Travis County Commissioners Court
February 8, 2005
Housing Finance Corporation
Now let's call to order Travis County housing finance corporation. 1. Consider and take appropriate action regarding request to give direction on collection of past due annual fee from the metropolis apartments. Let's also call up tomorrow number 2 at the same time. 2. Consider and take appropriate action on request to consider the results of compliance audit of metropolis apartments project.
>> mr. Davis.
>> good afternoon, I知 harvey Davis, manager of the corporation. If it's okay, let me start with item no. 2. Discuss the compliance audit. On December 28th of last year, I initiated a compliance audit of the metropolis apartments. The audit focused on the requirement to lease at least 20% of the unit to low income tenants and 90% of the units to moderate income tenants. The apartment has 308 units. So that 62 or 20% of 308 have to be leased to low income tenants. I did focus my audit on the low income tenant requirement. And in fact I -- I did a -- I did an audit of all of the low income tenant files. The result of the audio exit was that -- of the audit was that I disqualified 12 of the units that they had classified as low income units. And because of disqualifying those units, they were -- they he were out of compliance of the low income tenant requirement on -- on December the 28th when -- when I initiated the audit. They had 56 units instead of 62. Classified as low income tenants. I did return to complete the -- the audit on June -- January 13th, they had -- they had some move-ins, so they had -- they were up to 59 units. What I am recommending is that the -- is that the board authorize our attorney, cliff blunt to send a cure letter giving them 60 days to -- to regain compliance, I will add that -- that since the audit they have -- they have sent me notification that they have -- have had some new low income tenants come into the units and that they feel like today that they are in compliance. However, I have not examined that part. And if that's the case, I would probably return and do a follow-up audit sometime in March and report back to the board perhaps in -- in late March. The manager -- the manager, tommy clark, is -- is here and is -- and -- to answer any questions of -- that the board may have. And --
>> would you like to give comments on item no. 2?
>> and I will add that -- that they have taken steps to -- to add some -- this property is managed by arbor properties, they have initiated some steps to -- to examine these files, do a thorough examination of the files and make sure that the files are properly classified. They have showed me some new forms that they had to -- to try to clarify things out there. So they have, I would say, aggressively taken some steps to correct the situation.
>> yes, sir, have a seat there, give us your full name, we would be happy to get your comments.
>> yes, sir.
>> I知 brandt baber, president of metropolis, abc, inc., which is the owner of the property. I had the pleasure of being in front of the housing finance corporation in 2001 when you all issued the bond and I知 here again. Mr. Davis' report is very helpful. We have discussed it with our property manager. Apparently there is a combination of leasing agents not knowing exactly how to compute income, a little bit of clerical sloppiness and so what we have done is they have arranged to have three staff members attend the next upcoming tdhca certification classes, in addition to going back to vet the files. We have also set up a procedure by which now three persons will review the income certifications for every application, including -- there's mr. [indiscernible] here from the corporate office, who has been designated by the president of the properties as the last quality control person. So hopefully with each of these persons being double checked, being additionally educated, this issue will not rise again.
>> you do all of that, mr. Davis will have to become -- is it maytag repairman? [laughter]
>> that would be --
>> nothing to do.
>> that would be just great.
>> move that we send an appropriate 60 day-advance letter on number two.
>> an example of the letter is in your backup that would -- that our attorney cliff blunt could use to send to them.
>> second.
>> mr. Blunt bills by the letter, that's not getting too much help. All in favor? That passes by unanimous vote. That leaves number 1.
>> okay. These bonds for metropolis were issued in July of 2001. As you know, the bond -- the -- that we issue from multi-family apartments require that the -- that the apartments pay the corporation an annual fee that is equal to 10 basis points of the outstanding bonds. 10 basis points is 1/10th of one percent. So the bonds, the metropolis apartments paid the fee in -- in July of 2002, again they paid the fee in July of 2003. The fee was not paid in July 2004, because the property was not generating enough income to make the payments on the bonds and the bond payments have priority over the annual fee payments. Per our policy, I am required to -- if we do not receive timely payments of our annual fee, I知 required to -- to notify the board of this -- of the circumstances, which I did on August 31st, 2004. At that meeting, the board voted to -- to ask the owner of the apartments to -- to come to the board and discuss the situation and so mr. Vaber has agreed to come and he is here to comply with that request on July -- August 31st. I will add that the -- that the owner of the bonds is all state insurance company, they own all of the bonds. I did contact all state insurance company to invite them, also, to come to the meeting. Obviously, as the owner of the bonds they have quite a bit of say-so on the operation of the apartment complex. They declined to -- to come. They are headquartered in chicago and -- and they told me that they didn't feel like they really had anything to add other than there's not enough income from the bonds or enough income from the property to pay on the bond and the bonds have the priority and you'll get your money whenever there's money left over.
>> that was the corporation owned -- how much is the corporation owed?
>> 19,035.
>> what's the prospect of us getting paid when the July 1st, 2005 payment comes due?
>> I would say it's not very good.
>> then we need to start talking about the same creative solution that we worked out with somebody else --
>> maybe good news, is there?
