a square one, and it would have to be confirmed that the new application complies with the Board’s eligibility requirements of the PILOT program, and then it would be approximately a sixty (60) day process to get back before the Board, and then the Board would consider the new application at that time. Wellford stated that everything that has been said today makes sense, he is just wondering what the justification was for some of the earlier extensions when it looked like it just may not get done in six (6) months, but the Board is here today, and this is a terrible precedent. Wellford stated that he is willing to vote in favor of this one last extension but would like the record to reflect that other than an act of God, this will be the final extension considered. Wellford stated that moving forward, the Board should be more diligent in when something looks like it will take longer than a six (6) month period to resolve, consider not granting a closing extension and having the applicant start over, but given where the Board is, he will vote in favor of the closing extension today.
Carpenter stated that this is unprecedented, and there is opportunity to handle things differently moving forward, as Wellford has mentioned, or maybe doing a variation from the policy for good cause shown. Carpenter said the basis for the six (6) months is for the Board to keep oversight of the project's condition, and that is how we got here. Monice Hagler said it is also under consideration that this is with Memphis Housing Authority (MHA) and not a private developer. Wellford agreed that this is also a big factor for him in his consideration. Cliff Henderson stated that this was a massive project that had progress in enough areas, and it was amid COVID, and it was just a perfect storm of circumstances. Carpenter also clarified that in the beginning of the project, all properties were submitted together, and for various reasons it was recommended to split the projects up and it is a worthwhile project with a clear path to get to the finish line and would encourage support for this project. There being no further questions or comments,
Monice Hagler moved to approve the 8th PILOT Closing Extension for MH Strategies II, LP (Borda Towers and Venson Center). Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Jennifer Croxton, Joy Miller, Luretha Phillips, Kelita Dickson, Moshe Cole and Kevin Pilate left the meeting.
3. PILOT Refinancing Applicaiton for Country View 2021, LLC (d/b/a Country View Apartments)
David Shores and David Shemano entered the meeting.
Carpenter said his firm participated in the application submittal conference with Board staff and reviewed all the information. Carpenter stated that staff had requested supplemental materials that have also been provided and based on his review, the refinancing application is straightforward and complies with the Board’s policies and procedures. Carpenter turned the meeting over to representatives for additional comments. David Shores introduced himself, as well as David Shemano, the general partner. Shores thanked the Board for its consideration, stating that this refinancing would assist with further repairs to maintain the property. Carpenter said that a portion of the refinance will be to add additional improvements and benefit the property, and this property is in good standing and recommended the Board favorably consider this application. There were being no further questions or comments,
Cliff Henderson moved to approve the PILOT Refinancing Applicaiton for Country View 2021, LLC (d/b/a Country View Apartments). Buckner Wellford seconded, and the motion passed unanimously after proper roll call vote of the Board members.
David Shores and David Shemano left the meeting.
4. PILOT Refinancing Application for Mazal in Eden, LLC (d/b/a Eden Pointe Apartments)
Frank Stockdale Carney and Neil Knopf entered the meeting.
Carpenter introduced this agenda item as a refinancing application for Eden Pointe Apartments, and likewise for action item three, his firm and staff have reviewed the application and it does comply with the Board’s policies and procedures. Carpenter invited representatives to make any additional comments. Frank Stockdale Carney stated to the Board that this is a refinancing application on the smaller of the two parcels associated with the PILOT. Carney said the first parcel is substantially complete, and this refinancing will help complete and lease up the second parcel. Carpenter stated that this is a straightforward application and had no additional comment. Katie Shotts asked if this developer has other properties in the Board’s portfolio. Carney responded yes, and advised that this development team includes Mendel Fischer and Shrage Marasow, and they have five (5) other properties that actively participate in the Board’s PILOT program, and one (1) property, that is pending closing, which is anticipated to be completed in the next two (2) months, but this refinancing application before the Board today is ready to close upon approval of the Board. Corbin Carpenter confirmed the developer’s other active properties in the Board’s portfolio: (i) Bridgeport Manor, (ii) Eden Pointe Apartments; (iii) Scenic Hills (formerly Hightop Ridge and Hunter’s Ridge, (iv) Timber Pines, (v) Watkins Manor, and (vi) Willow Oaks). There being no further questions or comments,
Cliff Henderson moved to approve the PILOT Refinancing Application for Mazal in Eden, LLC (d/b/a Eden Pointe Apartments). Buckner Wellford seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Frank Stockdale Carney and Neil Knopf left the meeting.
