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Date
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August 24, 2009
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Agenda
Item No. 17 Roll
Call No. 09- Communication No.
09-593 Submitted by: Larry Hulse, Community Development
Director |
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AGENDA
HEADING:
Authorizing the City Manager to determine the Fair
Market Value and enter into negotiations to acquire the Southern Meadows
Apartments at 2800 SE 8th Street, Des Moines, Iowa 50315.
SYNOPSIS:
The
City of Des Moines was awarded $3.9 million in NSP funds from the Iowa Department
of Economic Development (IDED). The City
is interested in acquiring the Southern Meadows Apartments at 2800 SE 8th
Street and redeveloping the site. This
action will allow the Real Estate Division to begin negotiations for the
acquisition of the property. Final
approval will require an additional council action.
FISCAL
IMPACT:
Amount: Property
Acquisition $560,000-$580,000
Site Redevelopment Costs $1.1-$1.3 million
Funding Source: CDBG Neighborhood Stabilization Program (NSP),
Project CDBG2008900.
ADDITIONAL
INFORMATION:
At the June 8th meeting (Roll Call No.
09-996), the City Council approved the contract with the IDED to allocate $3.9
million of Neighborhood Stabilization Funds.
The plan calls for the City to work with a coalition of housing agencies
to purchase and redevelop approximately 90 foreclosed and abandoned housing
units over the next four years.
As
part of the NSP plan, staff expressed an interest in finding larger-scale
redevelopment projects that could benefit from this program which were unlikely
to occur without a subsidy. One such site is the Southern
Meadows Apartments (2800 SE 8th Street), a 34-unit apartment
building owned by the Iowa Finance Authority (IFA). IFA took ownership of the property in
December 2008, after receiving a deed-in-lieu-of foreclosure. See the attached Southern Meadows Site Map
for the location of the property.
The property is currently in poor
condition. Seven of the units are
uninhabitable and the remaining 24 units are in need of major repairs. A physical needs assessment
was completed in March 2009, which shows approximately $333,000 in repairs
needed over the next 12 months, and an additional $1.5 million in repairs
needed over the life of the building.
This program provides an opportunity to redevelop
the Southern Meadows site. The building was
appraised by IFA in December 2008 for $570,000.
NSP regulations mandate that properties acquired using NSP funds be done
at a maximum of 99% of the current appraised value. In this case, that would be $565,290. However, prior to any offers being made for
the property, NSP guidelines dictate another appraisal be completed on the
site. At this time it is anticipated
that the fair market value for the property will be similar to the December
2008 appraisal.
The
Southern Meadows Apartments have a history of problematic management. Indianola at Eighth Inc. originally attempted
to rehabilitate the property in the mid-1990’s. The City allocated $101,592 of 1995 HOME
funds for the Southern Meadows Apartments.
Of that sum, $46,706 was to be repaid.
Prior to the property being foreclosed on, the City had received
approximately $5,000. Indianola at
Eighth Inc. never completed the project.
They were foreclosed on by West Bank and the construction bonds were
used to complete the construction. West
Bank arranged for the sale of the property to Marv Tomason
a.k.a. Southern Meadows Associates L.L.C. in 2003. At that time, West Bank was the first lien
holder, while IFA, held the second lien position. IFA’s interest in the property comes from a
loan given in 1995. The Southern Meadows
site is not a tax credit project.
Since
that time, the property has suffered from sub-standard rehabilitation work and
has fallen into disrepair. In 2008,
Southern Meadows Associates L.L.C. fell behind on the mortgage. IFA bought West Bank out of the project, and
IFA received the property via deed in lieu of foreclosure in December
2008. At that time, the City released
its liens on the property. Currently,
the City has no financial stake in the property.
NSP
funds would be used to acquire the apartments, relocate the current residents
and prepare the site for redevelopment. As
a part of this process, staff plans to prepare a redevelopment concept plan to
showcase the potential for this site. Once that process is complete, the City will
dispose of the land via a formal request for proposals (RFP) process.
