Travis County Commssioners Court
December 16, 2003
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Housing Finance Corporation
Now let's call to order the Travis County housing finance corporation. 1. Consider results of compliance audit of prime crest and royal crest apartments, and take appropriate action.
>> good afternoon.
>> good afternoon, I'm harvey Davis, manager of the corporation. To my right is monty smith who is the compliance agent for the prime crest and royalty crest apartments and then jason knicks that is part of the ownership group that owns the apartment complex. If you will recall, on December 2nd, I had this item on the agenda to discuss the compliance issues with these apartments that we had sent a 60 day cure letter, it had gone out and done a follow-up audit. They had still not regained compliance and the board expressed an interest to hear directly from the owners and so with -- with your permission, judge, I will let them make a presentation about their plans for regaining compliance.
>> okay.
>> good afternoon.
>> afternoon.
>> judge. If I may, I'm one of the owners for these apartment complexes.
>> state your name, please.
>> my name is jason nix with winston capital corporation.
>> okay.
>> just to give you a little bit of background, if I may. We purchased these apartments from a [indiscernible] named aimco back in July of 2001. These two properties were part of a nine property portfolio. We did understand that the bonds were attached to these properties. We inherited the bonds, which we understood. We also understood that it was our responsibility to take care of these bonds at some point in time. As well as be compliant on these bonds through the year 2005. I just want to clarify when we bought these properties and inherited these bonds, we did not get the tax benefits from these bonds. We paid full taxes from the first day that we received these bonds and continued to do so. Having said that, when we first bought these properties, we had a management company called bishop management out of san antonio that took care of all of our properties. We felt that they were a good management, third party management company. They took care of the properties. They understood from our understanding or our assumption the bond process and the compliance issues that went along with it. And that they had to stay in compliance. After some period of time, we decided that bishop was no longer suitable for the management. We decided to bring management in house to -- to winston management. Because we felt like we could watch our properties a little bit closer, having them in house. We hired a lady named rebecca russell to do so. Unfortunately, we didn't have the manpower or the systems put in place for that to be very successful. We quickly realized that we were better off having a third party management company handling that. We switched over from this -- from ms. Russell to devonshire, current management, in may of this year. Unfortunately the transition did not go as smoothly as we had hoped for. Several things slipped through the cracks. One being the compliance issue on these two Austin properties. We had a letter sent to us from mr. Davis shortly after devonshire took over, I believe in June. That letter was sent to our office, winston capital, and I don't believe devonshire received a copy of that. Being in the transition that we were in and trying to get a handle on our properties that were falling in occupancy across the board, unfortunately that item somehow slipped through the cracks at the time. Later in the year, we received a second letter which we did find. We immediately sent to devonshire, told them we needed to get on this immediately. We had somehow missed the first letter and we needed to get on this compliance issue as quickly as we could to get this taken care of. Because obviously that's one thing that we always want to be in -- any kind of compliance issues, that we require to -- that we are required to be under. So having said that, devonshire then hired ms. Smith to help us and help our staff get acquainted to the bond system. Get acquainted to the compliance issues. And -- and turn around that part of -- of those properties. So -- so unfortunately, having said all of that, this was a case, I feel, that -- that in a transitional period more -- on more than one occasion, we -- we just let this slide through the cracks. We are very understanding of how important this is. That's why we have hired this consultant to take care of us and train our people where this will not happen in the future.
>> staff is recommending 60 days?
>> yes, sir.
>> to come into compliance. What's your response to that, mr. Nix?
>> your honor, I would lying to turn this over to mrs. Smith who is helping us become compliant.
>> 60 days enough time?
>> well, sir, I believe that is enough time on one of the community, however the occupancy is extremely low in the other, it's in the 50s. I don't see that 60 days would be given sufficient amount of time give very much the market. The leasing is virtually zero on the property. A lot of the vacancies cannot be counted asset aside because there's not enough data to actually call it a set aside units. Therefore we can't pull from the vacants on that property as well as we can from the other. I believe on woodwind chase ii, we would need at least 120 days. To be truly at 90%. I'm afraid if we try to shoot it for sooner -- sooner than that, we are going to be back here again with a non-compliance of not yet reaching the 90%.
