Des Moines to invest up to $1.3M in troubled apartment complex – contaminated with mold


Boards block the entrance to a sewer-damaged area of the complex. City housing inspectors said last month that they planned to condemn the property unless repairs were made.

October 19, 2009

Melissa Sholley says the low-income apartment complex on Des Moines’ south side “just sucks the life out of you.”

She says loitering visitors usually mean a drug deal is in the works. Tenants’ pets urinate on the stairs and hallways. Mold in the basement has caused her headaches. “It’s not somewhere I want him to be,” nodding to her 2-year-old son, Korbyn.

The troubled complex – marked for condemnation in September – has an unlikely owner, the Iowa Finance Authority. The state housing agency has more than $500,000 invested in the property and took possession a year ago from an out-of-state owner seeking to avoid foreclosure.

In a few weeks, Southern Meadows Apartments will be sold to another government, the city of Des Moines.. The project is part of the city’s plan to buy and rehabilitate or raze 90 foreclosed housing units.

The city plans to spend as much as $1.3 million of $3.9 million in federal neighborhood stabilization money to buy the 34-apartment complex and make it suitable for private development

Linda Westergaard, an east-side neighborhood leader, questions whether a third of the neighborhood recovery money should be sunk into one site.

“Foreclosures are affecting my neighborhood and neighborhoods across the city. Why put so much money in one project, when there are so many houses that need to be rescued?” said Westergaard, president of the Northeast Neighbors, a coalition of north and east Des Moines neighborhood associations.

Without the city’s intervention, the property at 2800 S.E. Eighth St. would not likely find a buyer, said Larry Hulse, Des Moines community development director. “It would negatively impact the surrounding neighborhood if it was boarded up and nothing happened with it.

“The property has been in distress for some time,” he said. “It’s about as bad as it gets.”

Developer owed state $570,000 on property

The city and state’s history on the property dates back to the mid-1990s.

In 1995, the city gave a development company, Indianola at Eighth, $101,592 in federal housing money to rehabilitate the building, but the group never completed construction. The city received $5,000 of the nearly $50,000 it was supposed to be repaid before the property fell into foreclosure.

The Iowa Housing Corp., a nonprofit group that disbanded and transferred its assets to Iowa Finance Authority in 2003, loaned the development group $150,000. And Iowa Finance Authority was into the project for $85,000.

The primary lender, West Bank, also provided the developer a $450,000 loan.

When West Bank sold the complex to Marvin Thomason of Southern Meadows Association in 2003, Iowa Finance agreed to give his company a consolidation loan of $603,000 to save the project as “affordable housing for very low-income tenants,” records show.

By August 2008, Thomason had stopped paying his Iowa Finance loan, owing the agency $570,000. The state agency then realized how far the building had deteriorated and decided it needed to push foreclosure.

The state says its role as a lender hasn’t required it to monitor upkeep of the property.

“We sought quicker action on foreclosure because of the building’s condition,” said Craig Johnson, an Iowa Finance loan underwriter. “The owner was collecting rents, but he wasn’t spending it fixing the building.”

Despite the groups’ efforts to help the property’s development, the building has “suffered from substandard rehabilitation work” and “problematic management” since the mid-1990s, the city said.

City will seek developer who might build condos

David Dunn, a Des Moines planner, said the city will have more control over the project as the owner.

The city plans to demolish the 1950s addition at Southern Meadows, the first floor of which is closed, contaminated with mold and sewage; gut the main building, constructed in 1921; and conduct needed archeological and environmental studies.

Then the city must find a developer. The most likely plan: build condos in the remaining historic space and construct townhouses along the edge of the three-acre lot. The condos and townhouses would most likely be sold to moderate-income families.

The proposal could eliminate many of the hurdles Iowa Finance Authority faced when it tried to sell the property.

No nonprofit housing groups would consider rehabilitating the apartment complex, Johnson said. The groups said the property repairs were too expensive to tackle.

In September, Des Moines housing inspectors told Iowa Finance it planned to condemn the property, unless major problems were remedied, including fixing a broken sewer line, said Ben Bishop, who leads the city’s inspection department. “It was unlivable,” he said. “It had serious mold issues in the basement where the plumbing had backed up. And sewage wasn’t going into a sewer line. That’s a problem.”

In September 2008, the city cited Iowa Finance Authority, in the process of taking over the property, for 243 health and safety violations. The state spent about $200,000 addressing immediate safety concerns.

Bishop said the building had a long history of violations but none as severe as those that surfaced a year ago. The state agency said it would close the building.

Citizen questions value of city’s investment

Westergaard, the east-side neighborhood leader, said she’s concerned about more taxpayer money going into the project.

“Does the city need more townhouses and condos?” she asked. “The city will never get its money back. Why not tear down the building and build a park?”

Mark White, who lives near Southern Meadows, said it makes sense to redevelop the property. It’s close to downtown and shopping and sits across from Howe Elementary School. “It’s a good spot for families,” he said.

Dunn, the Des Moines planner, said the city should see some of the money returned once the property is sold to a developer. But the neighborhood stabilization program is designed to help housing that’s unattractive to private buyers. “It’s a second chance for a viable property,” said Dunn.

Now the city and state are working to relocate the building’s remaining 20 residents, providing rental and moving assistance, said Shawna Lode, an Iowa Finance spokeswoman. “No one is going to be homeless because of this,” she said.

Altogether, the city has set aside about $300,000 of the federal recovery money to help relocate residents, including up to three years’ rent assistance to cover the added costs of renting similar housing. It’s a federal rule the city must meet, Dunn said.

So far, finding a new home that’s affordable has been a challenge, said Sholley, who lives with her son and husband, Joseph, in the complex. The couple’s rent was about $500 a month.

“I’ve got most everything packed,” she said earlier this month. “I’m happy to be leaving. And the deposit and first month’s rent help.”

Dunn sees the dilapidated building becoming a “landmark.” He said redevelopment of the site could begin in about a year.

Note – “Dunn sees the dilapidated building becoming a “landmark.”  – Are you kidding me!  Too bad this is not in Louisiana.  The State of Louisiana and the Louisiana Housing Finance Agency would have that complex up and running regardless of mold contamination just like Jefferson Lakes Apartments in Baton Rouge.  They just IGNORE inspection reports!  katy

Note – Information on Riverstone Residential knowingly exposing tenants to extreme amounts of mold toxins at Toxic Mold Infested Jefferson Lakes Apartments in Baton Rouge, Louisiana.  katy

Toxic Mold Infested Jefferson Lakes Apartments managed by Riverstone Residential

Riverstone Residential Litigation

Mold Inspection Reports

Photos of Mold in Apartment

About Sharon Kramer

Hi, I'm an advocate for integrity in health marketing and in the courts.
This entry was posted in Environmental Health Threats, Health - Medical - Science, Louisiana Housing Finance Agency, Mold and Politics, Toxic Mold and tagged , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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