MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, June 6, 2018
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice on Wednesday, June 6, 2018. The published meeting time was 12:00 Noon. The meeting was held at the Board office, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chairman Buckner Wellford
Monice Hagler Cliff Henderson
Nancy Willis Brittney Rowe
The following Director was absent:
Dr. Manoj Jain
Also present were:
Staff members Martin Edwards, Jr., Lauren Magallanes, and Stephanie Wright were in attendance. Charles E. Carpenter, General Counsel, Corbin I. Carpenter and Cheryl Hearn, Assistant City Attorney, were also in attendance.
Krishun Lovelace, an intern with Corbin I Carpenter and Megan Keene, an intern with Cheryl Hearn, Assistant City Attorney and member of the public, James Stokes were also in attendance.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Chairman, Daniel T. Reid.
James Stokes entered the meeting.
Approval of Minutes
Buckner Wellford moved for approval of the Minutes for May 8, 2018. James Jalenak seconded and the motion passed unanimously.
Finance Committee Report
Daniel T. Reid presented the financial results for the month ended April 30, 2018. Thereafter, a discussion of the financials was completed.
Monice Hagler moved for acceptance of the Finance Committee Report for April 30, 2018, and properly seconded by Nancy Willis, the motion passed unanimously.
Charles Carpenter presented the legal report, as follows:
1. For informational purposes, Carpenter reported one new materialmen’s claim involving the Bent Tree Apartments PILOT. Carpenter further reported that he contacted the attorney for the PILOT Lessee and was advised that an agreement has been reached regarding resolution of the claim, however, the official release has not been provided. Carpenter advised that this matter would be monitored, and he will report back to the Board.
2. Carpenter provided an update on the Bond and PILOT projects pending before the Board with the three (3) Millennia Housing Development, Ltd. properties. The Millennia properties being referenced are (i) Cavalier Court Apartments, (ii) Gospel Gardens Apartments, and (iii) Hope Heights Apartments. These three properties were purchased as a part of a portfolio of properties by Millennia, which is a national, well experienced development company owning many multi-family properties around the country and are making their first venture into the state of Tennessee. These three (3) Millennia properties have been induced for bond financings, as well as, approved for PILOTs. A working group has been formulated for these properties and Millennia is working through THDA with their applications for bond and tax credit allocations. Carpenter advised the Board that he anticipates these properties will be coming before the Board in the month of July 2018 for their respective Final Bond Resolutions.
3. Carpenter reported his concern that there continues to be no movement on the Oakshire PILOT request which the Board approved for voluntary termination, and currently the PILOT is still in effect. Carpenter made a recommendation to staff to have the third party vendor to immediately inspect the property to see if it is in compliance. If Oakshire is shown by the inspection to not be in compliance, a letter of deficiencies should be issued and if no information is received following this, the Board should then issue a default letter.
4. Carpenter provided a status update on the Bent Tree Apartments PILOT stating that it has complied with the requirements of the Board and upgraded the property by completing lighting, confirming the addition of a SkyCop Camera for security to the premises, restored units, and substantially improved the occupancy at the property. Carpenter also reported that, because the property is located in a flood zone, there continues to be major drainage issues. Because the Board has required that the PILOT Lessee to address this issue, it has hired an engineering firm; talked to adjoining property owners and has developed a preliminary strategy on how to address the drainage issue. Also, the PILOT Lessee has contacted MLGW regarding information on the location of underground utilities to facilitate digging needed to be done underneath the parking lot, as this process provides the preferred method of permanently removing the flow of wastewater from the premises. After the site work and plan is completed this will allow the engineering firm to finalize the plans and provide a final cost estimate. The June meeting was scheduled for final report by the PILOT Lessee; however, as the final plan and cost estimate has not been completed, the PILOT Lessee has asked to appear at the July Board of Directors meeting, rather than the June 6th meeting because of the material outstanding issues remain at no fault of their own. Hence, Bent Tree Apartments representatives will appear before the Board in July 2018 to provide an update and to outline their plans for addressing the drainage issue.