>> what makes you feel that you can become compliant and the other person, that the owner has prior to you coming on board would -- was not able to satisfy the same --
>> if I may Commissioner, the prior company for management companies, mrs. Smith is a consultant strictly for this type of compliance. And she understands the process and has come in and taught our current management and staff exactly how the process works and exactly how everything needs to be taken care of. In the past, we were -- we did not have that consultant leading us down the right path.
>> you are using different names, I think. We have prime crest and royal crest, right?
>> yes, sir. Those names have been changed. Royal crest is now known as woodwind chase i.
>> w woodwind.
>> one word,.
>> chase i.
>> uh-huh.
>> and prime crest is now known as woodwind chase ii.
>> which can you bring into compliance in 60 days.
>> woodwind chase i.
>> do you all take section 8 vouchers?
>> on that property, I don't believe so. At one point in time we did. But not at the present time.
>> I'm just trying to think in terms of creative ways. You feltly there is always talk about there just aren't enough places for section 8's to be.
>> sure, no, absolutely. That -- that -- we did take section 8 there for a while. The current status, I do not believe we have been as of late but something I need to check into.
>> what's staff's response to the request for 120 days for woodwind chase ii.
>> I would recommend the board approve that request. I --
>> mr. Blunt, where do we stand legally?
>> there's [inaudible - no mic] two sets of restrictions on these properties. One of them is from the internal revenue code, tax status, 20% of the units set aside, my understanding is that we are in compliance with that. So we don't have to worry about the tax exempt status of the bonds, even though they have been defeased. That's the number one concern. The second, 90% requirement is a state law requirement, so I think we have a little bit more flexibility in working with the owner to come back in compliance. So if the board understands that there is progress being made and intending to be made and so forth, I don't see any legal problems with -- with allowing an extension to work on regaining compliance.
>> I move that we authorize an additional 60 days to come within compliance for wood wind chase I and 120 days for woodwind chase ii and that we be given a status report whether you are in compliance or not in those time periods on both units.
>> second.
>> both complexes. Any more discussion? Yes, sir?
>> I have a couple of questions. Mr. Nix, I guess I'm halghts confused, I remember asking mr. Davis this question. Whenever the new owners bought these properties, were they -- I'm confused with whether or not you were aware that there were compliance measures that you were going to have to reach, I mean I guess the answer to that is yes you did know that.
>> yes, sir.
>> you have a consultant now that deals with the management company. Does the ownership understand all of the compliance needs?
>> yes.
>> so you are under -- you would not need attention from ms. Smith with regards to what needs to happen in order to become compliant. But the management company does?
>> the management company, there's no question. As I understand to -- to a certain degree, I could not sit here and tell you I know 100% exactly what has to happen. But I'm learning along with the management company at this point in time. And that's another reason to bring in the consultant. Obviously we understood the process, we understood that there -- that there were definitely compliance issue that's we had to maintain through the year '05. Now, did I know 100% what those were? No, sir, I did not. And that's what I'm learning now along with the management company. Through our consultant.
>> well, that's -- that's real important to me because I asked harvey, I said, harvey when a new owner buys something, what do we do to ensure ourselves of that owner really understanding and knowing with regards to what really needs to happen. And it sounds like that you knew a little bit, but maybe just enough to be dangerous.
>> that's probably correct.
>> that's -- did.
>> to be quite honest.
>> that's something that I want to know because in the event that we do more of these, I would like to make sure that we need to have some sort of a signoff that, hey, just because you have qualified or gone out and done the financing to buy this, we want to make sure that you know what you have to be compliant with.
>> no question. It would be my suggestion from an owner's standpoint to have some system set up that somebody, whether it's a third party consultant, et cetera, be required to meet with a new owner and really kind of go through, you know, even at the owner's expense, be required to sit down with the consultant and -- really understand how important and obviously the management company is going to execute these procedures. But obviously the owner in his due diligence needs to be aware how important it is where he can continue with the consultant through whatever management company he chooses.
