MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Thursday, May 11, 2017
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice on Thursday, May 11, 2017. The published meeting time was 12:00 Noon. The meeting was held at the Board office, located at 65 Union Avenue, Suite 1120, Memphis, TN38103.
The following Directors were present:
Daniel T. Reid, Chairman Dr. Manoj Jain
Monice Hagler James Jalenak
Nancy Willis Buckner Wellford
Carolyn Head Ashley Foxx
Also present were:
Staff members Martin Edwards, Jr., Lauren Magallanes, and Amber Hayes were in attendance. Charles E. Carpenter, General Counsel, and Corbin Carpenter were also in attendance. Cheryl Hearn, Assistant City Attorney, was present as well.
Frank Stockdale Carney and Gene Thornton from Evans Petree and Dennis Brown representing Camelot Apartments and Washington Manor Apartments were also in attendance.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by the Chair, Daniel T. Reid.
Approval of Minutes
Monice Hagler moved for approval of the Minutes for April 5, 2017. Nancy Willis seconded and the motion passed unanimously.
Finance Committee Report
Carolyn Head presented the Financial Statement ending March 31, 2017. Ms. Head also discussed changing the financial report presentation from a cash basis to an accrual basis format. James Jalenak had a question regarding PILOT closing fees. Charles Carpenter responded to Jalenak and explained how the PILOT fees are assessed. Carpenter also explained the difference between the standard PILOT closing fees and the MHA PILOT closing fees and the allocation percentage of the MHA PILOT closing fees paid to the City of Memphis. Dr. Manoj Jain had a question regarding the variance in financial balances on a year to year basis. Ms. Head replied that it is based on the timing of billing and receipt of (i) annual issuer and administration fees and (ii) compliance monitoring fees charged to all outstanding PILOTs. Buckner Wellford asked about the process and difficulty of switching the financial reporting from a cash basis to an accrual basis accounting presentation, and Ms. Head replied that the data is the same and would only be presented differently. Further, that the change would not create an issue for the corporation.
Buckner Wellford moved for acceptance of the Finance Committee Report for March 31, 2017. James Jalenak seconded and the motion passed unanimously.
Review of Audit for the Year Ended December 31, 2016
Due to the change in meeting dates, Banks, Finley White & Co., independent auditors for the corporation were unable to attend. Thereupon, the annual audit report for FY2016 was distributed to the members and the report was presented by Ms. Head. Carolyn Head presented the audit to the Board and confirmed that it was a clean audit with no findings cited. Thereafter, there was a brief question and answer session with members of the Board.
Buckner Wellford moved for acceptance of the Audit for the Year Ended December 31, 2016. Dr. Manoj Jain seconded and the motion passed unanimously.
CONSIDERATION OF CAMELOT APARTMENTS AND WASHINGTON MANOR APARTMENTS 3rd EXTENSION REQUEST
Evans Petree representatives Frank Stockdale Carney and Gene Thornton and Washington Manor Apartments and Camelot Apartments representative Dennis Brown entered the room.