5. Carpenter provided an update on the status of the previously approved Bond Inducement for East Gate Village, located in Union City, Tennessee, owned by the CME Church based in Memphis, Tennessee. Carpenter advised the Board that due to his previous public disclosure of his prior working relationship with the CME Church, he wanted to remind the Board that he will serve not only as counsel to the Board, but also, at the request of the CME Church, as developer, he would serve as Bond counsel as well. Carpenter also reported that after additional diligence, it was determined that there is a Health Educational and Housing Facility Board of Union City, Tennessee (the “Union City Board”), however, the Union City Board has not held a meeting and is not experienced or interested in facilitating the tax-exempt bond financing for East Gate Village. Pursuant to this finding, a Notice of Public Hearing was published to advise the residents of Union City and Obion County that the Health, Educational, and Housing Facility board of the City of Memphis had induced a bond, financing for the East Gate Village Apartments in Union City, Obion County, Tennessee. At the same time, a formal meeting of the Union City Board was held to address the bond financing. This public hearing and meeting of the Union City Board was held, and the information presented was well received. The results of the public hearing and Union City Board were documented and Carpenter provided the members of the Board with (i) a letter from The Mayor of Obion County welcoming the financing and requesting that the Health, Educational, and Housing Facility Board of the City of Memphis, Tennessee issue the Bond, (ii) a letter of Mayoral approval of the TEFRA Hearing in Obion County, as well as (iii) a resolution from the Union City Board that consents to moving forward with the financing for East Gate Village Apartments by the Health, Educational, and Housing Facility Board of the City of Memphis. Carpenter explained the process of bonds and noted East Gate Village is on a parallel track with THDA for its volume cap allocation and tax credit allocation. Similarly, East Gate Village is on a parallel track with HUD attempting to get a new 20 year housing assistance program (HAP) contract. Once all of these components come together and are structured, East Gate Village will come back before the Board seeking approval for its Final Bond Resolution authorizing the issuance of the bonds, which is estimated to take place sometime in August 2018 or September 2018. Carpenter stated that progress will continue to be disclosed in the Minutes and the Board will be advised moving forward. Buck Wellford mentioned that he would like Board staff to determine how other Boards in Tennessee handle multiple roles of counsel and for the Board to develop a policy(ies) to determined best practices to address this type of issue moving forward.
6. Carpenter reported that due to our new board members, the Board Chair has recommended scheduling a Board orientation to discuss the two primary components of the scope of services rendered by the Board, being (i) the issuance of tax exempt bonds and (ii) the payment in lieu of tax (PILOT) program. Carpenter reported that there has been discussion at various levels of how the parameters of the Board’s authority for its PILOT program might be expanded to provide enhanced benefits in order to assist low and moderate income properties, but no definitive agreement has been reached at this time.
The above concluded the legal report and there was a brief question and answer session with members of the Board.
Martin Edwards, Jr. stated the PILOT committee met and their recommendations would be detailed in the Action Items portion of the meeting.
PILOT TRANSFER APPLICATION FOR GRAHAMWOOD PLACE APARTMENTS
Martin Edwards, Jr. outlined the current PILOT properties (i) Grahamwood Place Apartments located on Summer Avenue and (ii) Pinebrook Pointe located off Perkins Road and Winchester Road. Edwards explained these are two properties of a six property sale involving some 1272 units. These two are the only two out of the six properties that have an active PILOT in the program. Edwards advised the Board that the purchasers are very experienced apartment owners based in Skokie, Illinois and this will be an out-of-state transfer of wealth to the City of Memphis. The purchasers are making a loan on all six properties at one time, which would include Grahamwood Place Apartments and Pinebrook Pointe Apartments. Purchasers have provided all documents requested apart from a signed commitment letter for the loan discussed. Edwards made a staff recommendation to approve the transfer of both Grahamwood Place Apartments and Pinebrook Pointe Apartments subject to further review of the financial structure and debt coverage ratio by the Executive Director.
Monice Hagler made a motion to approve the PILOT TRANSFER APPLICATION FOR GRAHAMWOOD PLACE APARTMENTS subject to properly executed commitment letter, debt service coverage ratio, and appropriate rents per property to be determined by the Executive Director. Brittney Rowe seconded and the motion passed unanimously.
PILOT TRANSFER APPLICATION FOR PINEBROOK POINTE APARTMENTS
Martin Edwards, Jr. made a staff recommendation to approve the PILOT Transfer Application for Pinebrook Pointe Apartments, subject to properly executed commitment letter, debt service coverage ratio, and appropriate rents per property.
Nancy Willis moved for the approval of PILOT TRANSFER APPLICATION FOR PINEBROOK POINTE APARTMENTS subject to properly executed commitment letter, debt service coverage ratio, and appropriate rents per property to be determined by the Executive Director. Brittney Rowe seconded and the motion passed unanimously.
1st EXTENSION OF BOND INDUCEMENT FOR CAVALIER COURTS APARTMENTS
Charles Carpenter outlined a general overview of the extension procedure of the Board and referenced the three (3) Millennia Housing Bond Inducements, to wit: (i) Gospel Gardens Apartments, (ii) Hope Heights Apartments, and (iii) Cavalier Court Apartments. Carpenter explained that these properties are moving forward to closing and the applicants intend to come back to the Board in July 2018 for a Final Bond Resolution for each property. Carpenter also advised that the approved PILOT for each of the three aforementioned properties would be finalized with the Final Bond Resolutions. As a matter of disclosure for the public record, new Board member, Brittney Rowe advised that her employer, Bellwether Enterprise, has had previous experience with Millennia, however, Ms. Rowe disclosed for the record that she has had no personal direct or indirect involvement with Millennia properties. She also disclosed that her firm is not involved in the financing of these three Millennia properties before the Board, and further that she has no direct or indirect interest in these transactions. Based on the above, Carpenter recommended that the Board consider a 6 month extension for each of the three Millennia properties. The extensions, if approved, would be contingent upon all extension fees being paid at closing.
