REHAB HOPEFUL: The Alexmire Apartments at 347 E. McLemore Ave. in the West Person/Elvis Presley Boulevard area is one of the properties that applied for the Memphis Health, Educational and Housing Facility Board’s payment-in-lieu-of-taxes program. -- PHOTO BY ERIC SMITH

The Memphis Health, Educational and Housing Facility Board will consider granting payment-in-lieu-of-taxes (PILOT) status to a pair of apartment complexes at this week’s public meeting, set for Wednesday at noon in the board’s conference room at 65 Union Ave.

At stake are tax-exempt bonds for the Presidential West Apartments at 5393 Hudgins Road in Whitehaven and the Alexmire Apartments at 347 E. McLemore Ave. in the West Person/Elvis Presley Boulevard area.

John Baker, executive director of the HEHFB, said these were the only two applications during this last round of new PILOT projects for the calendar year. The board has up to $50 million allocated for rehabs of affordable multifamily complexes, but it will only reach half that amount with the approval of $3.8 million in tax-exempt bonds for Presidential West and $750,000 in tax-exempt bonds for Alexmire.

“If these get approved we will still be well under the allocation for the year,” Baker said. “We’ll be using up about half of what we had allocated for the year. It’s been that slow.”

Economic impact

Baker attributed the slowdown in new rehab projects to the sluggish economy as it relates to commercial real estate lending. Specifically, apartment owners aren’t able to secure new financing for buying or rehabbing multifamily properties, and the PILOT is contingent upon the owner obtaining a loan.

“You can get the PILOT approval, but if you don’t have the financing to do your rehab, then the PILOT will expire, because if you don’t do the rehab it doesn’t matter,” Baker said. “We can’t put it into place. There’s very little lending going on, so we’re not being hit as bad as the lenders, I suppose, but it’s been slow in all these commercial markets.”

When the calendar year rolls over, however, the board will receive a new allocation of tax credits. And as Baker pointed out, the board in December 2007 was approved by the City Council for a “recapture provision,” which allows unused allocated funds to be recaptured. So in 2010 the HEHFB would be able to recapture funds from 2008 because a project didn’t close, giving the association more than its current $50 million.

The HEHFB is a public corporation that issues “tax-exempt revenue bonds and to use other financing vehicles for the development of multifamily housing facilities. The purpose of the Board is to encourage the development of additional safe, appropriate, and sanitary multifamily housing facilities for qualified citizens of the city of Memphis,” according to its Web site.

Baker said the board’s goal is to give forbearance on tax burdens for apartment owners who are able to secure financing and who are committed to seeing a revitalization of their multifamily properties.

“We, as required by state law, become nominee title holders to the property,” Baker said. “We take title, and we do a leaseback to the developer so that there’s a lease agreement. There’s a quitclaim. And there’s a PILOT agreement, which says you’re going to live to the PILOT terms.”

Springtime in the fall

Of the two new PILOT applications, the Presidential West Apartments is the biggest. The complex is owned by Presidential West Partners, which bought the 112-unit complex in 2003 for $2.3 million. The owner took out a $2.4 million loan through Highland Mortgage Co. at the time of purchase.

Built in 1971, Presidential West sits on 8.88 acres on the west side of Hudgins Road between East Holmes Road and Stateline Road. Hudgins parallels Interstate 55. The Shelby County Assessor of Property’s 2009 appraisal of the Class D multifamily property is $2.5 million.

As for the Alexmire Apartments, that property is owned by Alexmire Memphis LP, which built the 32-unit complex in 2000 for $1.3 million. The property sits on 1.49 acres on the south side of East McLemore Avenue. The assessor’s 2009 appraisal of the Class C multifamily property is $1.1 million.

Also on the board’s agenda is a PILOT extension for the owner of Raleigh Village Apartments at 5022 Yale Road in Raleigh. Baker said the owner, Grant Investment LLC, has a $9.6 million PILOT for an ongoing “large-scale rehab plan.”

Built in 1973, the 142-unit Raleigh Village sits on 7.75 acres on the north side of Yale Road near Covington Pike. The assessor’s 2009 appraisal of the Class C multifamily property is $3.1 million.

Lastly, the board will consider granting an inducement resolution to the owner of Triangle Noir Apartments. That process would give the owner proof the board supports tax-exempt bonds for its renovation, potentially helping the owner secure financing.

Baker is hearing good signs from commercial brokers and bankers that the commercial real estate market is on the verge of turning around, giving apartment owners a better shot at refinancing – and therefore offering a better chance at tax-free bonds. It also would give Baker and the rest of the board hope more apartments will be improved for Memphis residents.

“There are signs of life,” Baker said. “Even though the weather’s turning cool, it feels like spring. We don’t have crocuses blooming, but I see little buds of projects on the rise.”