Staff
has prepared several preliminary re-development scenarios. There is some flexibility within the plans to preserve
or demolish the original structure. Staff
has also examined acquiring the two vacant residential lots to the west of the
site and the abandoned public nuisance buildings to the south. A redeveloped site could provide
approximately 26-38 housing units. The
majority of these units will be row houses along the perimeter of the
site. If the original structure is
maintained, it will be downsized from the current 10 units to 6-8 units. All
redevelopment scenarios include the demolition of the 1950’s addition to the
building.
The
table on the following page shows the estimated redevelopment costs for the
site. All of these costs will be paid
for using NSP funds. Twenty units are
currently occupied in the building.
These residents will be relocated in accordance with the Uniform
Relocation Act (URA). Because portions
of the site have not been developed, it is likely an archeological survey will
need to be completed. Other costs
include demolition, the acquisition of the additional land, maintenance of the
site and the redevelopment concept plan.
Estimated
Southern Meadows Site Development Costs
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* Acquisition Price based on 99% of December 2008 appraisal of
$571,000 in accordance with NSP Regulations |
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** One of the old commercial buildings was a gas station that
may require additional environmental clearance |
There are several unresolved issues. The northeast corner of the site contains an
underground MidAmerican gas regulator. Development
plans will need to work around the gas regulator, or consider relocating it at
a cost of approximately $100,000. In
addition, the site has varied topography with a steep drop off between the original
building and the addition. The site will
require grading and water retention systems.
Water and drainage issues may limit development plans.
The original Southern
Meadows Apartment structure dates back to 1919 when the Salvation Army
purchased the land and constructed the Booth Memorial Hospital for unwed
mothers. Though exact numbers are not
known, the hospital served several thousand women throughout the state and
region, providing medical services and educational opportunities that they
otherwise would not have received. In
the early 1970s demand dropped and Booth Hospital phased out their services and
moved to the Salvation Army’s current location on 6th Street. From 1974 through 1989 Iowa Christian College
occupied the building. The structure
remained empty from 1990 until 1996 when it was converted into apartments.
To proceed with this project, the City will order an
appraisal. If the appraisal differs
significantly, the City will reevaluate the development project. Assuming the appraisal does not differ
significantly from IFA’s December 2008 appraisal; the city will enter into
negotiations and conduct an environmental review. This project will return to Council for final
approval prior to the acquisition of the property.
PREVIOUS
COUNCIL ACTION(S):
Date:
June 8, 2009
Roll Call Number: 09-996
Action: Neighborhood
Stabilization Program Contract with the Iowa Department of Economic Development
(IDED). Moved by
Vlassis to adopt. Motion Carried
7-0.
Date:
February 23, 2009
Roll Call Number: 09-341
Action: On the City’s
plan to spend CDBG Neighborhood Stabilization Program Funds. (Council Communication No. 09-105) Moved by Coleman to adopt. Motion carried 7-0.
Date:
December 8, 2008
Roll Call Number: 08-2159
Action: Authorizing the City Manager to develop and submit a plan to the State of Iowa to spend the allocated $3,900,000 Neighborhood Stabilization Program funds to provide emergency assistance redeveloping abandoned and foreclosed homes. (Council Communication No. 08-732) Moved by Hensley to adopt; refer to the City Manager to provide details about this program at a workshop. Motion Carried 7-0.
BOARD/COMMISSION
ACTION(S): NONE
ANTICIPATED
ACTIONS AND FUTURE COMMITMENTS:
The negotiated purchase agreement will need to be
approved by Council.
For more information on this and other agenda items,
please call the City Clerk’s Office at 515-283-4209 or visit the Clerk’s Office
on the second floor of City Hall, 400 Robert D. Ray Drive. Council agendas are available to the public
at the City Clerk’s Office on Thursday afternoon preceding Monday’s Council
meeting. Citizens can also request to receive meeting notices and agendas by
email by calling the Clerk’s Office or sending their request via email to
cityclerk@dmgov.org.