Buckner Welford moved for the approval of 1st SIX MONTH EXTENSION OF BOND INDUCEMENT FOR CAVALIER COURTS APARTMENTS. James Jalenak seconded and the motion passed unanimously.
1st EXTENSION OF BOND INDUCEMENT FOR GOSPEL GARDENS APARTMENTS
With the same terms being applicable to Gospel Gardens Apartments Bond Inducement,
Buckner Wellford moved for the approval of 1st SIX MONTH EXTENSION OF BOND INDUCEMENT FOR GOSPEL GARDENS APARTMENTS. Nancy Willis seconded and the motion passed unanimously.
1ST EXTENSION OF BOND INDUCEMENT FOR HOPE HEIGHTS APARTMENTS
With the same terms being applicable to Hope Heights Apartments Bond Inducement,
Buckner Wellford moved for the approval of 1ST SIX MONTH EXTENSION OF BOND INDUCEMENT FOR HOPE HEIGHTS APARTMENTS. James Jalenak seconded and the motion passed unanimously.
2nd EXTENSION OF PILOT APPLICATION FOR KEYSTONE LANDING APARTMENTS
Charles Carpenter updated the Board on the status of the pending bond and PILOT closings for Keystone Landing Apartments and Pendleton Place Apartments being delayed due to the developer obtaining the final approvals from HUD. Carpenter stated all extension fees will be paid at closing and requested that the Board consider a six month extension for the Keystone Landing Apartments PILOT as well as the Pendleton Place Apartments PILOT. The approvals will be contingent upon all extension fees being paid at closing.
Buckner Wellford moved for the approval of the 2ND SIX MONTH EXTENSION OF PILOT APPLICATION FOR KEYSTONE LANDING APARTMENTS. Monice Hagler seconded and the motion passed unanimously.
2nd EXTENSION OF PILOT APPLICATION FOR PENDLETON PLACE APARTMENTS
With the same terms being applicable to Pendleton Place Apartments PILOT,
Buckner Wellford moved for the approval of the 2ND SIX MONTH EXTENSION OF PILOT APPLICATION FOR PENDLETON PLACE APARTMENTS. James Jalenak seconded and the motion passed unanimously.
1st EXTENSION OF PILOT APPLICATION FOR CEDAR RUN APARTMENTS
Charles Carpenter reported that he has been working with the attorney for the PILOT Lessee and they are in a position to close forthwith. Carpenter advised this is a viable project and requests that the Board consider a six month extension for Cedar Run Apartments. If approved, a six month extension will be granted. The approval will be contingent upon all extension fees being paid at closing; however, Carpenter advised that the applicant will be seeking a waiver of the extension fee if the PILOT can be closed prior to the next Board meeting.
Monice Hagler moved for the approval of the 1ST SIX MONTH EXTENSION OF PILOT APPLICATION FOR CEDAR RUN APARTMENTS. James Jalenak and Nancy Willis seconded and the motion passed unanimously.
Executive Director Report
1. Martin Edwards, Jr. reported that he received an outline from Sunrise Terrace Apartments showing the amount of work that will be completed in the next sixty (60) days.
2. Edwards reported that there has been a request sent to Washington Manor for a detailed letter showing completion items within the next thirty (30) days.
3. Edwards reported Eastwood Park Apartments has not responded to the Notice of Noncompliance that was sent on February 22, 2018. Edwards has provided Eastwood Park with a thirty (30) day Demand Letter, which will be passed by the July meeting. Charles Carpenter added that typically, after staff has sent out Notice of Noncompliance and received no feedback, Carpenter’s office would then send out formal Notice and if no response is provided at that point, the Board would then consider termination of the PILOT and, if approved, the property would be immediately restored to the tax rolls.
4. Finally, Edwards reported on a preliminary meeting he had with Mayor Strickland regarding the Board’s PILOT authority and current structure. The discussion centered on the possibility of the current PILOT term being extended and new PILOTS having a term longer than ten (10) years with a possible of extension ability up to a twenty (20) year term with to be determined checks and balances being met during the term. The conversation was requested by The Mayor. There was no resolution on the matter, but Mayor Strickland favored continued discussions to look at alternatives in updating the PILOT program to address the issues identified. Charles Carpenter supplemented the discussion by adding that Memphis is one of the few Boards in the state of Tennessee that has a PILOT Program. Carpenter also reiterated the Chairman’s request for a Board retreat to discuss needed changes in connection with the PILOT program, being that the Board has more PILOTs outstanding for multifamily housing than any other entity in the City of Memphis.
The above concluded the Executive Director Report and there was a brief question and answer session with members of the Board.
There was no official new business.
James Stoke representing Bass River Advisors advised that he attended this Board meeting in order to observe public government, public investment, and public procurement. Stokes made a request for the Board to include him in the Board Retreat for discussion.
Due to the next regularly scheduled meeting date being July 4th, it was announced that the next scheduled meeting of the Board will be held on Monday, July 9, 2018 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:08 p.m.