Little Rock's federally funded public housing agency cut ties with the Texas development company that managed three low-income housing properties after maintenance and upkeep problems went unresolved.
The management contracts between ITEX, based in Houston, and the Metropolitan Housing Alliance expired in June. The housing authority board of commissioners did not renew the contract, which stated that ITEX must "maintain the Project in good repair ... and in a condition at all times acceptable to the Owner including but not limited to cleaning, painting, decorating, plumbing, carpentry, grounds care, and such other maintenance and repair work as may be necessary."
[DOCUMENT: Read emails between ITEX, housing officials » arkansasonline.com/1010itexmha/]
The relationship between ITEX and the housing authority has soured in recent months, and the pending business deal that would have allowed the authority to secure private capital to fund maintenance and renovations at the three properties ITEX managed has stalled, according to interviews and internal emails.
The internal emails, which were obtained through an Arkansas Freedom of Information Act request, show how ITEX and housing authority officials could not reach an agreement on the division of responsibilities for the properties and what the entities owed each other. In August, ITEX demanded $544,000 in compensation that the housing authority has refused to pay.
Housing authority board members said repeatedly at public meetings that tenants told them ITEX did not respond to requests to fix fire damage, mold buildup, plumbing problems and other quality-of-life issues at the Homes at Granite Mountain and two Madison Heights complexes.
Many residents had been unable to pay rent since 2020 due to the covid-19 pandemic, resulting in a financial shortfall for ITEX, Chief Operating Officer Bobken Simonians said at the housing authority's July 15 board meeting.
During that meeting, Commissioner Leta Anthony said the housing authority would give ITEX 30 days to rectify "an overwhelming neglect of our properties" before potentially terminating the management contracts.
"You can't make slumlords out of us because of obvious management [and] financing problems within ITEX," she said.
The Metropolitan Housing Alliance oversees about 900 traditional public housing units, 200 affordable housing units and 160 market-rate units. It also administers more than 2,000 Section 8 vouchers. It is the largest public housing authority in Arkansas and provides housing assistance to about 8,000 low-income people.
Four members of the housing authority board, including Anthony and Chairman Kenyon Lowe, are also on the board of the agency's nonprofit arm, the Central Arkansas Housing Corp. The nonprofit's goal is "to facilitate the development, financing and construction of multi-family and single-family residential housing" in Little Rock and Central Arkansas, according to the housing authority website.
The corporation took over management of the three properties, which it owns, from ITEX at the end of August.
MAINTENANCE COMPLAINTS
Sixty units at one of the Madison Heights complexes were unoccupied when ITEX stopped managing the property, and 18 of those units could be ready for new tenants after some basic cleaning, said Sylvester Smith, the Central Arkansas Housing Corp.'s attorney.
He said ITEX had no excuse not to take care of the property and ensure all units were occupied.
"As a property manager, your primary goal is to fill the property up with people who pay rent, and then you use that rent to do things like fix up plumbing issues [that cost] less than $1,000, to fix a $2,000 fire repair," Smith said, citing some simple maintenance he claimed ITEX did not address. "You make those units ready, you rent those units and you use that revenue to fix the next issues that come up. For whatever reason, ITEX did not rent this place up to its full capacity, so it never reached its maximum revenue potential."
Simonians and other ITEX executives did not respond to several calls, text messages and emails requesting comment in the past two weeks.
When confronted with the housing authority's management concerns at the July board meeting, Simonians reminded the board that ITEX was the manager and not the owner of the three buildings.
"As owner of the property, you also need to pay attention to what is lacking," he said. "We brought it to your attention over a year ago, about the plumbing issues and problems there, and we have not received [a response]."
Three days before the meeting, Lowe and Andy Delaney, the housing authority's acting executive director at the time, said they wanted to end the contracts with ITEX, according to internal emails.
"Please make sure there isn't any language in the original contract that we must honor," Delaney wrote in an email to Jada Johnson, the agency's contracts and procurement coordinator.