5. Affordable Multifamily PILOT Term Extension Application for Bent Tree LLC (d/b/a Creekside Meadows) (Deferred from the October 4, 2023 Board Meeting, November 1, 2023 Board Meeting, and December 6, 2023 Board Meeting)
Phil Balderston and David Upton entered the meeting.
Charles Carpenter introduced this agenda item by stating that it was deferred from the Board’s October 4, 2023, November 1, 2023 and December 6, 2023 Board meetings. Carpenter stated that the Board has been holding a PILOT Refinancing Application and a PILOT Term Extension Application from month to month since the Board’s October 4, 2023 Board meeting. Carpenter stated that there has been substantial progress made with this project. At the Board’s December 6, 2023 Board meeting, Carpenter stated that there was a discussion about improvements that were needed not only at Creekside Meadows, but also at Mill Creek Apartments, and there was an agreement with the developer that even though the refinancing is with Creekside Meadows, that improvements at Mill Creek would be a part of the solution to addressing this issue. Carpenter said things have moved forward, all parties have gotten to a point where everyone was in agreement, and his firm worked with the legal counsel for Phil Balderston that there had been a repair replacement reserve to be set aside, there would be a notice and requisition process for the improvements to those properties, and as everything was about to be finalized, two things happened: (i) Freddie Mac decided that the underwriting needed to be updated and would have to defer the loan, and (ii) the actual PILOT Term for Creekside Meadows expired in October of 2023.
Carpenter said the Board has been deferring action on the PILOT Term Extension consideration because there were other financial obligations for the developer and an interim financing that has now been closed. Carpenter stated that he has a discussion with David Upton about what improvements are being made, and part of the interim financing dollars were used to pay off some other financing, and part of it was to be used for improvements. Carpenter said the Board thought those improvements would be required by Freddie Mac before they would do the final loan. After recent discussions, that may have changed, and Carpenter stated of note for the Board is that progress is being made and the Board’s internal monitors can address their view of those external on-site improvements and secondly, that the term extension for the PILOT is being held to ensure that there was evidence of dollars available to make those final improvements, and once that was done, then the PILOT Term Extension would be considered by the Board.
Balderston stated that Carpenter did not miss anything, but he would like to add a little more color and provide an update. Balderston stated that Creekside Meadows is currently ninety-six percent (96%) leased, so the property has come a long way over the last couple of months. Balderston reported that his team did close the bridge financing that was approved by the Board at the December 6, 2023 Board meeting, which put $1,200,000 in escrow for improvements to the property. Balderston explained that those improvements that are required by Freddie Mac are exactly what was presented to the Board as part of the requirements for the PILOT Term Extension and his team is working on those items now. Balderston reported that over the last thirty (30) days, since the closing of the bridge financing, his team has been working on the down units nonstop and gave credit to his team for working hard on that. Balderston said he hopes to complete the largest item this month, which is milling and resurfacing the entire parking lot. Balderston stated that this is a humongous job that he would like to have completed before he appears before the Board again at the March 6, 2024 Board meeting. Balderston stated that this is something that has not been done since the property was built and should be a fifty (50) year type of improvement, as well as beginning the painting work, that was the other large item. Balderston stated that he looks forward to presenting to the Board all the items on the list of PILOT requirements that are currently roughly fifty percent (50%) complete, and will be substantially complete by the Board’s March 6, 2024 Board meeting. Balderston stated that this work includes all the Freddie Mac required work and all the work required by the Board and that work is funded and the necessary dollars are with Berkadia and will be released as the work is completed. Balderston stated that for Mill Creek Apartments, there is a PILOT Expiration date of December 2024, so his team will be submitting a PILOT Term Extension Application to the Board for its consideration in the coming months. Balderston stated he has walked both Creekside Meadows and Mill Creek properties and there are some siding issues and parking lot issues that need to be completed at Mill Creek and those are expected to be complete by the time his team plans to submit the PILOT Term Extension Application request. Balderston stated that his team is working to get the Freddie Mac loan closed, but he does not anticipate that loan to close between now and the Board’s March 6, 2024 Board meeting, but he is committed to funding the anticipated escrow for Mill Creek that was agreed upon, once that financing closes.