Dennis Brown explained that his company, which owns both properties are fully committed to each project. Mr. Brown advised that as an out of state developer, it has taken some time to understand the market, but he feels that his company has put together a good team at this time. Brown advised the Board members that his company had originally hired a professional management company, but the management immediately went through a merger in which they acquired more properties, which Mr. Brown felt this caused Camelot and Washington Manor to become a much lower priority. Finally, the relationship with the management company was ended in September 2016 and the decision was made to self-manage each property. It has taken a period of time to fully transition the management but at this time both properties are functioning well. Mr. Brown advised that they are accepting bids and ready to proceed. Brown said now they also have a better understanding of the market and demographics. Martin Edwards, Jr. asked what the current occupancy is for both properties. Brown responded 65% for Camelot and 25% for Washington Manor. Brown stated that he is very hopeful for the future of Washington due to its location to downtown and shopping centers. He said they are already receiving a lot of traffic. The rental rates are very competitive. He feels the occupancy will increase considerably. The construction plans provide for the renovating of 10 units per month. They already have a wait list of over 10 people. Brown feels very confident occupancy rate will increase to 50-75% in the next several months. Charles Carpenter asked about the new property tax assessments. Carpenter asked if they are planning to appeal the new tax assessments for properties. Brown answered probably, he will discuss with his attorneys. He is not aware of what the new assessments are. He more than likely appeal. Carpenter reminded him that once the PILOT is applied, the assessed value freezes for the tenure of the PILOT and strongly urged him to review the new assessments. Carpenter also asked if the tenant benefits will change since the closing has been delayed for a while. Brown said they would not change and will follow what was stated in the original application. Daniel T. Reid asked what the time limit is for an extension. Several individuals replied six months. Carpenter asked Brown if he is sure he will be ready to close in six months. Brown replied yes and that construction will start June 1. Dr. Manoj Jain asked if Brown is based in Los Angeles. Brown replied yes. Buckner Wellford asked if we have minutes that state the basis of the 2nd extension. Wellford said that not knowing the market is not a satisfactory answer for requesting three extensions. Brown reiterated that it wasn’t only not knowing the market, it was also issues they had with the original property management company and having to change property management companies. Additionally, they were not satisfied with bid quotes they were receiving. Wellford reiterated his concern for the 3rd extension and asked for the 2nd extension approval meeting minutes. Carpenter addressed the Board members regarding the look-back period for the annual allocation set forth by Memphis City Council. Carpenter advised that the look back period is two years; and explained that once the Board makes an allocation, and that allocation is not used or recaptured in the two-year period, then we lose that allocation value. Based on the above, Carpenter stated Wellford’s concern over the 3rd extension is well taken and reiterated a 3rd extension is extremely unusual. Dr. Jain asked Brown if he recalled what the reason for the last extension request and Mr. Brown replied the same issues as for this request. After further discussion, Martin Edwards reiterated he wants to be guaranteed that construction will be completed at the end of the six-month extension. Brown stated that Washington was going to take longer due to structural damage. Edwards asked what he expected the lease-up to be at the end of the six-month period. Mr. Brown stated over 50% for Washington and 80% for Camelot. Reid requested from Mr. Brown to let us know if any other complications arise.
Buckner Wellford moved for the approval of the WASHINGTON MANOR APARTMENTS 3rd EXTENSION REQUEST. Monice Hagler seconded and the motion passed unanimously.
Monice Hagler moved for the approval of the CAMELOT APARTMENTS 3rd EXTENSION REQUEST. NANCY WILLIS seconded and the motion passed unanimously.
Evans Petree representatives Frank Stockdale Carney and Gene Thornton and Washington Manor Apartments and Camelot Apartments representative Dennis Brown exited the room.
CONSIDERATION OF AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR KEYSTONE LANDING APARTMENTS
Martin Edwards, Jr. started off by stating that the developers for this property are out of Denver, CO. This complex is in good condition and is located in Frayser right next to the Nike plant. This is a HUD/Section 8 property. Edwards stated that he anticipates on the front end that this application will probably need an extension due to it having a HUD application attached to it. Edwards recommends approval of the PILOT application. Charles Carpenter mentioned that this property is seeking bond approval as well for the issuance of tax exempt bonds. They will also apply to THDA (Tennessee Housing Development Agency) for Low Income Housing Tax Credits. Carolyn Head is concerned about the longevity of the tenant benefits. She wants to know if we consider that the tenant benefits will last throughout the PILOT tenure. Daniel T. Reid replied that is why we do the annual compliance inspection of each property. This ensures that the property owner is consistently investing in the stated tenant benefits.
James Jalenak moved for the approval of AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR KEYSTONE LANDING APARTMENTS. Carolyn Head seconded and the motion passed unanimously.
