MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, October 3, 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, October 3, 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, Chair Buckner Wellford (via phone)
Nancy Willis Cliff Henderson
The following Director was absent:
Monice Hagler Brittney Rowe
Dr. Manoj Jain
Also present were:
Staff members Martin Edwards, Jr., and Stephanie Wright were in attendance. Charles E. Carpenter and Corbin I. Carpenter, General Counsel, and Cheryl Hearn, Assistant City Attorney, were also in attendance.
Chris Lamberson, Richard Hamlet, and Geoff Benson representing Bent Tree Apartments, Jennifer Lowrie, Esq. representing Uptown and Patterson 2, and Carl Mabry, Terry Smith, and Vanecia Kimbrow, Esq. representing Heritage Oaks, LP 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.
Chris Lamberson, Richard Hamlet, and Geoff Benson entered the meeting.
PILOT TERMINATION OF BENT TREE APARTMENTS
As background, this PILOT property had previously been issued a Notice of Default for various deficiencies and the PILOT Lessee has been required to provide ongoing periodic updates to the Board. As such, Lamberson, Hamlet, and Benson appeared before the Board to provide an update and to discuss the progress made on certain identified deficiencies at the property. Benson stated that four of the eight fire damaged units have been completed and are occupied, and the remaining four have been completed and are awaiting final inspections to completed before the units will be able to be leased and occupied. Martin Edwards, Jr. stated that he has driven the property recently and agrees with the stated progress of the units. Edwards then referenced the ongoing drainage issue on the property and requested an update as to the progress in resolving the issue. Hamlet stated that a contract has been signed with Benson and Adirondack Construction to perform the needed repairs. Hamlet also stated that they are in the process of coordinating logistics with the residents to reduce parking lot disruptions. Benson elaborated on the logistics, stating the parking lot will need to be torn up in order to run the easement through and this will likely have to be done in sections in order to minimize any disturbance or disruption to the tenants. Benson stated this project should start by the end of October 2018. Charles Carpenter requested a completion timeline of the project, to which Benson stated an expectation of six to eight weeks for completion, weather permitting. Lamberson stated that he would be providing and updated rent roll to staff as well to show occupancy levels. Edwards asked about the condition of the front gate, to which Lamberson responded he would get a current report on that and provide to staff as well. Carpenter stated that the Board would expect a full comprehensive report at the December 2018 Board meeting. With no further questions, the Board took no formal action and deferred this item to the December 2018 Board meeting.
Chris Lamberson, Richard Hamlet, and Geoff Benson left the meeting.
PILOT REFINANCING FOR THE LAKES AT EPPING WAY
Martin Edwards, Jr. stated that the PILOT committee met and would recommend approval of the refinancing for The Lakes at Epping Way (f/k/a Lantern Square). There being no questions or comment,
Nancy Willis moved to approve PILOT REFINANCING FOR THE LAKES AT EPPING WAY. James Jalenak seconded and the motion passed unanimously.
PILOT REFINANCING FOR MILL BRANCH CROSSING (FKA WINBRANCH APARTMENTS)
Martin Edwards, Jr. reported to the Board that the PILOT Committee met and recommended approval of the refinancing for Mill Branch Crossing (f/k/a Winbranch). There being no questions or comment,
James Jalenak moved to approve PILOT REFINANCING FOR MILL BRANCH CROSSING (FKA WINBRANCH APARTMENTS). Cliff Henderson seconded and the motion passed unanimously.
1ST PILOT CLOSING EXTENSION FOR OWENS PLACE APARTMENTS
Charles Carpenter stated that Owens Place Apartments is an existing Apartment complex that intends to add new units under their PILOT. The property is owned by the Church of God in Christ. Once the PILOT is approved, the project has a six month period to close the transaction. If the transaction is not completed, the property may request a six month closing extension, which includes payment of a closing extension fee. Carpenter explained that the first closing extension request is not unusual. Carpenter recommended the Board favorably consider the approval of the 1st closing extension for Owens Place Apartments. There being no comment,
Cliff Henderson moved to approve 1ST PILOT CLOSING EXTENSION FOR OWENS PLACE APARTMENTS. James Jalenak seconded and the motion passed unanimously.