David Upton stated this is all good news. Upton stated that since at the Board’s December 6, 2023 Board Meeting, it was thought that Berkadia was going to replace some old financing with some bridge financing, and that has been done and there is money in escrow. Berkadia is allowing those escrow funds to be used for the Freddie Mac required repairs and the repairs committed to the Board. Upton stated that the next step is to get the list of repairs previously discussed back out and review that list, hopefully within the next thirty (30) days, and set up a site visit with the Board’s compliance inspectors, go through the work that has been done, determine what work is remaining, and be sure everyone is eye to eye with that. Upton reiterated the large remaining items left already discussed by Balderston previously in the meeting. Upton stated that he hopes by the Board’s March 6, 2024 Board meeting, that the Board would feel comfortable that either enough work has been done, or that there is enough money set aside to feel comfortable enough to make a determination concerning the PILOT Term Extension request at that meeting, but he will see how it goes. Upton stated that Odin properties has been self-funding, and once the final loan has been closed, Balderston is ready to escrow the agreed upon funds for repairs at Mill Creek, as previously stated by Balderston, and he would like to begin a reconciliation process with Board staff to ensure that commitments that have been made by the Odin properties team have been done and see where we are. Upton addressed damage that happened at Mill Creek as a result of the recent winter storms, and Balderston stated that none of the damage was major and there were two broken underground pipes that are in the process of being repaired right now, and the leaks have been stopped. Balderston also stated that there are a couple of siding issues that have also been corrected already, and Mill Creek is currently ninety-eight percent (98%) leased.
Carpenter asked Bryce Miller to provide the Board with any comments he would have from internal compliance inspection observations. Miller stated that Creekside Meadows has some minor issues outstanding, and the main concerns are the larger items already discussed, including the milling and repaving of the parking lot and the major painting of the project. Miller stated he has observed serious improvements in both Creekside Meadows and Mill Creek Apartments. Upton stated that he would like to touch base with Miller and staff to be sure the Board has all the documentation it needs for its review of repairs that have been done and what is still outstanding. Balderston advised the Board that Odin Properties will be hosting a Grand Re-Opening of Creekside Meadows in the late spring of 2024 as a celebration of the journey the asset has taken from his group’s acquisition of the property to the point when the parking lot and painting are completed, and all down units have been completed, and it feels brand new. Chairman Reid thanked representatives for the job in getting this asset where it is today. Carpenter stated that the plan of action outlines by representatives to get these last major items done and for the Board to look at the March 6, 2024 Board meeting as a time frame for formal action on the PILOT Term Extension is appropriate. Carpenter recommended that the item be formally deferred to the March 6, 2024 Board meeting. There being no other questions or comments,
Cliff Henderson moved to defer the PILOT Term Extension Application for Creekside Meadows (Bent Tree) to the March 6, 2024 Board Meeting. Monice Hagler seconded, and the motion passed unanimously after proper roll call vote of the Board members.
Phil Balderston left the meeting.
PILOT Default Status Updates:
1. Creekside Meadows (Bent Tree)
2. Mill Creek Apartments
An update for Creekside Meadows and Mill Creek Apartments was provided during the Action Items.
3. Grahamwood Place
4. Pinebrook Pointe
An update for Grahamwood Place and Pinebrook Pointe was provided during the Legal Report.
5. New Horizon Apartments
Mark Jobe entered the meeting.
Charles Carpenter began by stating that New Horizon Apartments has been a participant in the Board’s PILOT program since 2013 and is one of the largest complexes in the city, with eight hundred ninety-eight (898) units. Carpenter stated that this project has had many challenges, and the Board approved a PILOT Transfer application in 2023. Carpenter reminded the Board that the proposed new developer appeared before the Board, outlined a plan of how he was going to do a substantial rehabilitation with the property and prior to closing, that sale did go through. In the meantime, Carpenter stated that the current owner, who had been doing renovations and updates, stopped in anticipation of the sale, and several fires took place on the property, along with some security issues and occupancy level issues and now the property is very challenged, and appears to have little to no momentum. Carpenter stated that representatives are here today to provide a status update, and that representatives appeared before the Board at the Board’s December 6, 2023 Board meeting and provided a basic plan on how ownership intended to move forward. Carpenter turned the meeting over to Mark Jobe, legal counsel to the owner, to provide a status report to the board.
