Sunday, March 3, 2013

Apartments acquisition OK’d as grant-obligation strategy

It is hard to imagine a more blighted street in Scottsdale than the one immediately south of SkySong.
The first block of Belleview Street east of Scottsdale Road includes a string of boarded-up and long-vacant apartment buildings surrounded by fencing.
It is a striking contrast to the $44million, 325-unit apartment buildings the Plaza Cos. is developing at SkySong, the ASU Innovation Center southeast of Scottsdale and McDowell roads.
Belleview and the surrounding neighborhood are in the last southern mile of Scottsdale in an area that has languished for decades.
Now, Scottsdale is considering condemnation of two blighted apartment buildings on Belleview to hedge its $825,000 investment in a failed affordable-housing project.
The Scottsdale City Council on Tuesday authorized buying or using eminent domain to acquire a pair of four-plex apartments at 7220 and 7224 E.Belleview St.
Community Services of Arizona, a non-profit group, bought the two buildings and others nearby in 2006 in a failed effort to develop affordable housing for the neighborhood.
Scottsdale gave Community Services $825,000 in federal-grant money for the project. But nothing was built and the group lost the property to foreclosure.
“This is some cleanup of some older issues,” Mayor Jim Lane said at the council meeting. “I think this is a tactic and a strategy we … need to employ to reduce the exposure the city has in repayment to the feds.”
Feds track $825,000 grant
The U.S. Department of Housing and Urban Development wants Scottsdale to repay the $825,000 in federal-grant money or show that the money has been used to develop affordable housing.
Scottsdale’s strategy is to buy or condemn the property and seek a developer to renovate the dilapidated 50-year-old buildings for low-income tenants.
The city does not have a funding source to pay for that development.
“Scottsdale has invested a lot of money in this and we still have a blighted neighborhood,” said Nancy Cantor, a neighborhood activist and former member of the dissolved Scottsdale Housing Board.
The two apartment buildings need to be torn down and new structures built based on Community Services’ plans for the property, she said.
That included low-energy-use buildings that would have provided badly needed workforce housing, Cantor said.
Michelle Albanese, Scottsdale community-assistance manager, said the city has not done structural evaluations of the buildings but acknowledged that they will need “significant rehabilitation.”
Redevelopment plans have not been finalized but could include a developer paying for the improvements and getting a return on its investment by leasing apartments as affordable housing, she said.
Community Services did not respond to calls to discuss why its project failed.
Project financing disappeared
Albanese said the non-profit, which is phasing out its business, failed to assemble all the parcels it needed and was unable to get financing for the project when the recession hit.
Community Services borrowed $425,000 to buy the apartment buildings, using them as collateral, and the lender held the first position on the loan.
Lili Rubin Investment Properties LLC bought the apartments at a public auction Feb.13 for $330,000, according to attorney Scott Wakefield, trustee for the property.
The city intends to negotiate to buy the buildings or condemn them and pay fair market value.
In the meantime, the apartments, on the north side of Belleview, will remain vacant seven years after the city invested in the improvements.
Elisabeth Connell, who lives nearby and works on Belleview, said the apartments “have always looked like this.”
Some boards have been pulled off a doorway and the fenced property is littered with trash.
An exterminator came out last year to get rid of Africanized bees that inhabited one of the buildings, Connell said.
The bees are gone but the eyesore remains.

By Peter Corbett The Arizona Republic Mar 1, 2013

Apartments acquisition OK’d as grant-obligation strategy

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