1ST PILOT CLOSING EXTENSION FOR HIGHLAND CREEK APARTMENTS
Carpenter reported on the Highland Creek Apartments closing extension request. Carpenter stated that this property is under an existing PILOT agreement, which the Board has previously agreed to terminate and enter into a new PILOT agreement. The closing of the new PILOT agreement, along with financing, is expected to take place within the next thirty (30) days. Carpenter stated that the property is seeking a term longer than 10 years. This property owner is stated to be a client of David Upton, who was instrumental in having the new delegation of authority to the Board approved by Memphis City Council. Carpenter recommended to the Board to approve the PILOT, if it is closed in the next thirty (30) days according to the same terms that we have, and once the revised policies are established, this property could come back before the Board and the term could be amended based on the length of time that it would qualify for under the revised policies. Carpenter also stated that attorneys representing the property have requested, based on policy the Board has adopted, that if the property closes before the next Board meeting, that the applicable closing extension fee be waived. Carpenter recommended the Board favorably consider the first closing extension for Highland Creek Apartments. Carpenter also clarified that the reason for terminating the original PILOT agreement and entering into a new PILOT agreement was due to the property owner receiving the funds necessary to complete the renovation of over four hundred (400) units. After a brief discussion,
Nancy Willis moved to approve 1ST PILOT CLOSING EXTENSION FOR HIGHLAND CREEK APARTMENTS. Cliff Henderson seconded and the motion passed unanimously.
AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR PATTERSON FLATS 2
Martin Edwards, Jr. reported that this application is one of two applications that were originally submitted as one application for bond financing purposes, but were separated into two separate PILOT applications because they are two facilities to be constructed on separate sites. As mentioned, the Bond application received by the Board will be considered in a separate action item later on this meeting. This property will be new construction. Edwards stated that the PILOT committee recommends approval of this Patterson Flats 2 application. Charles Carpenter informed the Board that this property will be using Low Income Housing Tax Credits (LIHTC) and tax exempt Bonds. Carpenter stated that he is in agreement with Edwards, stating the this is a first class developer, all new construction, and would carry out the mission of the Board very well. It was also stated that this application is an MHA endorsed application. There being no further comment,
James Jalenak moved to approve AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR PATTERSON FLATS 2. Nancy Willis seconded and the motion passed unanimously.
AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR UPTOWN FLATS 2
Edwards reported this application is also an MHA endorsed application, as well as the second phase of an existing PILOT. The project will also be new construction. Edwards stated that the PILOT committee recommends approval of this application. Carpenter reported this is a 136 unit project that will greatly impact the community. There being no further comment,
Cliff Henderson moved to approve AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR UPTOWN FLATS 2. James Jalenak seconded and the motion passed unanimously.
1ST EXTENSION OF BOND INDUCEMENT FOR EAST GATE VILLAGE APARTMENTS
Carpenter reminded the Board that East Gate Village Apartments are owned by CME Church and located in Union City, Tennessee and restated for the record that this is the project which his firm serves as Bond Counsel, as well as Counsel to the Board. Carpenter reported that all the preliminary matters have been completed. The bond volume cap and tax credit applications have been approved by, and are pending with, the Tennessee Housing Development Agency (THDA), however, the developer was notified by THDA that it is out of allocation for the 2018 year. Unless a previously approved THDA project falls through, it will be January 2019 before this transaction can close. HUD has already approved the project. Carpenter also stated for the record that this is the project which his firm serves as Bond Counsel, as well as Counsel to the Board, but based on the outline of facts and the stage of development, Carpenter recommended the approval of the first extension of bond inducement for East Gate Village Apartments. There being no further comment,
James Jalenak moved to approve 1ST EXTENSION OF BOND INDUCEMENT FOR EAST GATE VILLAGE APARTMENTS. Buckner Wellford seconded and the motion passed unanimously.
BOND INDUCEMENT RESOLUTION FOR PATTERSON FLATS 2 AND UPTOWN FLATS 2
Jennifer Lowrie, Esq. entered the meeting. Attorney Lowrie is employed at the law firm of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, being the same firm that Board member Buckner Wellford is employed; as such, out of an abundance of caution, Mr. Wellford recused himself from the deliberation and vote on the agenda item.
