Mobile Housing Board (MHB) member Norman Hill had some concerns over master developer agreements approved last week for the redevelopment of Roger Williams Homes, Thomas James, R.V. Taylor Plaza and Boykin Tower. Regardless, the board unanimously approved the agreements, which set the framework and business terms between the board and developers on the mixed-income projects.
Hunt Development Group has been chosen to redevelop Roger Williams, while Hollyhand Development, Pennrose Properties and Bloc Global were chosen for the south side properties.
Hill made a motion to table the agreements until a work session can be held to “fully understand the language of the contracts.” The redevelopment projects have a total value of $950 million.
Board member Melvin Clark dismissed Hill’s concerns, saying “This is not our first rodeo,” and Hill’s motion failed for lack of a second.
Later in the meeting, Clark said the questions Hill raised have been answered on multiple occasions.
“The discussion we’re having now is a one-man discussion,” Clark said. “We’ve gone through this time and time again.”
Additionally, Hill said he was concerned over the two projects competing with each other for 9 percent tax credits, which are available for low-income housing and help developers build more affordable units. There are also 4 percent tax credits available, which are not competitive.
MHB Executive Director Dwayne Vaughn explained in an email after the meeting that the projects won’t compete for the credits because the MHB will support the strongest 9 percent tax credit application. He wrote the board would also have an alternating tax credit application window.
“MHB’s program manager (Jim Brooks from Boulevard Group Inc.) will assist MHB in determining which 9 percent tax credit application is strongest in any given application cycle,” Vaughn wrote. “The 4 percent tax credits are non-competitive and, therefore, all developers can seek to obtain those 4 percent credits and there will not be competition against each other. Moreover, the developers will have to use other financing tools to complete the total redevelopment and will not be able to rely solely on tax credits.”
Brooks added the 9 percent credits won’t be the only form of funding for the project. The $250 million project along Michigan Avenue, for instance, will be funded through 4 percent credits and private funding as well.
Hill also questioned the difference in management fees between developers on the two projects. For example, he said Hunt is charging a 4 percent management fee, while Pennrose demands 6.25 percent. But Brooks explained Hunt is simply a much larger developer that can charge a lower fee.
Brooks said MHB would retain ownership of the land used for the redevelopments and in both cases, MHB is also entitled to a quarter of the development fee.
Vaughn wrote that the development fees “are provided in real estate transactions that compensate the developer for the administration, construction management, financing and development of the property … Many times the fees are a percentage of the cost of the development.”
The housing board will be a co-developer on the projects, so it is entitled to a percentage of that fee, Brooks told board members. Brooks said the board’s fee is set at 15 percent of the cost of development.
Additionally, Brooks said there would be a 50/50 split of the cash flow between the developers and MHB once the development starts to make money.
When Hill questioned who negotiated the terms of the deals, board attorney Raymond Bell said there were “many meetings, emails and conference calls.”
Hill said he had concerns over the terms and asked that the final contract come before the board for a vote. Bell said negotiations are over and with the vote, the “parameters by which terms were made were authorized by the board.”
Don Langham, acting board chair due to Clarence Ball’s absence, said the board received copies of the terms in advance and questions could have been posed before the meeting.
“I have faith in our attorney and staff to guide us in the right direction,” he said.
Hill also questioned why Pennrose would get an additional $500,000 after the initial 15-year lease runs out.
Mark Straub, a senior developer with Pennrose, explained the property will be worth at least $4 million at the end of the 15-year timeframe and they thought a $500,000 fee on the back end was appropriate. Straub called the project a “windfall” for MHB and said the back-end money would only be a “small token.”
Hill called the arrangement unusual, mentioning Pennrose would also be getting tax credits on the project.
Brooks explained the fee would give MHB the right of first refusal to own the development when the 15-year agreement ends, but Hill said he thought the fee on the back end “should be zero.”
“You’re working for us,” Hill told Brooks. “I don’t want you to get that confused.”
Plans for the Roger Williams’ redevelopment would “probably” consist of 1,400 units, Brooks said. The developer must also build replacement housing for the 449 units filled there currently. Vaughn wrote that MHB would use only a quarter of the current Roger Williams property for replacement housing, as the rest of the property is in a flood zone. The rest of the units will be developed off site.
In other business, the board approved $22,000 in travel expenses for the month of July. CFO Lori Shackleford told board members the majority of the expenses came from resident travel and the money came out of the resident participation fund, which can’t be used for MHB operations.
Hill questioned the travel expenses for August to October, given the $450,000 hole in the budget. Vaughn wrote the expenses designated for resident travel would allow six resident leaders to travel to Tampa at the end of September to attend the National Resident Services and Leaders Conference.
“It is the one out-of-town trip resident leaders take using Resident Participation Funds,” he wrote. “Resident Participation Funds are monies provided by HUD and are assigned to resident associations to use for resident training, leadership development, resident elections, social support needs, self-sufficiency, capacity-building activities and resident programs, etc. The resident associations and their leaders determine the best use of the funds.”
Vaughn said of the $22,000, over half will be used for resident travel.