MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, June 7, 2023
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, May 31, 2023, 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:
Daniel T. Reid, Chairman Monice Hagler, Secretary (Zoom)
James Jalenak (Zoom) Cliff Henderson
Katie Shotts
The following Directors were absent:
Buckner Wellford Dr. Manoj Jain
Staff and others attending: Martin Edwards, Jr. (Zoom), Stephanie Bryant and Bryce Miller (Zoom); Charles E. Carpenter and Corbin I. Carpenter, General Counsel.
Also participating via remote Zoom virtual platform and/or in person were Thomas Robinson and Chamberly Martin of Alco Management, Inc representing Greenbriar Apartments; Luke Loveland of Prospera representing Kimball Cabana Apartments and Oakshire Downs Apartments and Townhomes; David Leake of The Winchester Law Firm and Mark Vengroff of One Stop Housing representing Bantam Airways Apartments and Bantam Springbrook Apartments; Frank Carney and Elizabeth Friary of Evans Petree, PC and Mendel Fischer and Shrage Marasow of MCF Capital Management, LLC representing Grainge Hill Apartments, Bridgeport Manor Apartments, Watkins Manor Apartments, and Willow Oaks Apartments; Renee Weiss, James Wells, Arthur Krauer of Millennia Housing Development, Ltd representing Memphis Towers, Cavalier Courts Apartments, and Gospel Gardens Apartments; Stephanie Reed, Rachel Stenger-Wiley, Pauline Olden, Brett Goldenhorn and Philip Balderston of Odin Properties and David Upton representing Creekside Meadows (Bent Tree) and Mill Creek Apartments; David Shores of Multi-South Management Services, LLC representing Macon Manor Apartments; Mark Jobe of Glankler Brown, PLLC representing New Horizon Apartments; Frank Carney and Elizabeth Friary of Evans Petree, PC and Matty Wercberger representing Sunrise Villas; Rose Eaton of Fallbrook Financial Company Services representing Winchester Grove 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 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, June 7, 2023 @ 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.
Approval of Minutes
Cliff Henderson moved for approval of the Minutes of the April 5, 2023 Regular Meeting, which was seconded by Monice Hagler, 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 March 31, 2023. After discussion,
Katie Shotts moved for acceptance of the Finance Committee Report for the month ended March 31, 2023, properly seconded by Monice Hagler, 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 April 30, 2023. After discussion,
James Jalenak moved for acceptance of the Finance Committee Report for the month ended April 30, 2023, 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 reminded the Board that the structure of the PILOT program is such that the deed to the property is in the name of the Board for the purposes of the PILOT, so when there are claims filed, either with construction through a materialmen’s claim or lack of payment claims or other litigation matters, as the Board is the title owner and Tennessee is a title state, the Board will always be added as a party to the claims and lawsuits. As such, Carpenter stated that his firm continues to monitor those lawsuits on an ongoing basis, and there are several currently pending. Carpenter stated that his firm is looking at a more proactive and efficient manner as far as litigation actions are concerned for getting the Board dismissed from the litigation. Also, Carpenter reiterated per state law, the Board has no financial or legal liability and the Board, its directors and staff are protected. Nonetheless, the ongoing surveillance of these types of matters for the PILOT program is required and Carpenter will continue to monitor and protect the interests of the Board in the matters and keep the Board advised.
2. Carpenter reported PILOT property activities, to wit:
a. Eden Pointe PILOT closed its new PILOT on May 25, 2023 with a twenty (20) year term.
3. Carpenter reported that as of June 1, 2023, there were two (2) successful remarketing of bonds for:
a. Kimball Cabana Apartments
b. Oakshire Downs Apartments and Townhomes
Carpenter reported that these bonds were issued in 2022 and additional comments will be made for these two (2) properties during the action items section of today’s agenda.
4. Carpenter reported that similarly with claims and lawsuits, some of the PILOT properties are presently in Environmental Court. Typically, those properties are undergoing substantial rehabilitation, and with projects where there is in-place tenant renovations, there is Code Enforcement and various advocacy groups and/or blight removal groups that cite these properties that end up in Environmental Court. Carpenter reminded the Board this is another part of surveillance services provided for the PILOT program and that his firm works closely with the Environmental Court, Code Enforcement, etc. and will continue the monitoring and oversight of these activities. Carpenter stated that the properties are all working in a positive direction and the coordination with the City Code Enforcement and Environmental Court has produced a more effective way of management and oversight.
5. Carpenter reported that Tennessee Housing Development Agency (THDA) had announced that it would publish the awardees of the Round One Low Income Housing Tax Credit (LIHTC) program during early June, but it has been delayed. It is now anticipated that THDA will make these announcements during mid-June 2023. Carpenter stated that the Board has four (4) different applications pending:
a. Greenbriar Apartments
b. Edgeview at Legends Park
c. Gardens of Forest Hill Irene
d. The Memphian
Carpenter stated that although the Chairman will mention the next Board meeting date at the end of the meeting, the Board’s monthly meeting which normally occurs the first Wednesday of each month will be modified due to the Independence Day Holiday, the Board’s July meeting will be moved up to June 28, 2023, which will be the last Wednesday in the month of June at 12:00 noon CT, and Carpenter anticipates the public announcement by THDA of the Round One awardees for the Western Grand Division will be announced by that time and may require Board action.