Carpenter reported that from a financing standpoint, these two properties will be considered under one Bond resolution as a single financing, differing from the PILOTs which are being considered under two PILOT separate applications. Carpenter stated the application was amended to increase the not to exceed limit of $20 million to a revised amount of not to exceed limit of $25 million. Carpenter stated that the revised not to exceed amount poses no issue for the Board and should be approved. Attorney Lowrie reported that the developer still expected the Bond amount to not exceed $20 million, however, the additional $5 million would allow flexibility to meet the tax credit fifty (50) percent test, if needed, without having to reappear before the Board. Lowrie stated this is a combined project of Patterson Flats 2 and Uptown Flats 2 that will be rolled into one financing for efficiency purposes. The expectation would be at this point to do a Fannie Mae permanent financing. The developer is working with various lenders to secure construction financing and the bonds are proposed to be issued as cash collateralized bonds. Lowrie referenced these projects would be similar structure to how the Forum Flats project was done, but with longer term bonds. Lowrie explained there may be a possibility of an “A” and “B” series bonds when they come back for final bond resolution, with the “B” series most likely being a shorter term bond that would be used to fill any gap to meet the fifty (50) percent test. Lowrie explained that the unit breakdown is Uptown Flats 2 property will have one hundred thirty-six (136) units and the Patterson Flats 2 property will have fifty-five (55) units. Carpenter stated that the proposed project fits within the guidelines and the mission of the Board and this is an experienced developer. Carpenter recommended favorable consideration of approval by the Board of the revised inducement resolution for Patterson Flats 2 and Uptown Flats 2.
Cliff Henderson moved to approve the REVISED BOND INDUCEMENT RESOLUTION FOR PATTERSON FLATS 2 AND UPTOWN FLATS 2. Nancy Willis seconded and the motion passed unanimously.
Jennifer Lowrie, Esq. left the meeting.
BOND INDUCEMENT RESOLUTION FOR HERITAGE OAKS SENIOR LIVING RESIDENCES
Carl Mabry, Terry Smith, and Vanecia Kimbrow entered the meeting.
Venecia Kimbrow, Esq. is serving as developers counsel, Terry Smith is the Executive Director of the Collierville Community Housing Development Organization, and Carl Mabry is serving as a consultant. Charles Carpenter stated that the Board has received a revised application and asked that these individuals explain the structure of the transaction as well as identify Bond counsel. Mabry stated they will be using four (4) percent tax credits, which will be applied for through THDA in January 2019 or February 2019. Mabry stated that they have not identified Bond counsel, but they have identified Duncan Williams for the placement of the bonds. This project will be new construction. Collierville Community Housing Development Organization will own and operate the property, but will hire a professional management company. After a short discussion, Carpenter recommended favorable consideration of the approval of the bond inducement for Heritage Oaks Senior Living Residences. There being no further questions or comment,
Cliff Henderson moved to approve BOND INDUCEMENT RESOLUTION FOR HERITAGE OAKS SENIOR LIVING RESIDENCES. James Jalenak seconded and the motion passed unanimously.
Carl Mabry, Terry Smith, and Vanecia Kimbrow, Esq. left the meeting.
Approval of Minutes
James Jalenak moved for approval of the Minutes for August 7, 2018. Cliff Henderson seconded and the motion passed unanimously
Finance Committee Report
Daniel Reid presented the financial results for the month ended July 31, 2018. A discussion of the financials was completed and
Nancy Willis moved for acceptance of the Finance Committee Report for July 31, 2018, and properly seconded by Cliff Henderson, the motion passed unanimously.
David Upton entered the meeting.
Daniel Reid presented the financial results for the month ended August 31, 2018. A discussion of the financials was completed and
Cliff Henderson moved for acceptance of the Finance Committee Report for August 31, 2018, and properly seconded by Buckner Wellford, the motion passed unanimously.
