Construction lender attempts to force out IHA executive director as loan deadline looms

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INDIANAPOLIS — John Hall said that when Mayor Hogsett hired him early last year as executive director of the city’s troubled public housing agency, he didn’t realize the depths to which the Indianapolis Housing Agency had sunk under its previous leadership and Board of Commissioners.

“I inherited an organization that was defined by HUD as ‘substandard,’ and we would have been ‘troubled,’” said Hall as he recalled attempts by the Department of Housing and Urban Development to force IHA into receivership. “The Agency was not in the best condition. The financials, we literally have 100 audit findings that we’re working through to resolve and so I had to come in and stabilize the agency… We’ve been jumping from one crisis to the next over the last 17 months that I have been here.”

Slumping occupancies, neglected properties, lax enforcement of tenant rules, questionable investments, scathing audit reports, undocumented spending and internal squabbles have hampered Hall’s attempts to turn IHA around since his arrival in March 2019.

Now Hall has less than a month to come up with $8.5 million to pay off a construction bond for a high profile downtown development while fighting back an attempt by the lender to remove him as the head of IHA.

“The loan doesn’t mature until September 1st,” said Hall. “Most lenders have the right to call a note at any time, but this particular demand letter was egregious because it went further to say they may entertain an extension if there’s a change in leadership and that leadership would be me.”

In a letter dated July 17, an attorney representing the lender, Merchants Bank of Indiana, called for the repayment of the loan but added, “Merchants may entertain a loan extension if and only if a change in leadership, acceptable to Merchants, occurs within Insight Development before maturity.”

Insight Development is the internal development arm of IHA and Hall took over as its director following the departure of Jennifer Green, the Insight President and IHA interim executive director, earlier this year.

Under Green’s management, the money was borrowed to build Millikan II at the corner of Massachusetts Avenue and East Michigan Street, which never enjoyed full occupancy in the Millikan on Mass Apartments up above and has restaurant tenants on the first floor that have been particularly hard hit by the coronavirus shut down that rocked the downtown Indianapolis restaurant industry this year.

Hall said in late May the lender indicated that the loan would be extended until next February, giving IHA time to arrange financing to cover the outstanding debt.

All that changed in a phone call with Merchants in June and the letter Hall received last month.

“I don’t think that’s industry standard,” said Hall. “I assume that’s coming from the lender and top brass because of the meeting that I had on June 25th the tone was of that nature.”

An attorney representing Merchants Bank refused comment for this story.

Merchants Bank’s expressed wishes to effect a change of leadership at Insight Development would seem to put it at odds with Mayor Joe Hogsett.

Exactly one year ago, when Hall received pushback from staff and his Board regarding the changes put in place to stabilize the faltering agency, the mayor told Fox 59 News, “He’s a reformer and I’m sure that decisions he is making are changing things at IHA and human nature being what it is perhaps he’s engaged some people who are trying to push back.

“John has been brought in to remedy whatever wrongs have been occurring, whether its at IHA or whether its involved in any subsidiary of IHA. That’s John’s primary responsibility to reform and change.

“To the extent that there are people who are not supportive of John’s reformation, that needs to change because the agency is an important agency to the city and John has been brought in to reform it.

“I have the utmost confidence in John’s ability to reform the agency.

“I’m very supportive of the efforts that he’s making to make IHA more responsive to the residents that IHA is intended to serve and I think he’s doing that and to the extent that we can continue to make improvements we will.”

Tonight, Fox 59 News received the following statement from Hogsett’s office regarding Hall’s oversight of IHA and its development entity, Insight Development.

“Insight Development was formed by IHA in 1997 to help develop low income housing and serve as a partner in furthering IHA’s mission in Indianapolis. Over the years, that mission has evolved as the organization has adapted to meet the changing needs of the community as well as best practices in affordable housing development.

“Mayor Hogsett fully supports John and the work he is doing at IHA. The role, leadership, and future of Insight Development should be carefully explored by the IHA board and leadership team.” 

Hall said his inquiries to several local lenders to receive financing to pay off the Merchants debt and but the response was, “lukewarm,” and while other national lenders have offered IHA a fraction of the total loan amount to pay off the original construction bonds, partial financing  may force the Agency to the Agency to seek gap funding from the city to make up the rest of the cost.

The IHA Board of Commissioners will receive an update on the Millikan II construction bond repayment deadline Tuesday afternoon.

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