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HRA Meeting
<br />Minutes –Tuesday, November 20, 2012
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<br />and commercial properties; with many investing everything they had and then experiencing the
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<br />downturn in the market. Even though a property owner may have faithfully made payments to the
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<br />bank, with new government banking regulations, those same lenders may now be unwilling to lend
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<br />money to those owners without an additional 30-40% equity down payment –not on the original value,
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<br />but at today’s values. Therefore, Mr. Brohman advised that the property owner lost any money that had
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<br />already put into the property, and in order to get another loan, the value of the building may be actually
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<br />what they owe on it, catching them in a difficult position, with many owners losing buildings or
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<br />struggling because of that current reality. While recognizing the above scenario as a risk in doing
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<br />business, it created a bind that most investment borrowers have for multi-family housing.
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<br />As a personal example, Mr. Brohman addressed the Centennial Garden Apartments, part of the
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<br />Arona/Hamline Redevelopment area, and suggestions that the complex be torn down, since it was now
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<br />forty (40) years old. Similar properties in Europe would be considered new. Mr. Brohman noted that
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<br />the new owners of the complex had rehabilitated the building to bring it up to code. During his
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<br />involvement in ownership of the complex, Mr. Brohman noted that one side of the complex(east side
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<br />with 100 units) was tied into one (1) alarm system, while the west side had four (4) separate alarm
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<br />systems. Mr. Brohman noted the problems this created when an alarm may have been tripped by an
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<br />unhappy tenant, and subsequent notices and fines from the City for false alarms.
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<br />Mr. Brohman reiterated that how the program was regulated would be most important; and agreed that
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<br />rental/housing licenses could be good. However, Mr. Brohman opined that it was important to have
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<br />part of that regulation address how people choose their tenants, with credit checks for example. Mr.
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<br />Brohman noted one of the biggest problems as a manager/owner is how to evict residents once living in
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<br />a unit, given their protections and rights. Mr. Brohman noted that, when possible, the process was not
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<br />fast, and hindered owners/managers from addressing problem residents in a timely manner. Mr.
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<br />Brohman noted that it was to the benefit of property owners to remove bad tenants before they lost their
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<br />good tenants. Mr. Brohman asked the HRA to take his comments into consideration accordingly.
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<br />Chair Maschka asked Mr. Brohman, based on his experience, how the HRA/City could incent good
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<br />management; and whether he was aware of any techniques that worked well. Chair Maschka reiterated
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<br />his preference to reward good management; while also addressing another problem with some real
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<br />estate having deteriorated and how to address resulting maintenance and ownership issues, without
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<br />necessarily evicting current tenants.
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<br />Mr. Brohman referenced the St. Paul, MN programs, as well as those used in Brooklyn Center and
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<br />Brooklyn Park, MN, and the specifics of their programs, their advantages and disadvantages. Mr.
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<br />Brohman noted that he had managed buildings in the Brooklyn Park area, with inspections done by the
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<br />City on an annual basis, and basing license renewals on those inspections with all units checked. In the
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<br />St. Paul, Mr. Brohman advised that they inspect the building initially on an annual basis, and then
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<br />reduce those inspections to once every three years, based on the results of those inspections, and as the
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<br />landlord addresses issues or improves the building.
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<br />Mr. Brohman referenced recent news articles regarding multi-family code violations in one particular
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<br />complex, noting that the landlord took the heat for the violations; however, he noted that the landlord
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<br />didn’t bring in the bedbugs and cockroaches, or have electrical appliance violations, it had been the
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<br />tenants themselves who had created those issues. Once those issues moved beyond a simple fix, Mr.
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<br />Brohman advised that the landlord may have been unable to address them due to tenant rights. Mr.
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<br />Brohman suggested that the HRA and City work with landlords experiencing tenant problems, to allow
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<br />them to address those problems quickly and effectively, rather than focusing on the negatives. Mr.
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<br />Brohman noted the many variables in rental vacancies, and fluctuations between purchase versus
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<br />rentals, and how owners/managers gauged those cycles.
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<br />Mr. Brohman opined that, if a landlord is good, he is in every one of his units at a minimum annually,
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<br />and therefore could address issues immediately before they became bigger problems. As taught in the
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<br />industry, Mr. Brohman advised that in the multi-housing industry, you minimize your risk; and if you
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