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11/2/2018 MPC PILOT Application - Google Docs

https://docs.google.com/document/d/1IXeQWPrRII16zN4tn-jLO79xdlpuE2j-A633BqGNNTE/edit 1/13

Malone Park Commons

Center City Revenue Finance Corporation PILOT Application

Applicant Background Andre D. Jones

598 North Main St., Memphis, TN 38105 Phone: (901) 3362305 Twentythree years experience as a corporate professional and twenty years of

construction business management experience Christian Brothers University

Bachelor of Science, Business Administration State Technical Institute at Memphis

Associate of Applied Science, Information Technology Andre has served on the following boards: Memphis and Shelby County Board of

Adjustment, Center City Development Corporation, Downtown Neighborhood Association and the Memphis Regional Design Center.

Andre currently serves as a member of the Uptown Community Advisory Committee.

W.C. Jones, Jr. (Curtis) 3384 Burgess Dr., Memphis, TN 38118 Phone: (901) 3362315 Fortyfour years of construction experience Majored in Business at Austin Peay State University

Company Bio/Proposed Legal Structure for Project Jones Urban Development is a DBA name for Populace Homes of Memphis, Inc. The parent company, Populace Homes is a C corporation. Andre Jones and Curtis Jones each have 50% ownership in the C corporation Populace Homes was founded in 1998 as a suburban speculative home building

company. In the early 2000’s our focus shifted to the urban core. We were of three building firms selected to build single family homes as part of Memphis’ first Hope VI program, Uptown. We’ve built many homes in Uptown and will continue to do so.

We also built homes in the McKinley Park subdivision for McCormack Baron Salazar as part of the Legends Park Hope VI program.

Malone Park LLC, will be the legal entity that holds this property. The LLC members will include the operating partners (Curtis and Andre Jones)

and the capital partners (TBD). Upon approval of requested entitlements and incentives, equity partners will be

vetted and confirmed.

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Proposed Project The subject property is a +/0.768acre group of parcels (001061 00011, 001061 00017,

001061 00024, and 001061 00025) located at 97 Saffarans Avenue, 103 Saffarans Avenue, 111 Saffarans Avenue, and 599 North Second Street in the Gayoso Bayou District of Uptown, and known as Lots 1, 2, 7, 14, and 15 of Malone Park Subdivision, Section B, zoned High Density Residential (HDR) in the Uptown Special Purpose District.

What is Malone Park Commons?

25 units of high quality market rate rental housing in the Malone Park section of Uptown

These units will be a mix of building types that were common prior to the popularity of the automobile and single use zoning over 70 years ago

Cottage courts (single detached units surrounding a park like setting), detached studios, fourplexes and live/work buildings

A walkable community near the shops and amenities of downtown Memphis

Easy access to alternative modes of transportation; trolleys, bike share, buses, electric scooters, horse drawn carriages, etc

Malone Park’s Unit Mix and Project Cost

1 X 340 square foot detached studio

1 X 340 square foot attached studio

1 X 504 square foot attached one bedroom apartment

8 X 504 square foot fourplex one bedroom apartments

6 X 504 square foot detached one bedroom single story cottages

4 X 700 square foot live/work style apartments

4 X 1120 square foot detached 2 bedroom 2 story cottages

The land area for this project is 29,383 square feet

The total project cost is $2,159,763.00

This unit mix will offer what many recently built neighborhoods lack: the flexibility for folks at multiple ages/income levels to live in the same neighborhood.

Property History The subject property was acquired by MLBUptown LLC for the Uptown

revitalization in the early 2000’s. It is a former park that contained a community pool.

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The property had perceived or real contamination that was remediated by the BelzTurley partnership.

We built the first home on this block upon its release for construction in 2007.

Site Plan

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Subject Property

Southwest Corner of Saffarans and North Second Streets

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Southeast Corner of North Main and Safarrans Streets

Example Pocket Neighborhood

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Phase 1

Phase 2

Phase 3



Malone Park Commons


Existing Corner Commercial Building at Saffarans and North Main

Plan Elevations

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Malone Park Commons Marketing Plans

The February 2017 Zimmerman/Volk Market Study commissioned by the Memphis Medical District Collaborative will drive our strategy of marketing to Medical District employees.