6. Finally, for informational purposes, Carpenter reported that the Economic Development Growth Engine (EDGE) Industrial Development Board received a grant from the Environmental Protection Agency of $1,000,000 to facilitate remediation of environmental issues in Shelby County. Carpenter stated that this is a revolving loan fund and if any of the developers have any Brownfield Issues, they may want to seek additional information from this grant program to see if it would fit ongoing projects in Shelby County.
There being no further questions or comments, the Legal Report was concluded.
Action Items-
1. 1st Bond Inducement Resolution Extension for APP Greenbriar Partners, LLLP (d/b/a Greenbriar Apartments)
Charles Carpenter introduced the agenda by stating that action items one and two are the same property and development team, will be considered together and voted on separately. As mentioned in the legal report, Carpenter stated that the developer, Alco Management, Inc., is awaiting the Round One announcement from THDA. Carpenter stated that though the announcement from THDA has not been made, based on the history of this developer and the quality of the projects that it represents, Carpenter anticipates this project will be awarded and the Bond and PILOT transactions would both be promptly closed at the same time. As such, Carpenter recommended approval for the 1st bond and PILOT closing extension for Greenbriar Apartments. Thereupon, Carpenter invited Thomas Robinson of Alco Management, Inc., to provide any additional comment. Robinson expressed appreciation to the Board for its consideration and Alco’s appreciation in working with the Board and staff. Robinson stated Alco Management, Inc is excited about what the proposed issuance of the bonds and the PILOT can do for Greenbriar Apartments, as the property has a solid package of tenant benefits currently for its other properties and with the adding of the bonds and PILOT benefits to improve the property, it will aid Alco in continuing to provide important rental assistance for another twenty (20) years at the property. There were being no further questions or comments,
Cliff Henderson moved to approve the 1st Bond Inducement Resolution Extension for APP Greenbriar Partners, LLLP (d/b/a Greenbriar Apartments). James Jalenak seconded, and the motion passed unanimously after proper roll call vote of the Board members.
2. Affordable Multifamily PILOT Application for APP Greenbriar Partners, LLLP (d/b/a Greenbriar Apartments
There being no further questions or comments,
Monice Hagler moved to approve Affordable Multifamily PILOT Application for APP Greenbriar Partners, LLLP (d/b/a Greenbriar Apartments). Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
3. 3rd PILOT Closing Extension for Kimball Cabana, LP (d/b/a Kimball Cabana Apartments)
Carpenter presented this agenda item stating that action items three and four are the same development company and will be considered together and voted on separately. Further, Carpenter remarked, as mentioned in the legal report, there was a successful remarketing of the existing bonds for Kimball Cabana Apartments and Oakshire Downs Apartments and Townhomes and each of these properties are now moving forward for their permanent financing and Carpenter’s firm is involved with the working group for both projects on an ongoing basis. It is anticipated that these permanent financing vehicles will be closed within the next sixty (60) days and the PILOTs will be closed for each project at that time. Carpenter recommended approval of the closing extension for Kimball Cabana Apartments and the closing extension for Oakshire Downs Apartments and Townhomes. There being no further questions or comments,
Katie Shotts moved to approve the 3rd PILOT Closing Extension for Kimball Cabana, LP (d/b/a Kimball Cabana Apartments). Monice Hagler seconded, and the motion passed unanimously after proper roll call vote of the Board members.
4. 3rd PILOT Closing Extension for Oakshire Apartments, LP (d/b/a Oakshire Downs Apartments and Townhomes)
There being no further questions or comments,
Monice Hagler moved to approve the 3rd PILOT Closing Extension for Oakshire Apartments, LP (d/b/a Oakshire Downs Apartments and Townhomes). James Jalenak seconded, and the motion passed unanimously after proper roll call vote of the Board members.
5. PILOT Transfer and PILOT Refinancing Application for Bantam Airways Apartments, LLC
Carpenter presented this agenda item stating that action items five and six may be considered together and voted on separately. Carpenter stated that Bantam Airways Apartments and Bantam Springbrook Apartments are each existing PILOTs and are seeking permanent financial through Freddie Mac. Carpenter reminded the Board that the Freddie Mac program requires a single asset entity for its financing and that is why the PILOT Transfer is being requested. The PILOT transfer will be in structure only to comply with Freddie Mac requirements and the principals and beneficial owners will remain unchanged. The refinancing would convert the construction lending to permanent lending for each property. Carpenter invited the legal representative for the developer, David Leake, to make any additional comments. Leake thanked the Board and stated that the projects have been completed and leased and are now trying to convert to new financing. Part of the refinancing with Freddie Mac was the requirement to set up single asset entities for each project to make it easier to administer each of the loans. Leake stated that Mark Vengroff was also present to answer any questions the Board may have. Vengroff thanked the Board for their consideration. Carpenter stated that each property is in compliance with the Board’s policies and procedures and would recommend approval. There being no further questions or comments,
Katie Shotts moved to approve the PILOT Transfer and PILOT Refinancing Application for Bantam Airways Apartments, LLC. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
6. PILOT Transfer and PILOT Refinancing Application for Bantam Springbrook Apartments, LLC
There being no further questions or comments,
Katie Shotts moved to approve the PILOT Transfer and PILOT Refinancing Application for Bantam Springbrook Apartments, LLC. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
