Tax breaks propped up a troubled Memphis apartment complex — and tenants paid the price

The signs at the entrance to Grahamwood Place Apartments invite future residents to a promising new life with a playground and a sparkling pool. It was here that Kerrie Washington, 29, believed she’d found a spacious home to raise her twin daughters.  

The $680 rent was lower than the median $900 for a 1-bedroom apartment in the Memphis area. The apartment was made possible, at least in part, by a decades-old government program that offers tax breaks to real estate developers who provide affordable housing.  

As soon as she used the hot water in her bathroom, the caulking began chipping off, Washington said. After three months, the sealant around the edge of the bathtub had loosened so much that the tub was pulling away from the wall. 

“That means they didn’t do it right anyway,” Washington said of the tub. “They just covered it up with some paint or something, just so it looked okay for when I moved in.”      

All around the 244-unit complex, there are other visible signs that something has gone wrong at Grahamwood Place. Shingles hang off the edge of buildings. The swimming pool is full of green water. A section of the parking lot is crumbling at the edges. Boxes of new LG appliances sit unopened in an out-of-service laundromat.  

The deteriorating conditions at Grahamwood Place haven’t gone unnoticed. The city’s little-known Health, Educational and Housing Facility Board, which issues bonds and gives property tax discounts to developers that build or renovate multifamily housing, has put the property on its agenda nearly a dozen times since October 2023. 

Yet Grahamwood Place has been allowed to slip in and out of compliance for years. The board has used PILOT contracts — or payment in lieu of taxes — to encourage developers to take on desperately needed affordable housing. Close observers of the board say some landlords operate within a system where second chances are plentiful, and residents are left to deal with the consequences.  

At Grahamwood Place, one woman was forced to sleep on the floor for months because a leaky roof left her bedroom unusable. Another apartment’s ceiling collapsed after a pipe burst in a unit upstairs. 

The Health and Ed Board, which oversees nearly 125 PILOT contracts, approved the deal for Grahamwood Place four years ago. The agreement allows KeyCity Capital, the complex’s owner, to receive tax breaks until 2032. While the board could cancel KeyCity Capital’s PILOT, some landlords are so reliant on the tax breaks that their finances would crumble without them, nudging the property into foreclosure. 

“Canceling a PILOT is a significant and disruptive action, one that directly impacts residents and their housing stability,” Vincent Sawyer, a board member and attorney for the nonprofit, The Works, Inc., said in an email. “It is a tool of last resort — one I believe should be reserved for circumstances in which all other efforts at resolution have proven ineffective.”   

The board’s attorney, Charles Carpenter, declined to answer questions about how the board defines success and ensures accountability in its PILOT program. After the board voted in March to revise its oversight policies, Carpenter said the policy change was a sufficient response to MLK50: Justice Through Journalism’s questions.  

The new rules are supposed to signal to landlords that the board is getting serious about living standards, formalizing four levels of compliance. Each level brings more scrutiny, monitoring and reporting before an apartment community lands in legal default — the final step before a PILOT deal is revoked. But for properties like Grahamwood Place, legal default isn’t a new threat.

“It’s been as long as two to three years since they’ve been in legal default,” said Shirley Bondon, a housing organizer who leads the Black Clergy Collaborative of Memphis, a group that regularly monitors the board’s meetings and does outreach to tenants at troubled apartment communities. “I don’t know any other thing where you can be in legal default for that long and something doesn’t happen.”  

Slipping in and out of compliance 

First constructed in 1969, most of the Grahamwood Place complex is tucked behind a strip center along a busy section of Summer Avenue near North Graham Street. KeyCity Capital purchased it in 2021 and convinced the Health and Ed Board in May 2022 to extend the tax breaks for another 10 years. The company saved an estimated $47,000 on the property taxes for Grahamwood Place alone last year, according to data collected by the Shelby County Trustee.

In its pitch to the board, KeyCity Capital said it had already “replaced 100% of the roofing systems” and vowed to “continue improving the property” throughout the term of the PILOT, according to the application. 

By October 2023 — some 16 months after the PILOT approval — the company was moved into legal default for the first time. Meeting minutes from the time suggest the owner could not maintain the 75 percent occupancy required for the property tax discounts, and the on-site laundry room was unusable, among other things. 

A notice of legal default forces landlords to regularly report to the board and be monitored by staff, including unannounced visits to the apartment buildings. It’s supposed to be as serious as an eviction, foreclosure or notice of repossession. But the weight it carries depends on the board’s willingness to enforce it.   

Tie Lasater, a managing partner for KeyCity Capital, said the firm has invested nearly $15 million to improve the six apartment communities it owns in Memphis. In its PILOT application, KeyCity said it would spend at least $1 million on various physical improvements in addition to the $1.2 million for the roof replacement, documents show. 

Two of the company’s properties get tax breaks — Grahamwood Place and Pinebrook Pointe Apartments. Both are in legal default. The apartment communities have faced persistent issues dating back before KeyCity purchased them, Lasater said.

“Both properties — and much of Memphis in general — have been navigating a range of challenges, including significant crime, economic pressures on tenants, and the broader impact of inflation,” Lasater said in an email. “While we don’t shy away from the tough work of turning around distressed assets, these realities can extend timelines and complicate progress.”   

After a year under the close watch of the board, a compliance monitor noted that Grahamwood’s pool was still unclean, sinkholes had formed, and windows needed to be replaced at the property, according to meeting minutes from September 2024. 

One month later, the board’s compliance monitor summarily reported that all of the issues had been resolved: “sinkholes have been filled and windows have been fixed, and the pool has been cleaned and closed for the year,” the monitor reported.   