Mark Jobe stated he submitted a detailed plan of action to the Board that included budget items and was a plan to bring the entire facility back online, meaning all units renovated and seeking tenants. Jobe stated this plan is a ten-million-dollar ($10,000,000) project in addition to the millions of dollars that have been invested through debt and equity in this property. Jobe stated he would not contest Carpenter’s assessment and background of the project, but the ownership group is working to come up with an additional ten million dollars ($10,000,000) of financing to put that plan of action into motion, and that cannot happen soon enough. Jobe stated ownership has been working with David Upton in looking at the potential for a bond financing and possibly tax credits, but that is in the early stages, and an application would be filed in the coming months, if that is the way ownership decides to proceed. Jobe reported that ownership is also pursuing private financing, and both options present different pros and cons. Jobe stated the photos of the most recent site visit performed by the Board’s compliance inspectors evidence some conditions that were brought about from the most recent winter storms suffered by the Memphis community in January 2024. Jobe reported management is working to resolve those conditions and clean up the property. Jobe reported there was limited garbage service across the city, which led to issues. Jobe reported between forty and fifty (40-50) units had issues with burst pipes. Jobe stated as is historically the case here, the operational issues really impact the overall progress, capital, and larger scale project completion. Jobe reported that 19 of the 20 necessary permits to demolish the burned units have been obtained, and ownership is currently waiting on the last one, which was apparently an oversight with Memphis Light, Gas and Water (MLGW), but is expected to be obtained this week, and demolish is to begin next week. Jobe stated that the head of construction across the owner’s portfolio, Yitz Horowitz, was unable to be here today, but introduced the on-site manager for the ownership group, Aaron Goodfellow, in attendance today, further stating that Goodfellow is on-site every day and would be able to answer any questions the Board may have. Jobe stated that the urgency has been relayed to ownership and Upton can provide some information on the pursuit of financing from his perspective. Jobe stated Upton has been helping on the urgency and concern and relayed to all levels of ownership and it is not taken lightly. Carpenter asked for clarity on the plan for the 20 units that are being demolished and whether those units will be reconstructed. Jobe reported that those units will not be reconstructed, and ownership would not be focused on those couple of buildings.
Carpenter stated that the Board is concerned about the occupancy and based on the Board’s policies and procedures, there is a seventy-five percent (75%) occupancy requirement, and asked what the current occupancy is at the project now. Jobe responded that occupancy is at seventy percent (70%) when considering only the available, habitable units, and there are approximately one hundred twenty (120) units that are not habitable. Jobe stated that is consistent with the past six (6) months. Carpenter referenced the Board packet, which included a listing of the occupancy rate for the term of the PILOT for New Horizon. Katie Shotts stated that according to quarterly occupancy reports submitted by PILOT Lessee, the property has not achieved the minimum occupancy requirement since the third quarter of 2019. Upton stated he had hoped the project would be further along by now. Upton said the feasibility of doing a bond deal if ownership were able to put together a successful bond application would not be considered until a second round, which would be summer 2024. Upton stated that ownership would have to get some questions answered to determine the feasibility of the bond option, but Upton has also identified other programs that deal with utility and energy efficiency that may be good for this property. Upton stated that he hopes in the next thirty (30) days, there will be some decisions made on what ownership will be pursuing. Upton stated he understands the Board has benchmarks that ownership is supposed to make in terms of affordability and this property has a long history with it. Carpenter asked for the benefit of the Board, what ownership is asking of the Board and what benefit the Board has from continuing to keep the PILOT in place and to provide the Board to give them some context about what is coming next that gives the Board something to justify keeping the property in the PILOT program with all the challenges that it is currently facing. Jobe stated that while technical compliance is an issue and acute, this is not a property that is creating cash flow and is not a windfall property and is not a big winner for the ownership group. Jobe stated there are still a lot of residents that rely on this housing and terminating the PILOT would make matters worse on the ground for the residents of this community and turn a difficult financial situation into possibly an impossible situation, and that is the benefit that would support keeping the PILOT in place. Jobe stated that this has been a continuously long process and representatives for New Horizon have appeared before the Board many times, but without the PILOT benefit, this 60-acre property would likely deteriorate, and there is not telling how the property itself would progress from there. Jobe stated this summarizes why the need for the PILOT benefit remains and is very important even in supporting the current condition.
