MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, January 4, 2023
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice published in The Daily News on Wednesday, December 28, 2022, 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 offices of the Board, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Monice Hagler, Vice Chair Buckner Wellford
James Jalenak Cliff Henderson
Katie Shotts
The following Directors were absent:
Daniel T. Reid, Chairman Dr. Manoj Jain
Staff and others attending: Stephanie Bryant and Bryce Miller; Charles E. Carpenter and Corbin I. Carpenter, General Counsel; Samia Mackay (attending remotely), legal assistant to General Counsel; Cheryl Hearn, Deputy City Attorney.
Also participating via remote Zoom virtual platform and/or in person were Jennifer Croxton of Knight Development representing MH Strategies I, LP (Barry and Jefferson Towers) and MH Strategies II, LP (Borda and Venson Towers); Carl Mabry representing Feels Like Home Senior Living Residences and Gardens of Forest Hill Irene; Tom Farnoly of SC Bartlett Investors, LLC and Hunter Humphreys of Glankler Brown, PLLC representing Tanglewood Apartments; Stephanie Sinito of Millennia Housing Management, Ltd. representing Cavalier Courts Apartments and Gospel Gardens Apartments; 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 Monice Hagler, Vice Chair.
Vice Chair Hagler 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 (the “Board”) is holding its regular meeting on Wednesday, January 4, 2023 @ Noon as an open public meeting in its conference room located at 65 Union Avenue, Suite 1120, Memphis, Tennessee 38103.
Vice Chair Hagler 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.
Approval of Minutes
Cliff Henderson moved for approval of the Minutes of the November 30, 2022 Regular Meeting, which was seconded by Buckner Wellford, 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, 2022. After discussion,
James Jalenak moved for acceptance of the Finance Committee Report for the month ended November 30, 2022, properly seconded by Katie Shotts, 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 reported on two (2) new claims filed against the Board, as title holder and PILOT
Lessor in connection with two of the Board’s PILOT properties:
a. A personal Injury claim, re: Kaliyah Dishmon, a minor v. University Gardens Manor Apts, et al.
b. A materialmen’s lien, re: The Sherwin-Williams Company v. Forum Flats Apartments, et al.
Carpenter reported that his firm has communicated with counsel for each plaintiff and advised of the statutory immunity of the Board and is currently working to have the Board dismissed from each matter. Carpenter will continue to monitor each matter and keep the Board advised. Carpenter reminded the Board that even though the statutory immunity is for the Board, the injured parties can proceed against the PILOT Lessee and continue forward with their respective claims.
2. For informational purposes, Carpenter reported a significant fire had taken place at Feels
Like Home Senior Living Residences PILOT property at the end of December 2022. Carpenter reported that there was one (1) fatality associated with the fire as well as significant damage to the property. Carpenter invited Carl Mabry to provide an update to the Board and turned the meeting over to Mabry for further comment. Mabry stated that the fire caused damage to sixty thousand (60,000) square feet of the total one hundred twenty thousand (120,000) square feet of the project. Mabry stated that this will require a rebuild of the majority of the property. Mabry reported that the residents that have been displaced are being housed at Embassy Suites Hotel temporarily while the project representatives locate other housing for those residents while the property undergoes reconstruction. Mabry also reported that representatives are going through the necessary process with the insurance company and plans continue to develop throughout this process. Carpenter thanked Mabry for the update and asked that representatives keep the Board advised of the timing of this and following the evaluation with the insurance company, communicate how ownership intends to proceed going forward as this could have an impact on the PILOT in regard to reconstruction and tenant benefits. Katie Shotts asked if the cause of the fire had been determined. Mabry stated that the Memphis Fire Department has not made a ruling on the cause, but what has been determined preliminarily is the fire started in the unit of the resident that died during the fire. Additionally, Mabry stated another contributing factor was the below freezing temperatures caused pipes to burst, which disabled the sprinkler system. A repair company was on site at 6:00 p.m. to repair the sprinkler system earlier in that day but did not have the necessary materials to repair it. The repair company was scheduled to come back to the property the following day, but the fire occurred at 8:00 p.m. the same night. Mabry speculated that the fire may have been caused by water leaking from the sprinkler system into the ceiling fixture in the unit of the deceased resident. The resident was also blind, and most likely did not notice the fire at first, until the smoke had overwhelmed him and he was unable to get out in time.