7. 1st PILOT Closing Extension for Mazal in Grainge Hill, LLC (d/b/a Grainge Hill Apartments)
Carpenter presented this agenda item as the first PILOT Closing Extension for Grainge Hill Apartments and turned the meeting over to Frank Carney for further comment on this item. Carney stated that the developer for this project is Mendel Fischer, who is also present, and Carney anticipated closing of this PILOT transaction in July or August 2023, with the understanding that if closing does not take place until August, that the closing extension fee would be due to the Board at that time. Carney stated that his firm has several projects working toward closing with this developer, and this closing is anticipated to close quickly. Carpenter stated that the first closing extensions have become very routine and customary now due to processing delays in the normal course of business. Further, the project is in good standing and he recommends approval. There being no further questions or comments,
James Jalenak moved to approve the 1st PILOT Closing Extension for Mazal in Grainge Hill, LLC (d/b/a Grainge Hill Apartments). Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
8. PILOT Refinancing Application for Cambridge Development Holdings, LLC (d/b/a Bridgeport Manor Apartments)
Carpenter presented this agenda item stating that action items eight, nine, and ten are all refinancing applications and are all represented by the same legal counsel and development team. Carpenter turned the meeting over to Frank Carney for further comment. Carney stated that this is a refinancing application to continue the development of each of these projects, Bridgeport Manor, Watkins Manor, and Willow Oaks. Carney stated that rehabilitation is completing, and these projects were all approved for PILOTs in December 2022 and January 2023. Each is a new project and the developer is continuing to raise funds including additional equity to continue the rehabilitation of these properties. Carney stated that all three (3) projects have substantial tenant improvements that are ongoing, and he or the developers are available for any questions the Board may have. Carpenter asked the Board’s Compliance Coordinator, Bryce Miller, to provide additional comments based on his observations of the projects. Miller stated that progress at these three (3) properties has been spectacular, and particularly Bridgeport Manor has come a long way in a short time. Miller stated that he would like to commend the developer on how well they have done with these properties. Dan Reid asked for confirmation if Bridgeport Manor has six hundred thirty-six (636) units, which Carney confirmed. There being no further questions or comments,
James Jalenak moved to approve the PILOT Refinancing Application for Cambridge Development Holdings, LLC (d/b/a Bridgeport Manor Apartments). Monice Hagler seconded, and the motion passed unanimously after proper roll call vote of the Board members.
9. PILOT Refinancing Application for Watkins Manor Apartments, LLC
Carpenter invited Frank Carney to make further comments on this item. Carney stated that progress is also being made with Watkins Manor, which consists of two hundred fourteen (214) units and us being rehabilitated from the ground up. Carney stated that the property was in a blighted state when it was purchased by the development team, and this is a refinancing application to continue the development and rehabilitation of the project. Carpenter stated that this property is one that is in the Environmental Court because of the dilapidated and abandoned condition and the property has been and is currently under supervision by the Environmental Court. Carpenter stated that the developer is working well with Code Enforcement, the City of Memphis, and with his office, and substantial progress has been made. Carpenter recommended approval of the PILOT refinancing for the continuation of the improvements to the property. There being no further questions or comments,
Katie Shotts moved to approve the PILOT Refinancing Application for Watkins Manor Apartments, LLC. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
10. PILOT Refinancing Application for Mazel Willow Oaks, LLC (d/b/a Willow Oaks Apartments)
Carpenter invited Frank Carney to make further comments on this item. Carney stated that this project consists of three hundred thirty-four units and rehabilitation is continuing and this is a refinancing application to continue to invest in the property. Carney stated that this is the same developer as Watkins Manor and Bridgeport Manor and several other projects, as this developer has invested a tremendous amount of money in Memphis, which has been very helpful for the affordable housing market and programs in the City of Memphis. Carpenter asked Bryce Miller if the comments made earlier about the total portfolio apply as well to Willow Oaks. Miller confirmed his comments apply to Willow Oaks as well as Watkins Manor. There being no further questions or comments,
Cliff Henderson moved to approve the PILOT Refinancing Application for Mazel Willow Oaks, LLC (d/b/a Willow Oaks Apartments). James Jalenak seconded, and the motion passed unanimously after proper roll call vote of the Board members.
11. Status Update on Memphis Towers PILOT property
Carpenter introduced this agenda item stating that action items eleven, twelve and thirteen are the same developer, Millennia Housing based in the State of Ohio. Carpenter stated that Millennia Housing has several properties in the Board’s PILOT and Bond program. Carpenter reminded the Board that action items twelve and thirteen refer to an update on a resolution that was approved by the Board in June 2022, authorizing the reissuance of multifamily housing revenue bonds Series 2018. At the time of the approval, there were three (3) different properties: (i) Hope Heights, (ii) Cavalier Courts and (iii) Gospel Gardens. It was envisioned that all three would be closed within a sixty (60) day period, but due to extenuating circumstances, closings of the bond reissuances were delayed. In December 2022, Hope Heights reissuance of bonds was completed and at that time, the developer indicated that within sixty (60) days the remaining two (2) would be completed and an additional extension was granted by the Board.