CONSIDERATION OF AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR PENDLETON PLACE APARTMENTS
Edwards advised that this is the same developer as Keystone Landing. The property is located at Lamar and Pendleton. Martin Edwards commented that the property is currently in very good condition and will have the same financing structure as Keystone Landing, and may have to come back to the Board for an extension within the next six months. Due to the protracted application process with HUD, Edwards did advise the developers to hold off on their PILOT application, but due to the HUD application and underwriting process, the THDA tax credit application and the bond application process, the developer wanted to move forward at this time. Edwards recommends approval of the PILOT application.
Monice Hagler moved for the approval of AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR PENDLETON PLACE APARTMENTS. Nancy Willis seconded and the motion passed unanimously.
CONSIDERATION OF MEMPHIS HOUSING AUTHORITY (MHA) AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR MASON VILLAGE APARTMENTS
Monice Hagler recused herself and left the room prior to the consideration and decision regarding Mason Village Apartments.
The affordable multifamily PILOT application for Mason Village was approved in July 2016 for a Board PILOT. Martin Edwards presented an approval letter from MHA and the matter is before the Board for an approval as an MHA PILOT property having a tenure of 20 years. Edwards ask Charles Carpenter to explain MHA endorsed PILOT properties more in depth. Carpenter explained the authority for MHA to issue PILOTs falls under different state statute that HEHF’s authority to issue PILOTs. The authority is also delegated from the Memphis City Council, and the major differences are the MHA PILOT must have low income housing tax credits (LIHTC) as a part of its structure and the term is for 20 years and HEHF PILOT term is for 10 years. Further, the MHA PILOT is normally reserved for projects where a developer agrees to replace demolished MHA housing. Carpenter further advised that Mason Village is a joint venture with the Church of God in Christ (COGIC). Mason Village will be located on Crump Blvd near the COGIC Temple. It is new construction and will help house some of the residents being displaced by the closing and demolition of the Foote Homes and Cleaborn Homes public housing properties. With MHA PILOTs the 1% closing fee, the Board will retain 30% and 70% will be paid to the City of Memphis. Edwards stated that the PILOT Committee recommended approval.
James Jalenak moved for the approval of the MEMPHIS HOUSING AUTHORITY (MHA) AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR MASON VILLAGE APARTMENTS. Ashley Foxx seconded and the motion passed unanimously.
Monice Hagler re-entered the meeting.
CONSIDERATION OF JAMESBRIDGE APARTMENTS TRANSFER
Martin Edwards stated this property has 432 units and is located on James Road. It was approved as a PILOT in July 2013. Edwards reminded the Board that policies changed last year regarding transfers. The property has to come back before the Board and be re-underwritten and re-approved. The property is in excellent condition. All items have been completed, except that the previous owners planned to build a pool, but never completed it. The new owners propose foregoing the swimming pool and instead propose building a recreation center and leasing office. Edwards agrees, and recommends to the Board that this change will provide a better amenity for the property. Edwards further reported that the tenant benefits have been kept up by the current owners, and that staff and the PILOT committee recommends approval of the transfer.
Buckner Wellford moved for the approval of the JAMESBRIDGE APARTMENTS TRANSFER. Dr. Manoj Jain seconded and the motion passed unanimously.
CONSIDERATION OF AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR NEW FOREST APARTMENTS
Deferred until June 2017 Board Meeting.
CONSIDERATION OF BOND INDUCEMENT RESOLUTION FOR KEYSTONE LANDING APARTMENTS AND PENDLETON PLACE APARTMENTS
Charles Carpenter referenced the sources and uses page. Carpenter reiterated that the developers are from Denver, CO and have entered the Memphis market to help preserve low-income housing. Their plan is to seek assistance from MHA and THDA tax credits. HEHF’s role is to facilitate the issuance of the bonds and the PILOT. Based on the structure presented, the developer would qualify for the inducement of bonds. Once the developer has talked to the lenders, MHA, and THDA, the developers will come back before the board for a final bond resolution. The developer will then outline to the Board how it plans to structure and issue the bonds, either through a private placement or a public offering. At that time, the Board will ask all pertinent questions and if the Board is satisfied, it will then authorize a final bond resolution. Carpenter further added that granting the inducement resolution poses no liability on the Board and all bond debt issued by Board authorization is non-recourse debt; however, in order to have the bonds issued on a tax-exempt basis, the bonds will have to be issued through the Board.