The Health and Ed Board’s executive director, Trey McKnight, told the board he was present for the on-site walkthrough of both properties before they unanimously agreed to move the properties out of legal default and place them under observation – the lowest level of monitoring.  

McKnight declined to comment and referred questions to the board’s attorneys. The attorneys did not respond. 

Sawyer, a board member, joined McKnight for at least two of the site visits, records show. Sawyer said he was comfortable with the decision at the time because “all issues identified in the legal default notice had been addressed.” 

Their decision lasted about two months. In January 2025, staff downgraded Grahamwood Place and Pinebrook Pointe to the level of compliance concern. They were moved again by the board to a non-compliance status in April and pushed back into legal default in May.       

“I understand that new issues have arisen since the October meeting,” Sawyer said. “These were not present during my visits and appear to have developed subsequently.” 

Persistent problems, rising frustrations

Every time it rained, Sherill Horner had to scramble to catch water leaking from the ceiling in her apartment at Grahamwood Place. She couldn’t sleep in her bedroom for several months; a hole had formed in the ceiling, exposing rotted wood and damp insulation.   

Horner, who relies on a housing voucher to cover most of the rent, said it wasn’t the first problem with the roof. Another leak was patched in the living room. But the issue in the bedroom was still unaddressed when MLK50 visited her in early May. The dank smell of the wet carpet hung in the air.   

Horner, 56, said she had been sleeping on the floor in the living room.  

“I’m not even supposed to be staying here,” Horner said. “They gave me another [unit] with one bedroom and two broken windows, so I might as well stay here and put that mold block stuff down so my (grand) baby won’t get sick.”

She reported the issues to code enforcement earlier this year. Inspectors turned up right away, Horner said. Records show Grahamwood Place was fined $362 for a handful of code violations in March, but the case remains open and active in Environmental Court.    

Frustrated with the property’s condition, Horner said she planned to move. 

“We can’t get in the pool. The washing machine broke down,” Horner said. “Everybody has to go down the street [to do laundry].”   

Horner isn’t alone. In April, Lasater told the board that there were 47 roof leaks throughout the Grahamwood complex, and the property is only about half full as people seek better living conditions elsewhere. 

In response to questions from MLK50, Lasater said the roof replacement that KeyCity Capital paid for was not a surface job. Contractors stripped the roof down to the decking – a layer of plywood at the base of a roof – before installing a new waterproof liner and shingles, he said. 

Lasater told the board in May that he was still fighting to get the roofing company to honor its warranty.

Lasater said the laundry room was inoperable when KeyCity Capital purchased the property, and the plumbing infrastructure was beyond repair and needed to be replaced. 

Although the company has put money into replacing the pump and fixed other plumbing issues, Lasater said the pool hasn’t been operational since last summer.

“Unfortunately, due to misuse by unsupervised minors who threw rocks and trash into it, the pool began causing more disputes than benefits,” Lasater said. “For safety and operational reasons, we decided to pause its use while we evaluate long-term solutions.” 

How tenants pay the price 

Cesley Brown, 43, signed a lease in August 2023 and moved into Grahamwood Place with her young daughter shortly after.  

Two weeks later, her sense of security was rattled after a man was shot and killed near her window, Brown said. That was only the beginning of the problems with her new home. 

By late October, the bathtub was so clogged that raw sewage began emerging from the drain and into the tub. Brown said the property managers took a few weeks to fix it, but it felt like “forever and a day.” 

Not long after the bathtub was repaired, Brown noticed a swollen bubble had formed in the ceiling above the shower head. Brown said she told the property managers, but no one came to inspect it immediately. So she started documenting the mysterious shape daily in short videos on her cell phone.   

In each clip recorded in mid-November, the bubble expanded, sagged, and then dripped water from the ceiling. Finally, on the 12th day, the ceiling collapsed into the tub. The hole revealed a stream of water shooting from a rusted pipe. 

Brown said the water was coming from a leak in the unit above hers. 

“And that went on for two weeks straight; just running water down until they came out to look at it and stopped it,” said Brown. “Then it started back leaking, and I’m telling them: ‘Hey, it’s back leaking again.’ ”

Brown and her daughter were forced to shower at her father’s house. She was offered another unit, but didn’t want to take off from work and pay to move all of their belongings again. Brown said she convinced one of the property managers to give her a rent reduction instead. 

But the discounted rent accommodation was never honored after the landlord switched property managers. The new company couldn’t find evidence that the previous managers offered it, Brown said.

KeyCity Capital, the owner, said in May that it had just replaced the property management company overseeing its Memphis properties again.   

Washington and her twin daughters moved into the one-bedroom apartment next door to Brown in December 2023. 

For Washington, the rows of gray courtyard-style apartments with peach-colored doors were a welcome change from living with her father shortly after giving birth. She was especially pleased with all the closet space that came with the unit. 

“It’s not too far from my dad’s house,” Washington said. “I was trying to get my own little independence.”

Like Brown, Washington has also learned how to cope with persistent maintenance issues. When the front door jammed and refused to open without a struggle, they got used to using the back door. It was closer to where the car was parked anyway. And after Washington noticed a rotting smell coming from under the sink, she started cleaning the area with bleach.    

The challenges have not been bad enough for her to move to a new place. She’s been encouraged by some of the small things the new property managers appear to be doing, like cutting the grass, and someone eventually fixed her front door. 

“I was at first, but it seems like it is getting a little better,” Washington said. “So I don’t know. I’m trying to wait it out.” 

Michael Finch II is the enterprise reporter for MLK50: Justice Through Journalism. Contact him at mike.finch@mlk50.com