Vice Chair Hagler asked what the options are for relocating the residents. Mabry responded that displaced residents are currently at Embassy Suites Hotel, while representatives are going through the process with the insurance company. Meanwhile, representatives will locate temporary housing for tenants following those determinations. Mabry stated that many things are still developing and the community has been very gracious in donating to those residents that lost everything in the fire. Mabry stated that this is a terrible situation, and representatives are going to do everything they can for residents in order to get them back on site to Feels Like Home Senior Living Residences. James Jalenak asked if the building insurance covers tenant belongings. Mabry stated that some residents had renters’ insurance and some did not and representatives are working through that as things develop. Vice Chair Hagler thanked Mabry for the update.
3. Carpenter reported PILOT property activities in the month of December 2022, to wit:
a. Summit Park PILOT Closing
b. Sunrise Terrace PILOT Refinancing closed.
c. Cottonwood Apartments PILOT Refinancing closed.
4. Carpenter reported receiving notice from the Shelby County Assessor of Property’s Office of several PILOT Lessees that failed to file Annual PILOT Reports to the State of Tennessee and to the Shelby County Assessor of Property’s Office. Carpenter stated that there were approximately ten (10) PILOT Lessees included in the notice and his firm has been working with Board staff and the PILOT Lessees to get the reports filed. Carpenter reported that due to the delay, there may be some financial penalties involved with the late filings due from the PILOT Lessees. Carpenter stated that his firm and Board administration and staff will continue to work to get these reports completed.
5. Finally, Carpenter advised the Board of bond closings for the month of December 2022, to wit:
a. Tillman Cove Supplemental Bond closed.
b. Memphis Towers Supplemental Bond closed.
c. MH Strategies, LP (Barry Towers and Jefferson Square) Bond closed.
d. MH Strategies II, LP (Borda Towers and Venson Center) Bond closed.
e. Hope Heights Reissuance Bond closed.
Carpenter advised that the supplemental bond closings for Tillman Cove and Memphis Towers were issued so that the bonds could meet the fifty percent (50%) test under the Internal Revenue Code. Carpenter stated that the MH Strategies, LP and MH Strategies II, LP bond closings were bifurcated closings in order to meet the mandates of the Tennessee Housing Development Agency (THDA) but the developers are still working through HUD for their permanent financing, but in order to complete tax-exempt bond requirements with THDA to close prior to December 15, 2022, the project had to move forward with the bifurcated bond closing.
Carpenter stated that the Hope Heights bond is a reissuance of bonds that had been issued previously by the Board as a private placement. Carpenter reserved comments for the remaining bond reissuances involving Cavalier Courts and Gospel Gardens for the action items.
There being no further questions or comments, the Legal Report was concluded.
Action Items-
1. 6th PILOT Closing Extension for MH Strategies I, LP (Barry and Jefferson Towers)
Charles Carpenter advised that action items one (1) and two (2) are the same development entities, are similarly situated and may be discussed together and voted on separately. Carpenter invited Jennifer Croxton with Knight Development to provide an update to the Board. Croxton thanked the Board for the opportunity to appear for this unprecedented sixth (6th) closing extension and stated that the development team expects to close on the full project within the next three (3) months. Croxton stated that her team is currently working with Housing and Urban Development (HUD) for the necessary approvals required, additionally stating that this is an FHA secured loan as a part of the RAD program, so the development team has been working through many bureaucratic challenges. Carpenter stated that there have been significant delays with HUD and the team has been working diligently to move forward. Carpenter stated that based on the bifurcated process, it was a strategic determination that the PILOT would be closed with the full HUD financing, which is why the process has taken much more time than anticipated, but the team is committed and moving forward and Carpenter recommended approval. Carpenter reminded the Board that this closing extension would be for a six (6) month period, and as indicated by the developer, they anticipate closing within that time frame. There being no further questions or comments,
James Jalenak moved to approve 6th PILOT Closing Extension for MH Strategies I, LP (Barry and Jefferson Towers). Katie Shotts seconded, and the motion passed unanimously after a proper roll call vote of the Board members.