There are 3,240 potential rental households per year for the next five years

These households can support rents ranging from $650 to $2,250 for units containing 350 to 1,400 square feet

MMDC’s Live Local grants can be utilized to incentivize medical district employees to rent near where they work.

We will market to the medical district anchor institutions and St. Jude’s 1 billion dollar expansion will generate a plethora of potential new residents.

Harris Realty Services will manage lease up and we anticipate six months to full occupancy.

Malone Park Commons Public Space Enhancements Enhanced neighborhood lighting with historical character Native landscaping Permeable walks and drives

Site Control The property is currently owned by MLBUptown, LLC. Andre D. Jones has a valid option to purchase the property. There are no existing liens, nor is there any financing on the property.

Financial Items Financial Background

Current nonaudited financial are attached. Populace Homes’ accounting relationship is with Watkins Uiberall, PLLC. This is the first attempt develop this project.

Financial Projections We are in conversations with two banks who are interested in financing the

project. Property taxes for this project are estimated at $68K annually, which pushes the

operating expenses to 55% of gross operating income. At a standard 80/20 debt to equity ratio, sans PILOT, there would not be enough income to cover debt payments.

Based on PILOT grading and project need, we are requesting a PILOT term of 15 years.

Sans PILOT, the debt service coverage ratio would be 0.82, well below the 1.20

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1.25 lenders perceive as viable projects to finance. Sans PILOT, the project would produce negative income the first six years. Sans PILOT, it would take 12 years to repay the investors, the first six of which no

payments would be received. The PILOT would lower the property taxes to an estimated $19K, which lowers

the operating expenses to 33%. To attempt to mitigate the need for a PILOT, several scenarios were reviewed

and/or implemented. Increasing the number of units Increasing rents Reducing unit square footage to reduce construction costs Decreasing the debt to equity ratio to lower debt payments

The most effective option for attempting to mitigate the need for a PILOT was to decrease the debt to equity ratio by providing a larger down payment. However, this proved to be infeasible for the following reasons: This would require raising $875K from equity partners, nearly half of the

estimated project costs. It would take 12 years to repay the equity partners with a 12% internal rate

of return. Equity partners can find better investment opportunities with much faster repayment schedules.

The operating partners would not receive income until year 12. Sources of Funds Project Debt $1,724,763.00

Equity Stake $435,000.00

DMC Development Loan $200,000.00

Total $2,359,763.00

Uses of Funds Detail of Project Costs including:

Land Costs $50,000.00

Construction Costs $1,750,841.00

Soft Costs $304,674.00

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Financing Fees $17,248.00

Professional Fees $12,000.00

Other Uses $25,000.00

Total Project Costs $2,159,763.00

Other Uses Equity Pay Down YR 2 $200,000.00

Total Uses of Funds $2,359,763.00

Pro formas

See attachments Project Timeline

Project Team

Developer/General Contractor – Jones Urban Development

Planning – Tolar Anderson Kim

Engineering – SR Consulting

Architect – Bruce B. Tolar, Architect

Legal – Shelley Rothman of Griffin, Clift, Everton and Maschmeyer

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Credit References

Business

First Alliance Bank – John Luke (901) 7538339 Ellendale Electric – Jan Putnam (901) 4122522 Thrifty Building Supply – Kim Rankhorn (901) 3162900

Personal

FedEx Credit Union – Jeanette Williams (901) 2638600 Region’s Bank Mortgage

Items for Lease Preparation

The lessee will be Malone Park Commons, LLC.

Tax parcel numbers of subject properties: 001061 00011 assessed value $30K 001061 00017 assessed value $30K 001061 00024 assessed value $30K 001061 00025 assessed value $30K

The project will NOT result in the subdivision or consolidation of any present tax parcels.

Disclosures

None of the applicants, guarantors, or any other principals involved with the project are currently engaged in any civil or criminal proceeding.

None of the applicants, guarantors, or any other principals involved with the project have ever been charged or convicted of any felony or currently under indictment.