Upton added to Jobes comments and went into the history of the previous owner of the property, and that it was sold to the current owner, but while in previous ownership, the plan was to do a bond deal because this project has never had a big subsidy. Upton stated that he had convinced prior ownership they needed to move forward with a bond deal, previous ownership had never done a bond deal like that, and they planned to move forward with it, but that was not what they did. Upton said he believed whoever bought the property would also come to that conclusion. Upton said for the property to have stayed in compliance, as it was when current ownership bought it, it would have needed a bond deal because it is one of the largest complexes in Memphis. Upton stated that as part of the PILOT benefit, current ownership has continued to provide 24-hour security, and most of the money is going to that, and although the property is below that 75% occupancy requirement of the Board, there is a possibility through a bond deal and tax credits and some other investment that ownership could get it to where it needs to be. Upton stated that if the Board terminated the PILOT, ownership will no longer have money for security, and the Board certainly does not want to start that. Upton stated maybe there is a plan that ownership can work up for the Board in the next few months to make the Board feel like the property is heading in the right direction. Upton said he thinks it is worth giving ownership more time and seeing if they can step up and make this next capital step.
Aaron Goodfellow said that he sees the Board looking at the compliance inspection report and photos of the property, which have been provided to the Board by its internal and external compliance monitoring. Goodfellow stated that he has seen this report and photos, and he thinks it gives a very bad picture of people always seeing this. Goodfellow said there were statements in the report that no visual progress has been made. Goodfellow stated that the pictures provided to the Board were taken after the winter storm and the city was shut down for several days. Goodfellow stated that it was unsafe to drive for several days so not all maintenance staff were on the property. Goodfellow said the trash that had piled up around dumpsters would normally have been taken care of by the maintenance staff during the first hour to two hours of the day, but management had to utilize maintenance staff for busted pipes, to ensure no more leakage. Goodfellow stated that all busted pipes had to be capped off, and to prevent more damage, management would go ahead and do the repairs to prevent tenants from having continuous leakage or no water. Goodfellow stated that focus shifted from garbage, to making sure tenants were more comfortable where they live, and the water was able to be turned back on. Goodfellow said during normal operations, there is not much trash around, because he has several staff members pick up trash for the first hour to two hours of the work day, and then one staff member is dedicated to the grounds for the entire day. Goodfellow stated that once the trash was cleaned up, within a couple of days, the same amount of household trash was back at the dumpster, so he asked the Board for some leeway because Waste Pro was also shut down for two to three weeks and trash was not picked up, even at his own personal home. Goodfellow stated in regard to no progress being seen and gutters being down, the snow and ice weighted down various gutters and some did fall. Goodfellow stated that if management was not able to remove them or repair them, they were surrounded by caution tape. Goodfellow reported that since that time, those items have now been dealt with. Goodfellow reported interior work has been focused on ensureing the property can get move ins, and exterior, there was a projection for December, but that is past.
Upton reiterated Goodfellow’s statements concerning the grounds crew and said they keep the property picked up and clean, and the property is safe because security stops everyone entering the property. Upton stated that if there is an interim period where the Board would consider not terminating the PILOT, and give the ownership group time to come up with a capital plan that works. Upton again discussed that the property is usually pretty clean and security is in place and those items should give the Board pause in terms of working with the ownership group a little longer. Carpenter stated that based on this history of this property, it is in a good location in Whitehaven and it has been a strong benefit, with some strong properties around it. Carpenter stated the Board is not trying to nitpick, but the Board needs a plan, and they have not been provided one, and statements of “in several months” or “by December” is not going to work. Carpenter stated the Board requires a definite plan and a path to compliance, and the Board would most likely be supportive, but representatives cannot continue to appear before the Board meeting after meeting, and listening to the challenges of the ownership group, when the property is out of compliance with the Board’s PILOT program policies and procedures. Carpenter stated that this is a two-way street, and the Board wants to be supportive, but the ownership group must provide a plan that will provide the Board checks and balances.
