Update: Cousins Foundation mad at AHA board over East Lake refinancing
By Maria Saporta
The CF Foundation, which spearheaded the revitalization of the Villages of East Lake community 20 years ago, has been unable to get the Atlanta Housing Authority to vote on refinancing the development to allow for the renovation of the property.
Lillian Giornelli, president of the CF Foundation, has sent a letter to AHA board members and AHA president and CEO – Catherine Buell – explaining that if the board does not meet on or before Wednesday, March 7, it stands to lose investment from the Georgia Department of Community Affairs and new tax credits.
“The proposal will allow for necessary rehabilitation and renovation of the AHA apartments at the Villages of East Lake and does not require any new funding by AHA,” Giornelli wrote. “Further, AHA will improve its financial position by sharing in development fees, increased cash flow and an improved security position.”
When asked to respond, Buell issued a statement that said: “The original structure of the project, unfortunately, resulted in the project being unable to repay all of its debts, including the AHA loan, and millions of dollars in operating deficits.”
Buell went on to say: “The AHA Board wants to ensure that as the property is recapitalized, that the approved structure does not result in continued financial issues – but rather ensures the long term financial health of the property.”
But she did not say whether AHA would call a special board meeting by the March 7th deadline. The statement is printed in full at the bottom of this story.
This unusual back-and-forth between AHA and the CF Foundation does raise questions.
According to the letter dated March 1, the CF Foundation and the Villages of East Lake have been trying to get their refinancing proposal on AHA’s agenda since August 2017 to no avail.
“Yesterday, for the fourth time in six months, the (AHA) Board of Commissioners refused to take up the proposal that has been carefully and thoroughly considered and recommended for approval by the Board of Commissioners by all relevant parties including AHA staff and both the Real Estate Committee and the Investment Committee…,” Giornelli wrote.
“In each case, there has been no business reason stated for the failure to act,” she continued. “Another meeting scheduled for this afternoon was abruptly and without notice cancelled for lack of a quorum. One then can only assume that this intentional and willful failure to act is purely personally and politically motivated – a failure of the Board of Commissioner’s duties to uphold the public trust and its contractual partnership duties to act in good faith.”
The letter concluded by requesting that AHA hold a special board meeting by close of business March 7.
“Failure to fully and finally approve the proposal within that timeframe will be considered by us as a breach of your fiduciary duty, and we shall pursue all remedies available to us at law and equity,” Giornelli wrote.
The letter was also sent to Atlanta Mayor Keisha Lance Bottoms and Laurel Hart, office director of Georgia DCA,
Hart also sent an email to Buell urging for AHA’s board to act.
“I am hopeful that you are successful in obtaining board support for Eastlake, and we can begin moving towards closing as quickly as possible,” Hart wrote on Feb. 27. “Please let me know the outcome of the meeting.”
Noel Khalil, CEO of Columbia Residential, also has written an email to Buell explaining that DCA has been “incredibly patient” waiting for AHA to respond.
“The East Lake property is in great need of renovation so as to improve the quality of life of its current residents,”Khalil wrote. “AHA and East Lake Community Foundation has created a new national standard for a community of excellence. Please let’s not lose this opportunity!”
When Giornelli was asked for an interview, she responded in a text: “the letter speaks for itself.”
She concluded by saying:
“This community has been invested in by Corporations, Foundations and individuals across the city and frankly the country. That investment and the continued success of East Lake families should not be allowed to deteriorate because of AHA inaction. The families of East Lake deserve better. The ball is in AHA court.”
The revitalization of the East Lake community has become a national model on how to revive distressed neighborhoods. Tom Cousins, the retired CEO of Cousins Properties who is Lillian Giornelli’s father, championed the effort and was able to attract investment from national leaders.
Then Tom Cousins, and two other well-heeled investors – Warren Buffett and Julian Robertson – established Purpose Built Communities to replicate the success of East Lake in other cities across the country. Former Atlanta Mayor Shirley Franklin has had a leadership role with Purpose Built Communities since she left office eight years ago.
Coincidentally, former Atlanta Mayor Kasim Reed was in attendance at the AHA board meeting on Feb. 28, as was former Mayor Franklin. But they were not present at the same time.
Here is the complete statement from Catherine Buell, AHA’s president and CEO:
AHA is proud of our partnership with the East Lake Foundation on the development of the Villages of East Lake I and II.
AHA has invested its land, $18 million in capital funds and millions in operating subsidies since the project was developed in 1996.
The original structure of the project, unfortunately, resulted in the project being unable to repay all of its debts, including the AHA loan, and millions of dollars in operating deficits.
AHA’s Board and staff have been working to thoughtfully review the proposed terms of the recapitalization proposed by the Foundation and its development partners.
While the project contemplates $17 million in capital improvements, the proposal also requests that AHA would authorize the payment of over $3 million in development fees, a new $11.9 million seller note for the East Lake Foundation, in addition to the outstanding AHA loan.
The AHA Board wants to ensure that as the property is recapitalized, that the approved structure does not result in continued financial issues – but rather ensures the long term financial health of the property. AHA’s Board has worked diligently through its review process, and looks forward to working with the Foundation and its partners to ensure that the structure authorized by the Board is best for the project – and most importantly the residents of Villages of East Lake.
Update: Lillian Giornelli, president of the CF Foundation, issued the following response on Saturday reacting to statement provided by Catherine Buell, AHA’s CEO, above.
Lillian Giornelli’s statement:
We regret that in response to our request for a public meeting, the Atlanta Housing Authority released a press statement containing false and misleading claims.
The Villages of East Lake property has never missed a bond payment or payment of interest. To claim otherwise is false.
We are glad that AHA acknowledges that the property does require a capital infusion for renovation which will be accomplished through the proposed refinancing. We have in fact been attempting to work with AHA for three years to resolve this issue.
Up until this past week we were under the impression that we had reached an agreement satisfactory to all based on the proposal recommended by staff.
If the AHA Board of Commissioners has an issue with the proposal before them, we ask for a special called meeting to present the merits, answer the full board’s questions and call for a vote immediately based on the merits of the refinancing of the Villages of East Lake.”