2. 6th PILOT Closing Extension for MH Strategies II, LP (Borda and Venson Towers)
There being no further questions or comments,
Katie Shotts moved to approve 6th PILOT Closing Extension for MH Strategies II, LP (Borda and Venson Towers). James Jalenak seconded, and the motion passed unanimously after a proper roll call vote of the Board members.
3. 1st Bond Inducement Resolution Closing Extension for ACH Partners, LLC & Bluff City community Development Corporation (d/b/a Gardens of Forest Hill Irene)
Carpenter advised that this project was induced by the Board, which inducement is valid for a six (6) month period. If the project does not close within that timeframe, the developer may appear before the Board in order to request a closing extension, which would be for an additional six (6) month period. Carpenter turned the meeting over to Carl Mabry for further comment and an update on the project. Mabry stated the development group is moving forward with the project and intends to apply to Tennessee Housing Development Agency (THDA) for volume cap and tax credit allocation during its first round of applications scheduled to open in March 2023. Mabry stated that the request for an extension is needed to keep the application in good standing for the project to apply to THDA in the first round for tax exempt bond financing. Mabry stated that representatives are in the process of completing the required items, including the TEFRA Hearing, in order to have all items prepared for submission to THDA and requests that the Board favorably consider this closing extension request. Vice Chair Hagler confirmed with Carpenter that this is the first closing extension request for this project. Additionally, Carpenter advised the Board that each year in January, THDA has a new set of tax credit allocations and it is anticipated that the first round will be initiated in March 2023, so this extension, if approved, would put the project in a position to move forward with its application and determinations from THDA should be announced sometime in April 2023 or May 2023. As additional background, Carpenter reminded the Board that 2022 was the first year THDA divided the allocations among the three (3) grand divisions of the State of Tennessee. Carpenter anticipated THDA to follow the same procedure for 2023, however, it is undetermined how much the allocations will be for each grand division. Carpenter explained that due to the retrenchment of single family housing starts due to the pandemic, more allocation was placed with the multifamily divisions than normal over the past two (2) years, but it is anticipated that the allocations will be more aligned with traditional amounts in 2023. Carpenter stated that this proposed project is a new construction project and recommended the Board look favorably upon this request at this time. There being no further questions or comments,
Cliff Henderson moved to approve 1st Bond Inducement Resolution Closing Extension for ACH Partners, LLC & Bluff City community Development Corporation (d/b/a Gardens of Forest Hill Irene). James Jalenak seconded, and the motion passed unanimously after proper roll call vote of the Board members.
4. PILOT Refinancing Application for SC Bartlett Investors, LLC (d/b/a Tanglewood Apartments)
Carpenter presented this agenda item as a refinancing application for Tanglewood Apartments. Carpenter advised the Board of recent inspection report and photographs in the Board’s meeting materials and invited Hunter Humphreys to make any further comment on this agenda item. Humphreys introduced himself as legal counsel to the applicant, SC Bartlett Investors, LLC. Humphreys also introduced Tom Farnoly, who is the manager of SC Bartlett Investors, LLC. Humphreys stated that SC Bartlett Investors, LLC purchased Tanglewood Apartments in March 2021 and entered into a PILOT in March 2022. Humphreys stated that at the time of the approval of the PILOT Lease, the property was in need of major renovations and was only fifty percent (50%) occupied. The developer obtained short-term financing and moved forward with major repairs and renovations, which are described in the original PILOT application as well as the current PILOT refinancing application. Humphreys stated that those renovations have been successfully completed and the property is now ninety-five percent (95%) occupied. Humphreys stated that his client has obtained a commitment for long term permanent fixed rate financing through a Fannie Mae Loan with Capital One National Association and is requesting Board approval for this PILOT refinancing application. Vice Chair Hagler asked for confirmation of the loan amount being thirteen million dollars ($13,000,000). Farnoly confirmed. Hagler referenced the tenant benefits stated in the PILOT refinancing application and asked if those items have already been taken care of or if they are part of the new financing. Farnoly stated that the tenant benefits listed were all addressed as part of the initial construction loan and are complete. There being no further questions or comments,
Buckner Wellford moved to approve the PILOT Refinancing Application for SC Bartlett Investors, LLC (d/b/a Tanglewood Apartments). James Jalenak seconded, and the motion passed unanimously after proper roll call vote of the Board members.