Carpenter stated to the Board that there is an option to go ahead and put New Horizon in a state of legal default, which would provide a firm timetable as to when representatives would need the appear again before the Board and it would put ownership in a more urgent mode. Carpenter stated the Board also has an option to allow ownership to voluntarily come up with a plan by the March 6, 2024 Board meeting, then the Board can determine whether it would want to put the property into legal default, which would begin the 30-day cure period. Carpenter said these options are at the Board's discretion how it wants to proceed. Cliff Henderson said there was an action plan provided to the Board in January 2024 that starts with financing, and asked if everything hinges on financing, and if the ownership groups can act on any of the items in the action plan without new financing. Henderson stated that everything is stuck until the Board knows something more about the financing. Jobe stated that the spend is constant at this property, and it is seemingly playing whack-a-mole on operational issues that require funds, there is general cash flow issues, tenant default, nonpayment of rents, so ultimately, the financing is necessary to move forward. Henderson asked when will the ownership group know more about that because he is still concerned about the present ownership’s commitment to moving forward with this property. Henderson stated that if the Board is able to see someone committing to a financial contract, there will be more confidence that the plan that has been submitted can go forward, and he would like to know what the timeline of that commitment is, otherwise all parties are stuck and waiting for the next shoe to drop. Henderson asked, from a financing perspective, when can the Board know something definitive so that it has assurances because aside from compliance, this property needs a financial and capital plan to be completed. Jobe stated that he will take these comments back to his client.
Buckner Wellford commented about the PILOT Transfer application that was approved by the Board in 2023, and then the sale fell through, and reiterated Henderson’s concerns about current ownership’s commitment to this project. Wellford commended representatives for their candor about what they are dealing with, but he does not sense any level of commitment from the owner. Wellford stated he is not casting aspersions, but it appears current ownership is looking to offload this property and is reluctant to commit to the obligations associated with multiple rounds of financing and that obligations that are associated with that. Wellford asked if there are active discussions about someone else coming in and acquiring this property right now. Jobe responded none that he is aware of, and that the previous deal got very far along, and then fell apart in late October or November 2023. Wellford stated what he is hearing is the Board is not going to get much of a commitment any time soon. Wellford stated that when it comes to properties like New Horizon and Memphis Towers, he believes the Board should be communicating with the new administration about properties that are close to legal default so that the administration has an opportunity to work with Memphis Housing Authority or other organizations to have a plan in place if things cycle out of control when a PILOT is terminated. Wellford stated he understands properties can cycle out of control very quicky, and with this property, they are feeding hundreds of children every day, and where would they go. Wellford stated he tends to think it is inevitable that the Board will put this property in legal default. Wellford stated he would like to have a little time and make the city administration aware of what may be going on, give representatives another thirty (30) days to think about this, come back and report a plan, and if the Board is not hearing very tangible plans to pursue the kind of financing the Upton is talking about, the it will be obvious to proceed with putting the property in legal default. Wellford stated the fallout from terminating a PILOT affects residents, and they must have a place to go, so there needs to be a plan in place when the Board votes to terminate a PILOT.
Henderson asked where the owner of this property is and why he is not here before the Board. Henderson stated this is a big deal, he appreciates the representatives for being present and representing the owner’s interests, but he stated he is willing to give sixty (60) days for ownership to come up with a capital plan, and at that point, the Board can begin discussions of default and a legal default letter being issued. Henderson stated that this project is at a point where there is a very delicate balance, and everyone realizes what is at stake here, but it is in the ownership’s hands of what to go and pursue to show commitment to take this forward, because it cannot stay in this state. Monice Hagler stated she agrees to allow sixty (60) days for a financing plan or some commitment and have the owner in attendance to tell the Board what the next steps are. Wellford agreed with Henderson and Hagler, but stated he would like to use that sixty (60) days to have a dialogue with the new administration, because it is not just this property, but Memphis Towers, and a couple of others, that he feels like the Board will ultimately have to terminate the PILOT and he would like to be proactive. Henderson agreed with Wellford, and stated the interest rate environment and the lagging impact is starting to squeeze, and the question will be which owners and properties in the Board’s portfolio are going to feel that pinch. Henderson stated this will be a domino effect because if tenants are not paying rent, it is going to eventually affect the owners and the financials and the investment groups that are behind these properties, and what Wellford is recommending is warranted and the Board does need to be proactive. Wellford stated his portion is not a motion, but if Henderson would like to make a motion on the sixty (60) days, he would certainly second that motion, with the understanding that the Board would start to engage the city administration on this as well as some other potential large default issues. James Jalenak stated that the central question that the Board should present to the city is what the best thing the Board can do given the circumstances for the people who live there. Jalenak stated that the best thing may be to keep the PILOT in place until things turn around, but the best thing could also be to terminate the PILOT, if there is an alternative place for those people to live. Jalenak stated the focus for the City of Memphis out to be what can be done to provide decent housing for those people who are there now.