Carpenter stated that the developer is now seeking an additional extension and introduced Renee Weiss, Jim Wells and Arthur Crawler with Millennia Housing and turned the meeting over to them for additional comments. Wells thanked the Board for its consideration and stated that this has been a protracted process. Wells stated that Millennia has done a lot of deals with Redstone (the identified lender), who is coming in to replace Key Bank for the purpose of extending the amortization schedule period while reducing the interest rate. Wells stated that Key Bank has been caught up in some recent banking issues and Wells stated that taking the bonds to Redstone is going to help the properties for multiple reasons, which will permit the property to have additional cash flow which is earmarked for security. Wells stated that these properties were purchased from Global Ministries Foundation and were in extremely poor condition and Millennia has rehabilitated them with the help of the Board’s Bond and PILOT programs and again extended his appreciation to the Board in that regard. Wells stated that Millennia underestimated the tenant base and the turning of the population as well as security needs and Millennia is amending those issues now.
Wells stated that Millennia has an application pending with Housing and Urban Development (HUD) for a markup to market, which will make the rents equal to the market rents, but that has required multiple reports being submitted to HUD and the process has taken much longer than anticipated. Wells stated that Millennia has received the markup to market and Redstone is still committed to reducing the interest rate and extending the term, which will increase cash flow, enabling Millennia to increase security to a level that is necessary for the properties based on the tenant base. Carpenter asked what timetable is anticipated at this point. Wells stated that plans have been submitted to HUD and once that process is complete, Redstone will be prepared to close in thirty (30) days as funding is in place and loan documents are complete. Wells stated that he would be willing to provide weekly updates to the Board on Millennia’s conversations with HUD through this process. Carpenter stated that would be required at this point. Carpenter stated that his firm interacts with several working groups for different projects, and he has been unable to receive any regular reports from Millennia on this process with the two (2) outstanding bond reissuances.
Carpenter stated that the Board looks at all of the properties in a developer’s portfolio that are part of the Board’s programs to make a determination in moving forward with any action. Carpenter stated that Millennia Housing has not been officially added to the Board’s default list but asked Bryce Miller to make any comments he has based on his observations from reviewing properties in Millennia’s portfolio. Miller began with his observations from several visits to the property including a walk-through of the property with Millennia staff at Memphis Towers on May 26, 2023. Miller stated that security issues are of grave concern. There were multiple points of entry observed where anyone could walk in from the street. Miller stated there is no 24-hour monitoring and no required key card or security device for entry onto the property at this time. Miller stated the security cameras are not in operation within the common areas, but there are however, working cameras that are monitoring the construction materials that are taking up part of the parking lot on the property. Miller stated that during his walk through with Millennia staff, they all witnessed a drug deal happen on one of the resident floors after touring a renovated unit. Millennia staff stated there was nothing that could be done in relation to the drug deal taking place. Miller stated overall the security at Memphis Towers is the main concern and if cameras are operational and monitoring the construction materials on site, then there should also be operational cameras monitoring the property for the safety of the residents. Miller stated that he was told by Millennia representatives on site that the cameras were not currently operational due to ongoing construction. Miller also stated there is very little lighting in the tower that is complete, and he was told that is also an issue from ongoing construction.
Wells stated that Millers comments were well received and appreciated and requested a meeting between Millennia representatives and Board representatives to address these issues prior to the completion of construction so that Millennia can change the scope during construction rather than after completion. Miller provided contact information to Wells to set up a meeting. Weiss asked for confirmation of the date Miller performed his site visit with Millennia staff, as some of the issues mentioned are already being addressed by Millennia. Miller stated the site visit took place on May 26, 2023. Weiss stated that the property is currently staffed 24 hours a day. Miller stated that there is staff there, but security is only on site from 4:00 pm-1:00 am.
Miller stated that these issues appear to be only with Memphis Towers, as his observations of the remaining properties in the Millennia Housing portfolio under the Board’s PILOT program are in good standing and very well maintained. Dan Reid asked if these status updates require any action from the Board at this time. Carpenter stated that the Board would need to take action in the month of June as the previous first extension granted is for a six (6) month period and will expire in the month of June. Monice Hagler asked if the Board would be able to table any action on these items until the June 28, 2023 Board meeting. Cliff Henderson stated that as previously discussed, Memphis Towers is the only property that seems to be faced with compliance issues and as the Board considers the portfolio of the developer as a whole and the other properties are in good standing, action should be deferred pending Miller’s meeting with Millennia representatives and Millennia should appear before the Board at the June 28, 2023 Board meeting with an update for Memphis Towers in order to determine what action is to be taken at that time. Carpenter clarified that no action is required by the Board for agenda item eleven, and this motion to defer action would apply to action items twelve and thirteen.
Cliff Henderson asked for an update on an incident that took place at Cavalier Courts Apartments. Carpenter stated that Millennia has provided a written statement to the Board but turned the meeting to Millennia representatives for any additional comment. Weiss responded that the incident is still under investigation by the Memphis Police Department (MPD) and Millennia is working closely with MPD and security has been increased at Cavalier Courts Apartments in response to the shooting. Carpenter asked if following preliminary investigation whether the parties involved were actual residents of Cavalier Courts Apartments or visitors. Weiss stated that in terms of the persons that committed the crime, Millennia does not believe they were residents of the property, but the person that was killed was a resident, but Weiss stated that Millennia is cooperating with MPD and will provide more detail to the Board as it becomes available. There being no further questions or comments,
No action from the Board is required for the Status Update on Memphis Towers PILOT property. Monice Hagler moved to defer action for:
12. 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
And
13. 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
to the June 28, 2023 Board Meeting. Cliff Henderson seconded, and the motion passed unanimously after proper roll call vote of the Board members.