>> but it always frightens me whenever somebody knows more about your business than you know.
>> sure.
>> if I have got an owner that's not really sure of what needs to happen, the opener needs to rely on the consultant, then you have got a little bit of a tail wagging the dog there. That frightens me. So I mean not so much, I'm not trying to give you a lecture --
>> no, sir [multiple voices]
>> I think there are some things that we need to do from this point forward to make sure that we don't put ourselves in this kind of a spot. After the fact, the truth of the matter is, you are upside-down on these projects.
>> correct.
>> you know, you don't have the resources, I mean I'm sure you are learning what you have to do to be compliant, you don't have the money to do it. And like ms. Smith said with the way the vacancies are here, I hope that we can give you enough time. But unfortunately in this market I'm not sure that 120 days is -- I mean let's face it, I mean, you know, I'm in agreement with what the judge has said I mean let's give it, you know, some, you know, the good all american try. But y'all very well may be back say you know we still can't get there because we don't have our vacancies --
>> sure, we are, I will say I'm very confident in our current management company. Along with -- with our consultant because they have made great strides. More so, especially considering this market. They really have done well in our opinion to -- to get these properties on the right track. And I -- understanding that there's no question, it's a tough time. But we feel like we do have finally the right people in place to get it taken care of.
>> thank you, judge.
>> I would just like to address your concern. This project was financed in 1990, the most recent regulatory agreements require the consent of the issuer to any transfer of the project and some of the requirements to obtain that consent are, the opinion of council that the regulatory agreement is enforceable, as well as evidence that the transferee or the new owner has the ability to comply with the restrictions and so I think, probably 98% of the projects we have financed, that is addressed. This one was just done before those changes were made to a lot of the documents.
>> okay.
>> since that motion that you made, did you request a status report during the interim of the 120 days? By that deadline can we get -- we can get a status report on compliance or not compliance.
>> because if it is getting pretty close to where you still are not in compliance, there may have to be other situations that you may have to deal with to come into compliance.
>> yes, sir.
>> if you have enough time to do that, if you are seeing that you are not going to make compliance, it just appears that you would take advantage of that time.
>> yes, sir. Absolutely.
>> that's my concern.
>> yes, sir.
>> that's why why I was asking the question about section 8.
>> good point, Commissioner.
>> sure.
>> good point, Commissioners.
>> any more discussion? All in favor? That passes by unanimous vote. Thank you very much.
>> thank you.
>> thank you, mr. Nix.
>> appreciate it. 2. Approve minutes of board October 14, 2003.
>> so move.
>> second.
>> all in favor? That passes by unanimous vote. 3. Consider and take appropriate action on the following requests: a. Approve invoice for legal services rendered and expenses incurred through November 30, 2003; and invoices to three apartment owners for reimbursable legal fees.
>> the invoice that I'm asking the board to approve is for $4,825. This represents legal services from January 1st, 2003, through November 30th, 2003. I have closely reviewed the invoice and do represent to the board that in my opinion the -- all of the services have been provided and that the hours, in my opinion, are reasonable. I will add that -- that $2,000 of the invoice is legal work on two of the lottery applicants this last round. We were paid each -- each applicant paid the corporation $2,000 application fees. That money has been deposited into the corporation' bank account. In addition, the -- the fees, or part of the fees are eligible to be passed on to -- to apartment owners. I listed in the backup three -- three items, three apartment complexes. And do request permission from the board to invoice those people for the -- for the legal services.
>> so there is money in the corporate account now to pay the legal invoices.
>> yes, it's in the budget and we do have funds.
>> questions or comments? Move approval of 3 a and b.
>> second.
>> grant mr. Davis the authorization in question. All in favor? That passes by unanimous vote. Thank you all very much.
>> move we adjourn.
>> second.
>> all in favor? That passes by unanimous vote, too.
Last Modified: Tuesday, December 17, 2003 6:46 AM