Goodfellow stated that his biggest fear is for this property to turn into a situation like what happened at Peppertree Apartments, now it is a public nuisance, the place is shut down, and how is anyone going to be able to restart something like that, and how would you rehouse those people. Goodfellow stated that New Horizon took in residents that it could from Peppertree, given the progress of the renovations. Goodfellow stated he has a meeting with the Raines precinct, which is the police precinct in charge of the area New Horizon is in, and they informed New Horizon representatives, whether it is tenants or New Horizon security, that they are doing a great job of calling them. Police officials have notified New Horizon that since the close of Peppertree Apartments, that activity has to go elsewhere, and that New Horizon is becoming an active area and known for drug activity and where drugs can be bought and sold. Goodfellow stated that the New Horizon representative’s response was if the police knew this, why would they not do anything about it. Goodfellow stated that police are understaffed, and patrolmen refer these types of issues to the narcotics unit. Goodfellow said he sees the same faces of the same people on the property that should not be there because they are not tenants, and it is an issue, but he believes this is an issue for Memphis in its entirety. Goodfellow stated he is unsure if this is an issue the new administration can assist in, but he has asked for help from the police department but has not been successful. Goodfellow stated that vacant units are boarded up as a hindrance, but people continue to enter vacant units at night and the boards are ripped off night after night, and resources are constantly being used to re-secure the vacant units. Goodfellow stated that there have been times when his security team has called for the police, and they are told no one is coming, and that is not good.
Upton asked if it is fair to say that is representatives come back before the Board with a plan to apply for bonds, and the Board wants to hear the owners say that while they are pursuing these things, here is a plan monthly to keep the property maintained, similar to the plan that was put in place for Creekside Meadows. Upton stated that those deals take a long time to do, and he believes the Board wants a big picture plan and a short-term plan. Upton stated there is a slower plan to get the property to the minimum occupancy level required by the Board, but there is also a bigger picture plan to do some refinancing and get some equity in. Katie Shotts asked how many vacant units there are, to which Jobe stated there are one hundred twenty (120) vacant units, and twenty (20) units will be demolished from fire damage.
Carpenter stated when representatives speak with ownership, if ownership is looking at bond financing, bond financing is allocated on a year-by-year basis, so if allocation was received, the transaction would have to close by December 15, 2024, and if ownership is serious about pursuing that, it would have to be pursued right away. Carpenter reviewed that the recommendation from the Board is allowing sixty (60) days to put together a financing plan. Carpenter clarified that New Horizon is on the watch list but has not been placed in legal default and today was a status update. Carpenter clarified that the Board requires a financing plan, because it is aware of the challenges, but the Board will need to see a satisfactory financing plan that will allow an action plan to move forward. Jobe said he would relay the message that the Board would need to see a new face at the next update before the Board. Board staff advised the Board that the PILOT Lessee has been made aware multiple times that ownership’s in-person attendance is a requirement of the Board, and ownership has not followed that requirement. Jobe stated that Yitz Horowitz is not technically part of ownership, but he is the lead of construction for ownership across the country and does serve as representative but understood. Staff advised that the Board requires a member of ownership and a member of the development team. Wellford stated it is clear that none of these things that have been discussed have been done with any type of concern and no good faith steps have been taken by the owner. Wellford said this is all about preparing for and planning for the fallout associated with legal default, so that if that happens, there is a more proactive plan than just dropping it overnight. Representatives are to return to the Board’s April 3, 2024 Board meeting. There were no other questions or comments.
New Business
There was no new business.
Chairman Reid stated that the next meeting of the Board is scheduled for Wednesday, March 6, 2024 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 02:27 p.m.