The applicants have never filed for bankruptcy. Applicant Affirmation

Andre D. Jones 598 North Main Street, Memphis, TN 38105 (901) 3362305 [email protected]

W.C. Jones, Jr. 3384 Burgess Drive, Memphis, TN 38118 (901) 3362315

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[email protected] This application is made in order to induce the Memphis Center City Revenue Finance Corporation (CCRFC) to grant financial incentives to the applicant. The applicant hereby represents that all statements contained herein are true and correct. All information materially significant to the CCRFC in its consideration of the application is included. The applicant expressly consents to the CCRFC’s investigation of its credit in connection with this application. The applicant acknowledges that it has reviewed the descriptions of the CCRFC financial Revised August 8, 2017 Page | 8 program for which it is applying and agrees to comply with those policies. The applicant shall also be required to show a good faith effort with regard to the employment of M/WBE contractors. The applicant specifically agrees to pay all reasonable costs, fees and expenses incurred by the CCRFC whether or not the incentive is granted or project completed. Applicant Date

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Malone Park Commons sans PILOTMulti-year Cash FlowAssumptions:LLC A Members defer $40K in fees until the refinance in year 3.LLC B Members receive a 12% IRR on their cash equity investment and hold their interest in the property for a minium of 2 years for Capital Gains tax treatment(or 1031 exchange).

$200K Downtown Memphis Commission Loan at 1% upon C of O in year 2

Capital Stack (Sources) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

Operating Partners (A Members) Cash and Def. Fees $100,000Capital Partner (B Member One) Cash $335,000

Total Equity $435,000

Lease Up 100% 100%NOI Escalation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

GOI (4.0% Appreciation) $228,420 $237,557 $247,059 $256,941 $267,219 $277,908 $289,024 $300,585 $312,609 $325,113 $338,117 $351,642 $365,708 $380,336 $395,550Op. Exp. (1.5% Annual Increase) ($124,956) ($126,830) ($128,733) ($130,664) ($132,624) ($134,613) ($136,632) ($138,682) ($140,762) ($142,873) ($145,017) ($147,192) ($149,400) ($151,641) ($153,915)

NOI $103,464 $110,726 $118,326 $126,278 $134,595 $143,295 $152,392 $161,903 $171,846 $182,239 $193,101 $204,450 $216,308 $228,695 $241,634Annual Debt Service ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($125,808) ($139,302) ($139,302) ($139,302)Downtown Memphis Commission Debt Service ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) $0 $0 $0New Debt Commercial Loan (65% LTV with value at a 6% CAP rate) $200,000 $2,044,503Retirement of Orig. Debt (Month 144) ($1,161,169)Remaining Development Loan (month 120) ($104,994)Cash Flow After Operating Expenses and Debt Service ($22,344) $184,918 ($18,520) ($10,568) ($2,251) $6,449 $15,546 $25,057 $35,001 $45,394 $56,255 $845,944 $77,007 $89,394 $102,333

Phased Distribuitions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 ReturnsAnnual Operating Cash Flow after Debt Service ($22,344) $184,918 ($18,520) ($10,568) ($2,251) $6,449 $15,546 $25,057 $35,001 $45,394 $56,255 $845,944 $77,007 $89,394 $102,333Balance from Previous Year ($22,344) $32,574 $1,054 ($9,514) ($11,765) ($5,316) $1,000 $1,000 $1,000 $1,000 $1,000 $6,944 $3,951 $3,345 TOTAL IRR

Subtotal Cash Flow ($22,344) $162,574 $14,054 ($9,514) ($11,765) ($5,316) $10,230 $26,057 $36,001 $46,394 $57,255 $846,944 $83,951 $93,345 $105,677

B Member One Distributions $0 ($130,000) ($13,000) $0 $0 $0 ($9,230) ($25,057) ($35,001) ($45,394) ($56,255) ($650,000) $0 $0 $0 B Member Equity $963,936 12.1%---- IRR Calc Principal as negative number and distributions as positive($335,000) $0 $130,000 $13,000 $0 $0 $0 $9,230 $25,057 $35,001 $45,394 $56,255 $650,000 $0 $0 $0

Operating Partner's Distributions -- Jones Urban (LLC A Member) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 ($190,000) ($80,000) ($90,000) ($102,333) A Member Equity $462,333 12.4%---- IRR Calc ($100,000) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $190,000 $80,000 $90,000 $102,333

Cumulative Cash Flow at Year End ($22,344) $32,574 $1,054 ($9,514) ($11,765) ($5,316) $1,000 $1,000 $1,000 $1,000 $1,000 $6,944 $3,951 $3,345 $3,344

Cash Flow Order B Members of the Project LLC are paid out first. Once they have hit an IRR of 12% they surrender their shares in the LLC for $1.A Members of the Project LLC are paid spliting cash flow and net proceeds from any cash-out refinance or sale of the property split into equal shares.