Charles Carpenter presented the legal report, as follows:
1. For the Board’s information, Carpenter reported no new lawsuits or claims for the period.
2. Carpenter reported that they have been successful in closing several transactions including Cavalier Courts Bonds and PILOT as well as Gospel Gardens Bonds and PILOT. Hope Heights closing is pending due to delays from HUD. Everything is set up and ready to proceed and should be able to close within the next thirty (30) to forty-five (45) days.
3. Carpenter reported the closing of an MHA PILOT for South City Phase II. There was an opening ceremony on September 24, 2018 that Carpenter attended. This is a continuation of the Cleaborn homes, Foote homes redevelopment.
4. Carpenter reported on the IRS audit for Lamar Crossing Bond. In this particular case, the Bond counsel law firm has been dissolved and the attorneys disbursed to other law firms in the Ohio area, which were identified. Carpenter advised that he has reached out to the IRS and continued communication with it and reported there is research being done on the current Trustee. In looking at the file preliminarily, it appeared that this bond issue had gone into default and a substitute trustee had been appointed. Carpenter and his firm are completing its diligence to determine who would be the appropriate party to respond and whether or not the bonds have been paid off. If the bonds have been retired, there will be nothing to audit, and that would end the inquiry. If not, they will have to continue to go forward to make sure that we, as the conduit issuer, facilitate providing a full response to the IRS.
5. Carpenter reported on the Oakshire PILOT. The Board has been requested to voluntarily terminate that PILOT, however that process did not go well for the developer, and the lender actually foreclosed on the PILOT. Since that time, Carpenter has been communicating with counsel for the lender and they want the PILOT to be terminated. Carpenter stated that he does have the termination documents ready for signatures today.
6. Carpenter reported on several PILOTS that are in default including Camelot Manor, Washington Manor, Eastwood Park Apartments, and Graceland Farms. After a brief review of the Board procedure for default letters, Carpenter explained that default letters have now been send from his firm and that these properties are currently in their thirty (30) day cure period. Unless satisfactory arrangements are made, at our next Board meeting, they will be on the agenda for consideration of PILOT termination.
7. Lastly, Carpenter reported on the resolution passed by Memphis City Council that revises the delegation of authority for PILOTs and substantially enhancing the authority of the Board and increasing the benefits for the PILOT Lessees. Carpenter stated his appreciation for David Upton’s job in shepherding this resolution through Memphis City Council and how grateful the Board is for that leadership. Carpenter stated that his office has been working with staff to come up with the actual revised policies and procedures in dealing with the amended resolution. Under the leadership of Daniel Reid, Chairman of the Board, he has appointed a committee to work with the resolution. The efforts are ongoing. There has been consideration, subject to Board approval, to have an open comment period for the various stakeholders, current PILOT Lessees, and the lenders involved and have a date certain set for written comment to be considered by the Board. This will be something that must be finalized by the Board to go forward, as well as the time table. PILOTs that have a shorter term to close, it is the recommendation of Carpenter as General Counsel that those applicants be advised that their PILOTs will be approved under our current guidelines, and once the final guidelines are approved by the Board, as well as any other approvals that would be needed, then they would come back for revisions based on the new policies and would then extend their term based on the period that they would qualify for.
The above concluded the legal report and there was a brief question and answer session with members of the Board.
Executive Director Report
Martin Edwards, Jr. stated that the Attorney’s Report covered all points to be discussed, including the default notices that have been issues. Edwards stated that staff will be monitoring the aforementioned properties with default notices and will be reporting at the next Board meeting.
The above concluded the Executive Director Report.
There was no official new business.
James Jalenak requested that the minutes reflect his appreciation for the purchase of a table at the University of Memphis Pillars of Excellence event, which honored James Jalenak, a member of our Board.
Daniel Reid expressed the Boards appreciation to David Upton for his involvement is helping shepherd the resolution passed by Memphis City Counsel. Reid asked if Upton would like to make any comments.
David Upton commented that this work has been performed over the past year. He expressed his hope that this resolution will provide the Board with the tools needed to really do the work that needs to be done. Upton expressed his excitement for this change and looks forward to the work the Board is doing on forming new policies and procedures to reflect the changes created the resolution passed by Memphis City Council.
There being no further public comment, it was announced that the next scheduled meeting of the Board will be held on Wednesday, November 7, 2018 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:03 p.m.