The board later realized the management contracts had expired June 28 after two years in effect and did not have an automatic renewal clause, Anthony said at the Aug. 19 board meeting. The board did not draw up new contracts and instead voted 4-0 for the Central Arkansas Housing Corp. to take over management and expel ITEX by Aug. 31.
Smith said all three management contracts were "substantially the same" regarding their terms and conditions and expiration date.
In response, ITEX demanded that the Metropolitan Housing Alliance reimburse the company $434,000 for several payments ITEX made to the agency over the past five years, "including payroll, mortgage debt service, utilities, compliance fees and other miscellaneous expenses," according to an Aug. 24 letter to Delaney and Lowe from ITEX's legal counsel, John Pecore.
The letter also demanded $110,000 in compensation for the alliance ordering a management change with less than 30 days' notice, as the contracts had required in case of termination.
Smith said the corporation and the housing authority will not comply with the demand, especially since the contracts ended on their own, not by a board vote.
"We categorically deny that [ITEX is] entitled to anything, because they failed to uphold their end of the contractual obligation," Smith said.
AN 'IMPASSE'
The management problems came to the housing authority's attention in June and July, Smith said, but the commissioners already had concerns about the pending Rental Assistance Demonstration deal with ITEX, according to internal emails and board meeting discussions.
Under the federal Rental Assistance Demonstration program, administered by the U.S. Department of Housing and Urban Development, private companies take over the lease of a public housing building, though housing authorities still own the land. This private ownership allows housing authorities to enter into contracts with banks and finance companies -- whether through loans, tax credits, grants or a combination -- to receive the millions of dollars for plumbing, flooring, roofing, electrical and other maintenance.
Tenants in public housing buildings then receive housing choice vouchers, which allow low-income people to choose their own residences in a housing authority's jurisdiction.
The Metropolitan Housing Alliance has previously converted Cumberland Manor, Metropolitan Village and the Fred W. Parris, Cumberland and Jesse Powell towers from public housing to voucher programs via Rental Assistance Demonstration. Gorman and Co. Inc., a Wisconsin development and investment company, owns and manages the three towers.
After five years of negotiations, ITEX was set to assume ownership of the three buildings it was managing until its relationship with the Metropolitan Housing Alliance and the Central Arkansas Housing Corp. deteriorated.
At the housing authority board meeting on April 15, Anthony and Lowe expressed doubts about the multimillion-dollar transaction despite reassurance from Simonians that both the housing authority and the Central Arkansas Housing Corp. would receive the thousands of dollars that the deal promised.
"From a CAHC standpoint, we have not really taken any action to afford a lot of what you've shared," Anthony said at the meeting.
The board tabled the three resolutions that would have closed the Rental Assistance Demonstration deal, with one resolution for each property, at a special meeting April 30. Lowe and Anthony continued to say at subsequent board meetings that they were concerned the deal would be too costly for the housing authority, the Central Arkansas Housing Corp. or both.
As of Friday, the deal was "at an impasse," Anthony said. She declined to comment further.
Deborah Thrope, deputy director of the National Housing Law Project, said completing a Rental Assistance Demonstration deal is "extremely complicated" and not always successful.
"It's not uncommon for RAD deals to take this many years, let alone fall apart," Thrope said.
Housing-choice vouchers are not administered until the Rental Assistance Demonstration deal is complete, so tenants do not feel a direct impact if the deal fails, she said.
Responsibility for repairs and maintenance during Rental Assistance Demonstration negotiations depends on the individual agreements, Thrope said. Some housing authorities contract repairs with management companies, as the Metropolitan Housing Alliance did, or they retain responsibility for maintenance.
Simonians told the board in a July 26 email that he believed the conflict regarding "actual ownership and control of the properties" was "an internal issue between MHA and its instrumentalities."