5. Status Update on Resolution authorizing the reissuance of Multifamily Housing Revenue Bonds, Series 2018 (Cavalier Courts Apartments) and approval of certain legal documentation required in connection with such reissuance (Deferred from November 30, 2022 Board Meeting)
Carpenter advised that action items five (5) and six (6) are each owned by the developer, Millennia Housing and may be discussed together and voted on separately. On the agenda are two (2) of the three (3) properties with Millennia Housing that had bonds issued in 2018 by the Board. Carpenter stated that as discussed in the legal report, the third property, Hope Heights, has closed its reissuance of bonds in December 2022. These current two (2) properties are in line to be closed as well. Carpenter then turned the meeting over to Stephanie Sinito of Millennia Housing for further comment. Vice Chair Hagler advised that Sinito should include remarks for both Cavalier Courts and Gospel Gardens. Sinito advised that these were bond closings in 2018, substantial rehabs were completed for both Cavalier Courts and Gospel Gardens, and the development team has been working to stabilize post construction financing of the transactions. Sinito stated that the project required a reissuance in order to pay down the B bonds and transfer over to Red Stone from Key Bank. Sinito stated that the team has been working on all three (3) transactions, with Hope Heights being closed in December 2022, with an anticipated closing for Gospel Gardens at the end of January 2023 and closing Cavalier Courts at the end of February 2023. Carpenter stated that based on the timetable outlined by the developer, his firm would recommend that the Board vote on a sixty (60) day extension to give the projects the opportunity to close prior to the Board’s March 2023 Board meeting.
If the projects are closed by that time, the transactions would be complete, but if they are not, a show cause or status would be required at the Board’s March 2023 regular meeting. Carpenter stated that this would be a resolution authorizing the bond reissuance extension and provided additional context by stating that the Board initially approved the reissuance in June 2022 but the environment tightened due to market conditions and the interest rate environment, causing delays. To provide the Board necessary, Carpenter recommended that the Board approve an extension for the authorizing resolution for the reissuance of the bonds until March 2023. There being no further questions or comments,
Katie Shotts moved to approve the Extension of the Resolution authorizing the reissuance of Multifamily Housing Revenue Bonds, Series 2018 (Cavalier Courts Apartments) and approval of certain legal documentation required in connection with such reissuance until March 2023. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
6. Status Update on Resolution authorizing the reissuance of Multifamily Housing Revenue Bonds, Series 2018 (Gospel Gardens Apartments) and approval of certain legal documentation required in connection with such reissuance (Deferred from November 30, 2022 Board Meeting)
There being no further questions or comments,
Cliff Henderson moved to approve the Extension of the Resolution authorizing the reissuance of Multifamily Housing Revenue Bonds, Series 2018 (Gospel Gardens Apartments) and approval of certain legal documentation required in connection with such reissuance until March 2023. James Jalenak seconded, and the motion passed unanimously after proper roll call vote of the Board members.
New Business
There was no new business.
Public Comment
There was no public comment.
Final Comments
Vice Chair Hagler stated that she is substituting as Chair for this meeting, as Daniel T. Reid, Chairman, was out today.
Buckner Wellford asked for an informal update on the walk through site visit conducted on December 6, 2022 at New Horizon Apartments by Bryce Miller, the Board’s Compliance Coordinator. Miller stated that due to the size of the property, the development team is working to get enough contractors on the property to complete construction in a timely manner. Miller stated that he had the opportunity to see some of the rent-ready units and spoke with management and construction project leaders and they are all in agreement that the property will need to hire additional construction crews and roofing crews, but the scheduling for this was in the first quarter of 2023. Miller stated that he intends to schedule another walk through on this site in the month of January 2023 to get an update prior to the next Board meeting. Miller stated that he was happy with the progress that he did see on site in December and looked forward to more progress on this site. Wellford agreed that this is a large site and thanked Miller for the update.
Vice Chair Hagler stated that the next meeting of the Board is scheduled for Wednesday, February 1, 2023 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 12:36 p.m.