PILOT Default Status Updates:
1. Creekside Meadows (Bent Tree)
2. Mill Creek Apartments
Carpenter stated that Creekside Meadows (Bent Tree) and Mill Creek Apartments are the same developer. Carpenter introduced representatives David Upton and Rachel Stenger-Wiley who were present in person with Brett Goldenhorn and Philip Balderston in attendance remotely for these two items and turned the meeting over to them for further comments. Upton stated that Odin Properties submitted a PILOT refinancing application for Creekside Meadows (Bent Tree) in February 2023. Upton stated that the property was a problem property when Odin Properties acquired it in 2019 and it has come a long way with a considerable amount of capital improvements having been made and currently a 90% occupancy rate. Most improvements have been on the interiors of the units and Upton stated that Odin properties feels that it is moving in the right direction.
Upton stated that Creekside Meadows (Bent Tree) has been conditionally approved for a fixed rate loan, which would lower the interest rate and representatives are hopeful that the PILOT refinancing application for Creekside Meadows (Bent Tree) would be able to be considered at the Board’s June 28, 2023 Board meeting. Upton stated that he has met with Carpenter concerning this application and advised him that the property has a floating rate construction loan coming due at the end of June, so Odin representatives has proposed a plan to have escrow accounts from the refinancing proceeds set up that would take care of the capital needs on the property. Upton stated that many needs are for the exterior of the property and the proposed escrow accounts would be used for those. Upton stated that he has also met with Bryce Miller on site as recent as June 5, 2023 and discussed some of the necessary improvements and Odin Properties plans to have detailed cost analysis and proposal of those items needed by the Board’s June 28, 2023 Board meeting.
Upton stated that funds from the refinancing of Creekside Meadows (Bent Tree) would be set aside for both Creekside Meadows (Bent Tree) and Mill Creek improvements. Upton stated that part of the issue with Creekside Meadows (Bent Tree) is timing, and the original ten (10) year PILOT Term is set to expire in October 2023 and part of the proposal being put forth by Odin properties will include a request for a PILOT Term Extension. Upton stated that Odin Properties has provided written commitments to the Board outlining close to $100,000 of work on the properties and a list of approved items approved by Odin Properties that are in process.
Upton stated, at Creekside Meadows (Bent Tree), that all exterior doors have been painted, and work will begin on stairwells, hand railings and lighting, painting, and a proposal for concrete work on a back corner of the property to remediate ongoing drainage issues on the property. Upton also stated that funds will be set aside for replacing security arms and a new front gate. Upton stated that brick work around air conditioners has been completed. Stenger-Wiley stated that Odin Properties has spent $20,500 on energy efficient appliances, $9,500 replacing carpet, $45,600 replacing CG hardwood flooring, $13,500 for windows, and $8,700 for air conditioning. Stenger-Wiley stated this is what has been spent from March 2023 to today. Dan Reid asked if she would classify these items as Tenant Benefits? Stenger-Wiley responded yes. Reid asked if HVAC should be considered a tenant benefit. Stenger-Wiley stated yes, because it will help to lower electric bills for residents.
Upton stated there has been approximately $80,000 spent at Mill Creek Apartments in the last two months. Stenger-Wiley stated that $106,000 has been spent on energy efficient appliances, and $20,900 on carpet. Reid stated that flooring is not a tenant benefit. Stenger-Wiley stated that $30,300 has been spent on CG for hardwood flooring, and Reid stated again that flooring is not a tenant benefit. Reid asked if these are intended to be capital expenditures and Upton clarified that Stenger-Wiley is stating capital expenditures for the property and they will not consider these as part of the property’s tenant benefits. Stenger-Wiley added that $6,800 has also been spent on windows and blinds at Mill Creek Apartments. Upton stated that Odin Properties is working with a contractor to complete additional repairs to the property including $11,900 is siding repairs and $33,000 in pressure washing for the entire property. Upton stated that Odin Properties is still in the process of completing the steel door replacements and more detail will be presented at the next Board meeting in terms of long-term capital. Upton stated that Odin properties has committed to window replacement at Mill Creek Apartments for $32,000, wood decking replacements for $39,200, fence repairs for $7,300, and $75,000 for rebuilding the front guard shack. Upton stated that more details will be presented to the Board and funds will be set aside from the Creekside Meadows (Bent Tree) refinancing for these items as well.
Upton stated that Odin Properties will also be seeking a PILOT Term extension at a later date as the original PILOT Term for that property expires in 2024. Upton stated that Odin Properties has a number of bids and estimates they will be putting together in addition to proposed tenant benefits for each property that will be part of the Creekside Meadows (Bent Tree) PILOT Refinancing Application. Upton stated that the loan would be a Freddie Mac loan and part of those requirements will be reserves for capital improvements, which will hopefully overlap with the issues observed by the Board. Upton stated that both properties seem to be moving in the right direction as of February or March 2023, but Odin Properties is aware that there is still much work needed.