"Itex, in good faith, has invested over five years of work and actual funds to comply with the MDA [Master Development Agreement] and fulfill its responsibilities," Simonians wrote. "If MHA is unable or unwilling to fulfill its responsibilities, then Itex must be fully compensated for its efforts, investments and lost opportunities."
He repeatedly expressed concern that lenders and investors for the Rental Assistance Demonstration deal would reconsider their involvement if ITEX and the housing authority did not appear to have a united front.
In a Sept. 2 email, Simonians offered the board a compromise on the deal, saying ITEX could leave the partnership as soon as the deal was complete.
Anthony continued to express frustration with ITEX in her response on Sept. 7, citing the lack of maintenance at the three properties.
"If no agreement or deal has happened in the past years, Maybe God Is Trying To Tell Us Something!" she wrote.
OVERREACH ALLEGATIONS
Additionally, three years of turnover in the Metropolitan Housing Alliance's executive director position created disconnects in communication among the authority, the Central Arkansas Housing Corp. and ITEX, Simonians said.
The housing authority has had six executive directors in three years. Three directors -- Marshall Nash, Anthony Snell and Nadine Jarmon -- have left the agency or been forced out amid clashes with the board.
Simonians told the board at a special meeting Aug. 10 that he was under the impression that Nash, Snell and Jarmon all represented both the housing authority and the Central Arkansas Housing Corp. instead of just the former.
Anthony acknowledged the issue at the Aug. 10 meeting.
"[We're] having to really hold the line that CAHC is a separate entity from MHA, not only with ITEX but even with our attorneys," she said.
Jarmon took the helm of the housing authority in April after nine months as interim executive director. In June, she sent a 161-page memo to the Little Rock mayor's office and the Little Rock field office of the U.S. Department of Housing and Urban Development.
The housing authority board suspended Jarmon in June and fired her in August. Delaney was appointed acting executive director until he left in September.
Jarmon's memo alleged a variety of misdeeds by the board, including excessive involvement in the agency's day-to-day operations. She also alleged that the board's delay on closing the business deal with ITEX cost the agency money it did not need to spend, including for a legal opinion on the board's decision to table the closure of the deal.
The opinion from the Dallas office of Coats Rose, a law firm that specializes in real estate development, stated that a failure to close the Rental Assistance Demonstration deal could "significantly affect" the Metropolitan Housing Alliance's business relationship with both the Arkansas Development Finance Authority, which had a hand in financing the deal, and the U.S. Department of Housing and Urban Development.
Since the Arkansas Development Finance Authority approved ITEX's involvement in the deal, it would have to approve any changes to the deal, according to the Coats Rose memo, which was included in Jarmon's complaint from June.
"MHA does not have the unilateral authority to change the members of the ownership team and keep the current approval from ADFA," the memo states.
Finance authority President Mark Conine said in a September interview that he could not comment specifically on the Metropolitan Housing Alliance's business deals or its relationship with the state agency.
The finance authority always has to assess the risk of the transactions it gets involved with based on several factors, including who else is involved, but those assessments are "case by case," Conine said.
Anthony accused ITEX of trying to "run out the clock" and force both the nonprofit and the housing authority into an agreement that would not benefit the authority or tenants, according to an Aug. 31 email.
Simonians alleged in his response that Anthony and Lowe were trying to "have control of the development process" by changing the entire development agreement between ITEX and the Central Arkansas Housing Corp. He said ITEX is supposed to be the entity in control, "as developer and guarantor."
"We are now at the eleventh hour, and it seems like MHA/CAHC is trying to go back to square one and restart the process," Simonians wrote.
CORRECTION: The relationship between ITEX and the Metropolitan Housing Alliance has soured in recent months, and the pending business deal that would have allowed the authority to secure private capital to fund maintenance and renovations at the three properties ITEX managed has stalled, according to interviews and internal emails. An earlier version of this story didn't clearly attribute details of the breakdown between ITEX and the housing authority.