>> at least I知 happy to tell a story and try to be as responsive as possible. For the record I知 brandt baber, the president of metropolis, abc, inc., the owner of the property. Let me take 60 seconds, tell a little story, then i'll answer your question, judge. We bought the property in July of 2001. When the market was ripping and roaring, it was 98% occupied. We had average rents of 1.02 $1.02 a square foot in Austin, which is pretty good, at least pretty high. It didn't take too long, it took about four months for occupancy and rents to start to fibrillate then tumble. Then we had 60% occupancy, the average for that submarket. We did things as right or as wrong as anybody, we basically were caught up in the downturn in employment in the Austin area. We have struggled back to where we are at 90% physically occupied, but our rents are approximately 2 hupdz per month per -- $200 per month per unit lower than they were when we bought the property. Multiply that times 308 units, you can begin to see the order of magnitude of the difference between the dollars we are collecting today, the dollars that were pro formad when the property was financed. It's approximately 80,000 a month. That's a million a year. I don't ask for your com miss rages here -- comisseration here, but what we are doing is now trying to hold on. We have entered into a forbearance agreement with our lender, all state insurance agreement, in which they continue to allow us to own the property, not foreclose on it. That's in their interest as well as in ours. However, I would point out to you, although I don't ask for any credit, in 2003 when in fact we were not paying full debt service, I got your fee paid. 2004 I did not. The difference between the two is very simple. All state insurance in late 2003, early 2004 decided that they were going to put a bit more constraint on our ability to operate by taking outline the cash and giving us back only enough per month to pay our regular operating bills. It's not that we are unwilling as an owner to pay the fee. In fact I think it is absolutely important to pay the fee, except we don't have the cash. The cash is effectively in a lock box with the lender's bond trustee and they take what's left after they give us the money to pay the monthly bills and they pay their debt service with it. Each month their debt service is short by somewhere between 30 and $50,000. Even today now that we are back in 90% occupancy. So that's -- that's the difference between where the property stood when we bought it. Where it stands today. Again, do I think the fee ought to be paid, you bet you. That has been my position to the insurance company, I have called them up, told them, guys the time to make friends it before you meet them. At some day you are going to come and ask for cooperation and need the assistance of the housing finance corporation, it's best to be on good working relationship had you come and ask for a favor. They have chosen not to accept that recommendation. Frankly, I知 not in the position by virtue of not controlling the cash to say to heck with you, I知 doing it anyway. So if -- if I could, I would. And frankly in 2003 I did. So the answer is --
>> creative ideas about ways to -- to help you pay off this -- this 19,000 quickly becoming 38. Do we talk directly with you.
>> yes, sir.
>> or somebody else we should chat with.
>> no, no, talk with me. Just in anticipation of your creative ideas, because judge I know that you are a man who has a bunch of them, you and I have talked before these bonds were issued before some of those. We have expressed our interest in being a supporter of the community, by doing things we have leased for no rent a unit to seco, project joy and hope, to safe place all for use by their clients for use on a long-term basis. Those are things that we did not because anybody asked us, but because it was the right thing to do, we had some vacancy, I would rather see a unit put to use than just sit there and [indiscernible] since we are operating rather skimpy now we can't afford to lose money by having people in our utilities, at least we need to allay the utility cost and we need to make sure that we have got some security deposit or at least somebody to go back against in case there are damages to the unit. With that said, i'll entertain any creative ideas that you've got.
>> okay. We'll be coming with that later. You are here locally?
>> no, sir. I live in clifton, virginia. I came out specifically for this meeting. Because --
>> you have his address and phone number right, mr. Davis.
>> he knows where to find me.
>> we did come up with creative ideas related to another property pretty close to here, it wound up being a partnership of Travis County and a group called family elder care. There is a tremendous shortage of housing for the elderly. And we wound up working out a deal that provided a little bit of income stream, helped get credit to pay off and it worked well for everyone.
>> in fact, I believe our property manager from arbor property has couple with some similar ideas. It's not that we have to choose one. We can choose multiple ones. Be happy to bring to you all what their ideas are and I believe it is a similar low income constituency relating to the school for the deaf, so -- so there are people who are living on ssi who have difficulty making ends meet. To the extent that we can reach out to them and better their lives and effectively assist in improving our relationship with this board, I知 happy to do that.
>> we have existing relationships with about 44 different social service agencies. And I know one of the reasons that we chose family elder care, although there are many others, is that that was a way to help leverage and do good things with an agency that we were already supporting. In fact it took pressure off of them coming to us to ask for dollars to do precisely that. So it was a way to get there in another way. So I know me personally would be interested in trying to leverage with one of our existing social service agencies that we could not -- we could prevent them from even coming to us related to a housing mission.
>> you wouldn't object if we did more with other people in addition to that?
>> I think --
>> let us get back with you later on in a.
>> yeah.
>> but we ought to be able to do something.
>> I would think so. Let me just follow up by saying I apologize to this board for not paying the fee. It's not right and I知 embarrassed to have to sit here and have this discussion. So -- so I ask your forgiveness and tell you that the next thing after asking for forgiveness is repet tans and we are ready to repent.
>> we are in this together, we will work our way out of it. Appreciate you coming down, too.
>> yes, sir.
>> we thought you lived in south Austin [laughter] not -- not another state. [laughter] good to see you again.
>> thank you. Anything further on number one? Mr. Davis, we will be getting back with you to chat with ms. Flemming a little bit.
>> yes, I will.
>> and we will chat further them maybe send a written proposal.
>> sure will. We will work on that.
>> all in favor.
>> move adjourn.
>> second.
>> that passes by unanimous vote.
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Last Modified:
Wednesday, February 9, 2005 9:04 AM