Carpenter stated for the record that he has discussed this Creekside Meadows (Bent Tree) Refinancing request in detail with Upton. Carpenter stated that with PILOT Refinancing Application, the Board is always focused on the uses of refinancing. Carpenter stated that several of the Board’s action items today were refinancing applications in an attempt to convert a construction loan to permanent financing and those are basically for the benefit of the property and long-term debt savings. Preliminarily information that has been submitted and reviewed for the Creekside Meadows (Bent Tree) PILOT Refinancing Application shoes a substantial portion of the uses would be to repay the development team, which causes a lot of concerns with the Board. Carpenter stated that well over fifty percent (50%) of the proceeds would be used to repay the developers, which creates the appearance that they are cashing out. Carpenter stated that of the ten (10) years in the PILOT program, this property has been on the Board’s watchlist or in a default situation for nine (9) of those ten (10) years. Carpenter encourages the developer as they go through finalizing their presentation to take a careful look at the proposed uses of funds. Carpenter stated that the Board did approve a PILOT Refinancing Application for Mill Creek on July 14, 2021 and it was a stellar property at that time. Carpenter stated that following the refinancing, funds were taken out for repayment of principals, and currently Mill Creek has found itself on the Board’s watchlist, subject to negative news stories and so forth. As such, the proposed uses for Creekside Meadows is something that is going to be strictly scrutinized by the Board when considering the PILOT Refinancing Application for Creekside Meadows (Bent Tree).
Further, Carpenter stated that the Board certainly acknowledges that the PILOT has been a benefit at Creekside Meadows (Bent Tree) with an occupancy of 90% and asked what the occupancy at Mill Creek Apartments is today. Stenger-Wiley responded that occupancy at Mill Creek Apartments is at approximately 88%. Carpenter stated that affordable housing is needed and stated the Board wants to be supportive of affordable housing in these areas and asked for any additional comments from the Board.
Cliff Henderson stated that this comes down to trust and default reporting started again on this property in 2021. He would not have expected that the Board would have had to continue this level of oversight at this point in June 2023. Henderson acknowledged that momentum has built in the last few months, but posed the question at what point will the Board be able to step away from this level of oversight moving forward? Also, how will the developer prove that the property can be a standalone and remain in compliance moving forward? Henderson added that the Board should not require this level of ongoing effort and oversight from the Board, staff and legal counsel, and in his view, trust is what has to be proven.
Further, Henderson stated that the Board receives compliance reports each month on these properties and it is unclear if there is a capital issue, or how Odin Properties maintains the properties, or if there is something systemic, but it must be determined how to get in front of that. Upton stated that most of the issues left are exterior and Odin Properties will hopefully be able to put together a plan with an escrow account that the Board would feel comfortable with as Odin Properties intends to request a PILOT Term Extension as well in the coming months, but the refinancing proceeds could fund an escrow account, but the construction loan is coming due and there are some time constraints associated with that. Upton recommended an escrow account that the Board would require approvals for release of funds for expenditures, to which Reid responded the Board will not enter into any agreement like that.
Upton stated that the proposed lender would provide a list of deficiencies and capital needs and there would be an escrow account set up that would be maintained by the lender most likely in accordance with the refinancing requirements and that would be the assurance the developer would be providing to the Board that these things would be done on a timely basis and there would be monies to fund the completion of those things.
Upton asked Brett Goldenhorn if he had any additional comments. Goldenhorn stated that since Odin Properties’ purchase of Creekside Meadows (Bent Tree) that the property has come a long way and the developer is not pleased with being on the watchlist at all and that is something the developer is working hard to get off of, particularly in the last few months. Upton stated that he understands the perspective that after the refinance of Mill Creek Apartments it appears that the property has gone downhill, but there were some unfortunate incidents during COVID at both assets and Upton stated that Odin Properties believes that both assets are moving forward and offered to report to the Board at whatever interval is required to keep in the Board’s good graces for the duration of the PILOT.
Upton stated that the developer will provide a comprehensive list of repairs needed with costs and there is no question that Creekside Meadows (Bent Tree) would be able to operate without the PILOT in place and the desire is to set funds aside for the capital improvements necessary to continue in the PILOT program. Upton stated that Odin Properties has over 10,000 units around the country in their portfolio including approximately 500 units in Memphis that are not a participant in the Board’s PILOT program, so they are committed to the market.
Katie Shotts commented that her concerns are that the property has been in the PILOT program for almost ten (10) years and the conditions are barely livable, much less provide tenant benefits and the extra things that make the properties in the Board’s PILOT program great. Shotts stated that it seems these properties are now barely maintained, much less providing a really quality place for the tenants, and that is a huge concern. Upton recommended providing the Board with a list of verifiable capital improvements that Odin Properties has made to each property, stating that the conditions are a little better than barely livable, but if that is the perception, then the developer needs to provide something to the Board to look at tangibly to feel that this is not the case. Upton stated that when Odin Properties acquired the Creekside Meadows (Bent Tree), there were many down units and it took time to bring those back online and Upton stated that the property has a fairly good tenant benefits offering through the onsite church, but that will also need to be revamped to do more good things. Upton stated that if the perception is that conditions are barely livable, the developer needs to address those concerns.
Dan Reid asked staff how many PILOT properties are currently in the Board’s program. Stephanie Bryant replied approximately one hundred twenty (120) properties are in the Board’s PILOT portfolio. Reid stated that of the approximately one hundred twenty (120) PILOTs that have been issued by this Board, six (6) properties are on the PILOT Default Status Updates and two (2) out of the six (6) properties on this list are Odin Properties projects and those statistics are not good, but the Board appreciated the update.