Buckner Wellford asked if it makes a difference if bonds are private placement or public offered. Carpenter stated it does not.
Cheryl Hearn exited meeting.
Monice Hagler moved for the approval of the CONSIDERATION OF BOND INDUCEMENT RESOLUTION FOR KEYSTONE LANDING APARTMENTS. Carolyn Head seconded and the motion passed unanimously.
James Jalenak moved for the approval of the CONSIDERATION OF BOND INDUCEMENT RESOLUTION FOR PENDLETON PLACE APARTMENTS. Ashley Foxx seconded and the motion passed unanimously.
Carpenter reported that since the last meeting, we have had two new lawsuits presented. One is regarding one of our PILOT properties being sued by National Carpet out of Arkansas filed against GMF – Bent Tree for services rendered. We responded and informed the Plaintiff of our statutory immunity. Fortunately, this law suit has been resolved.
The second lawsuit is regarding a Shelby County delinquent tax complaint. It is on Memphis Heights, d/b/a Kensington which was a previous PILOT property. This property was terminated over a year ago due to non-compliance. The appropriate deeds have been filed. This property should not currently be listed in the name of the Board. We informed the attorney representing the county, county trustee, and assessor’s office and forwarded documentation showing this property is no longer ours. We will continue to monitor the progress of the dismissal of the Board from this matter.
The next item regarding the sale of Warren/Tulane Apartments receivership and the potential legal implications as conduit bondholder was discussed in an attorney-client privileged session.
Following the attorney-client privileged session, Carpenter reported that Downtown Memphis Commission (DMC) and the Board have reached an agreement in principal regarding entering a memorandum for exemption from taxation for Board and MHA PILOTs that are in the Central Business Improvement District. Carpenter advised that a draft Memorandum of Understanding had been prepared and forwarded to DMC for review and approval. It is anticipated by the next meeting we will have the agreement ready for final approval by the Board.
Additionally, Carpenter reported an update on the IRS audit on Serenity Towers and his work with special bond counsel at Jones Walker. Carpenter advised that all required documentation has been submitted to the IRS, and the IRS has verbally advised that no further action will be taken. The IRS will send, in writing, a “no change” letter which will conclude the audit.
Finally, Carpenter advised that a letter was received from Memphis Housing Authority (MHA) that three of its PILOT properties are to be terminated: Fairway Manor, Ford Sr. Villas, and Horn Lake Apartments. Carpenter briefly discussed the background of ongoing discussions between MHA and the City regarding the handling of these properties from an ad valorem tax perspective, and the PILOT process was an interim step. Carpenter will continue to review and further advise the Board of the developments in the matter.
The above concluded the legal report and there being no further concerns or questions, the meeting moved to consideration of the Executive Director Report.
EXECUTIVE DIRECTOR REPORT
Martin Edwards discussed and answered questions regarding the following matters:
HEHF “Autopsy” Numbers
Edwards and Amber Hayes have been working on more numbers. Discussed average rents – market vs. low income housing rents.
Thompson Court Apartments
City Council approved street closures unanimously. Edwards was present.
Election of New Board Officers:
Monice Hagler discussed the recommendation of the nomination committee. The terms last two years. Normally, the board officer election is held in January; however, due to reconstitution of the Board members it was delayed. Ms. Hagler reported that the committee met and recommended the following:
Chair: Daniel T. Reid
Vice Chair: Carolyn Head
Secretary: Monice Hagler
Treasurer: Carolyn Head
Reid asked if there were any nominations from the floor; hearing none, the floor was opened for a motion.
Monice Hagler moved to the election of new Board officers as presented. Buckner seconded and the motion passed unanimously.
There being no public comment, it was announced that the next scheduled meeting of the Board will be Wednesday, June 14, 2017 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:45 p.m.