Malone Park Commons with PILOTMulti-year Cash FlowAssumptions:LLC A Members defer $40K in fees until the refinance in year 3.LLC B Members receive a 12% IRR on their cash equity investment and hold their interest in the property for a minium of 2 years for Capital Gains tax treatment(or 1031 exchange).

$200K Downtown Memphis Commission Loan at 1% upon C of O in year 2

Capital Stack (Sources) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

Operating Partners (A Members) Cash and Def. Fees $100,000Capital Partner (B Member One) Cash $335,000

Total Equity $435,000

Lease Up 100% 100%NOI Escalation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

GOI (4.0% Appreciation) $228,420 $237,557 $247,059 $256,941 $267,219 $277,908 $289,024 $300,585 $312,609 $325,113 $338,117 $351,642 $365,708 $380,336 $395,550Op. Exp. (1.5% Annual Increase) ($76,103) ($77,245) ($78,403) ($79,579) ($80,773) ($81,985) ($83,214) ($84,463) ($85,730) ($87,015) ($88,321) ($89,645) ($90,990) ($92,355) ($93,740)

NOI $152,317 $160,312 $168,656 $177,362 $186,446 $195,923 $205,810 $216,123 $226,879 $238,097 $249,797 $261,997 $274,718 $287,981 $301,809Annual Debt Service ($127,099) ($127,099) ($127,099) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489) ($124,489)Downtown Memphis Commission Debt Service ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) ($11,037) $0 $0 $0 30 Years Loan TermNew Debt Commercial Loan (65% LTV with value at a 6% CAP rate) $200,000 $1,827,105 $2,183,305 5.5% Interest RateRetirement of Orig. Debt (Month 36) ($1,619,877) ($1,242,684) ($10,374) MonthlyRemaining Development Loan (month 120) ($104,994)Cash Flow After Operating Expenses and Debt Service $25,218 $233,214 $237,747 $41,835 $50,919 $60,397 $70,283 $80,596 $91,352 $102,571 $114,270 $962,097 $150,228 $163,492 $177,320 (124,489) Annual

1.42 DSCR$582,264

Phased Distribuitions Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 ReturnsAnnual Operating Cash Flow after Debt Service $25,218 $233,214 $237,747 $41,835 $50,919 $60,397 $70,283 $80,596 $91,352 $102,571 $114,270 $962,097 $150,228 $163,492 $177,320Balance from Previous Year $1,218 $2,432 $9,179 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 TOTAL IRR

Subtotal Cash Flow $25,218 $234,432 $240,179 $51,015 $51,919 $61,397 $71,283 $81,596 $92,352 $103,571 $115,270 $963,097 $151,228 $164,492 $178,320

B Member One Distributions ($24,000) ($232,000) ($181,000) $0 $0 $0 B Member Equity $437,000 12.0%---- IRR Calc Principal as negative number and distributions as positive($335,000) $24,000 $232,000 $181,000 $0 $0 $0

Operating Partner's Distributions -- Jones Urban (LLC A Member) $0 $0 ($50,000) ($50,015) ($50,919) ($60,397) ($70,283) ($80,596) ($91,352) ($102,571) ($114,270) ($962,097) ($150,228) ($163,492) ($177,320) A Member Equity $2,123,541 38.6%---- IRR Calc ($100,000) $0 $0 $50,000 $50,015 $50,919 $60,397 $70,283 $80,596 $91,352 $102,571 $114,270 $962,097 $150,228 $163,492 $177,320

Cumulative Cash Flow at Year End $1,218 $2,432 $9,179 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Cash Flow Order B Members of the Project LLC are paid out first. Once they have hit an IRR of 12% they surrender their shares in the LLC for $1.A Members of the Project LLC are paid spliting cash flow and net proceeds from any cash-out refinance or sale of the property split into equal shares.

Annual Debt ServiceAfter Refinance year 3

Operating Partners' Equity at Refinance in year 3 (30% of value)

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