3. Macon Manor
David Shores introduced himself as the representative for this update, stating that exterior wood repairs on the property have been completed, as well as siding replacement and painting. Shores stated that more than 50% of the windows have been replaced. Shores stated that it just takes time to work their way around the buildings, but all windows have been purchased and are on site. Work on the erosion control efforts has begun, which includes gutters around the courtyards and clearing lines to get water out of the courtyards and removing trees. Shores stated this work should be completed in three (3) weeks. Exterior lighting has also been upgraded and porch lights have been replaced with LED lights. Existing flood lights are being replaced with brighter LED wall packs higher on the wall and that work is underway and should be complete within three (3) weeks as well. Shores stated that the developer is installing new concrete wall dumpster enclosures and then asphalt work will be done around those enclosures, which is scheduled for late June or early July. Shores reported that grilling areas and amenity areas are being added in the courtyards as soon as the erosion work is complete. Shores stated that exterior work is well underway, and all items should be completed mid-July provided the amenity items are delivered timely. Shores reported that interior unit renovations have begun, and some residents have been displaced due to these renovations, but the property is offering newly renovated units to residents that are at the end of their lease term the opportunity to move to a renovated unit. Shores stated that work is coming along as they proposed it would and should be completed by the end of July with the exception of the interior work, which would spread out over two (2) years or so. The directive from the owners is to make it happen as fast as possible without disrupting property operations more than necessary.
Carpenter asked what the occupancy is at the property. Shores responded occupancy is at 90% occupied and 94% leased. Carpenter asked Bryce Miller for any comments from his observations of this property. Miller stated that the property looks fantastic compared to eight (8) months ago. Katie Shotts asked for clarity on the occupancy, to which Shores responded the property has one hundred twenty (120) units and one hundred eight (108) units are occupied with five (5) units pre-leased for the end of June. Carpenter stated that based on the report of the PILOT Lessee and compliance monitors, Macon Manor should report at the August 2, 2023 Board meeting and the Board will assess the progress at that time with the intention of releasing the project from the watchlist and give the developer the opportunity to complete all the improvements that have been outlined. Dan Reid expressed his appreciation for the job well done over the last twelve (12) months and thanks Shores for the update.
4. New Horizon Apartments
Carpenter stated that New Horizon Apartments is a property that the Board has had on its agenda for an extended period of time due to the size and complexities. Carpenter stated that a written update has been provided to the Board and introduced Mark Jobe, legal counsel to the PILOT Lessee in attendance for this update and turned the meeting over to Jobe for further comment.
Jobe stated that the property manager, Ashley Lowe, was unable to join the meeting today, so if there are any questions that need to be answered following his report, he would reach back out with answers to those following today’s meeting. Jobe stated that construction continues, and ownership is happy with the progress. Jobe reported that paint, roof repairs, tree work, and asphalt work all continue to be in progress and ownership continues to inject capital into this property to complete the necessary improvements. Jobe stated that as previously mentioned, the size and nature of the property makes it a difficult project, and when one problem is solved, others arise, particularly with the condition units are left in after a move-out requiring the major maintenance for unit turnovers to place return them to rent ready condition.
Jobe stated that there are still one hundred twenty-one (121) down units that are presently under renovation and of those units, forty (40) units will be brought to market in the next thirty (30) days. Jobe stated that occupancy of rent-ready units is at 70% occupied and management continues to receive new applications and continues to improve and bring units back online on an ongoing basis. Jobe stated that tenant benefits remain in place, with security being a big part through 24/7 security with a number of officers on site all the time. Jobe reported that management works closely with Memphis Police Department in the area to make this as safe a community as possible. Jobe reported that New Horizon still participates and works with various nonprofits to deliver other tenant benefits and opportunities for healthcare, rental assistance, and other things trying to deliver lifestyle opportunities and benefits and make services available to the tenants at this complex.
Carpenter asked Bryce Miller if he has any comment from his recent observations of the property. Miller asked if the one hundred twenty-one (121) units down includes units involved in a recent fire. Jobe stated he is not certain, but he will get that information and provide it to the Board. Miller stated that the recent fire caused severe damage to one of the buildings. Jobe stated that he will request more clarity as to the down units and provide that information to the Board in more detail. Miller stated that he recognizes that ownership has highly focused on tenant benefits and the community outreach provided at New Horizon as well as security, and though there are still occupancy hurdles, he feels the property is still on an upturn. Based on site visits. Miller stated that there are always workers present and although progress is slow, improvements are still being made and the developer has not lost sight of its responsibilities and continues to improve the complex through interior and exterior work and grounds improvements and takes its commitment seriously.
Jobe stated that this is a unique property and will provide an update at whatever time interval the Board deems necessary. Jobe also stated that the Board would be receiving a PILOT Transfer Application and the project will be before the Board at the August 2, 2023 Board meeting for consideration of that. Jobe stated that his services are isolated to the PILOT portion of the project and his client is represented by other counsel on the transfer piece of the transaction, but in any event, he would be happy to provide an update at the August 2, 2023 Board meeting and there would be discussions prior to the next update. Carpenter stated that based on the report of the PILOT Lessee and compliance monitors, New Horizon should report at the August 2, 2023 Board meeting and there will be a lot of diligence required on behalf of all sides going forward.
5. Sunrise Villas
Carpenter introduced Frank Carney as the representative in attendance for this update and turned the meeting over to him for further comments. Carney stated that the developer, Matty Wercberger, is also in attendance via Zoom and is able to answer any questions the Board may have. Carney stated that the last report was provided to the Board in March 2023 and the focus was on plumbing leaks and some underground plumbing damage, which has been completed. Carney stated that one of the tenant benefits proposed was the development of the laundry room, which has now been completed with new energy efficient washers and dryers. Carney reported two (2) buildings that needed siding repairs, and the siding has now been delivered and work is expected to be completed this month. Carney reported that the developer continues to do renovations on the interiors of the units and has spent approximately $65,000 on additional renovations of kitchens and interior work. The developer has spent $20,000 to date and expects another $15,000 on improving metal steps going up to the second story for more stability and better appearance.
Carpenter asked Bryce Miller for any comments from his recent observations of the property. Miller stated that the property has taken an upturn and would consider the property in good standing. Miller stated that there are still a few items outstanding that need to be completed, but based on this report, it sounds like they have a good plan moving forward on finishing those items, but vast improvement has been observed on this property over the past year and the developer seems to be maintaining those improvements well. Miller stated that he has also had the opportunity to tour some of the renovated units as well as some that have not been renovated yet to see where they started and the improvements that have been made, and they are impressive.
Matty Wercberger stated that occupancy is above 90%. Miller stated that there were improvements made on the parking lot last year, but with the ongoing construction and through the winter conditions this past year, Miller stated that some of those potholes have redeveloped and asked if there are plans in place to take care of those repairs needed. Wercberger stated that he plans to begin asphalt repairs in August to make sure that is not an ongoing issue. Carpenter stated that based on the report of the PILOT Lessee and compliance monitors, Sunrise Villas should report at the September 6, 2023 Board meeting and the Board will assess the progress at that time with the intention of releasing the project from the watchlist and give the developer the opportunity to complete the improvements that have been outlined.
6. Winchester Grove Apartments
Carpenter stated that Winchester Grove is represented by Rose Eaton who is in attendance via Zoom to provide an update on this property and turned the meeting over to her for further comment. Eaton reported that the developer only has fourteen (14) units remaining under construction and they are completed other than waiting for plumbing work outside the building or meter work from Memphis Light Gas and Water (MLGW). Eaton stated that MLGW is still behind on placing meters at the property and as soon as they get cleared through MLGW on those units and power is turned on, those units will be ready for occupancy. Eaton reported that blockages were found in the sewer lines outside the building on the main sewer line and work is underway on those repairs. Eaton reported that the only outstanding construction is the community center, and the property is waiting for MLGW on that as well for the transformer and the hook up to the building so the construction can be completed. Eaton reported that the property is mid-construction at the entry gate and the contractor has run into additional problems for service and power issues, but it should be complete by June 15, 2023.
Following completion, tenants will have to have stickers in their windows issued by the management company in order for the card reader to work, and this will help to limit the ingress of outsiders from the property. Eaton reported that a new security company has also been hired, Securitas, and they will be providing cameras in some of the more shadowed areas and security patrols will start at 3:00 pm though 4:00 am. Eaton stated that the developer has negotiated a contract with a nonprofit, All Things Are Possible, for after school and family resource centers to be set up and staff the computer center as part of the PILOT program once the community center is complete.
Eaton stated that the developer has also contracted with a laundry facility to prepare and provide machines in the laundry area of the community center. Eaton reported the Winchester Grove is 94% occupied and most of the security issues are tenant related between tenants and the management company if trying very hard to get a handle on those issues at this point. Eaton requested that the Board consider releasing this property from the watchlist at this point and stated that the investor has contributed an additional $6 million, outside of his equity contribution of $10 million, to complete the project, and the property has a fantastic management company that is doing a great job and has fulfilled the obligations that the project was given under the PILOT program.
Carpenter asked what the projected timetable of completion of the community center is at this point. Eaton responded that it is anticipated to be completed by the end of July, but that is dependent on MLGW and when they get power to the building. Miller asked about the status of the playgrounds on the property, as he has observed caution signs around one of them and that has been the biggest concern lately. Eaton stated that the developer has reached out to several nonprofits, including FedEx cares, to try and partner with them to clean up the playgrounds. Eaton stated that the play equipment has been inspected and was installed correctly and is stable, and they only reason the caution signs remained was due to recent electricity issues and digging for a new conduit line and the developer wanted to be sure those issues were completed to keep children protected. Eaton also mentioned that there were some concrete issues at the playground on the other side of the property and those issues are currently being addressed. Miller asked what the timeline for completion of all items, including the playgrounds, would be. Eaton responded that the developer's goal is to be all complete by July 30, 2023. Eaton stated that Fallbrook Financial Services has hired a new property operations manager who will be on site next week working with the management team to complete the final list of what needs to be taken care of.
Carpenter stated that based on the report of the PILOT Lessee and compliance monitors, Winchester Grove should report at the September 6, 2023 Board meeting and the Board will assess the progress at that time with the intention of releasing the project from the watchlist and give the developer the opportunity to complete the improvements that have been outlined. Carpenter stated that Eaton and her team came mid-stream into this project and turned a valuable asset around with a very nice product and offered his congratulations.
New Business
There was no new business.
Public Comment
There was no public comment.
Chairman Reid stated that the next meeting of the Board is scheduled for Wednesday, June 28, 2023 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 02:01 p.m.