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HRA Meeting
<br />Minutes – Tuesday, November 20, 2012
<br />Page 6
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<br />and commercial properties; with many investing everything they had and then experiencing the 1
<br />downturn in the market. Even though a property owner may hav e faithfully made payments to the 2
<br />bank, with new government banking regulations, those same lenders may now be unwilling to lend 3
<br />money to those owners without an additional 30 -40% equity down payment – not on the original value, 4
<br />but at today’s values. The refore, Mr. Brohman advised that the property owner lost any money that had 5
<br />already put into the property, and in order to get another loan, the value of the building may be actually 6
<br />what they owe on it, catching them in a difficult position, with many own ers losing buildings or 7
<br />struggling because of that current reality. While recognizing the above scenario as a risk in doing 8
<br />business, it created a bind that most investment borrowers have for multi -family housing. 9
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<br />As a personal example, Mr. Brohman add ressed the Centennial Garden Apartments, part of the 11
<br />Arona/Hamline Redevelopment area, and suggestions that the complex be torn down, since it was now 12
<br />forty (40) years old. Similar properties in Europe would be considered new. Mr. Brohman noted that 13
<br />the new owners of the complex had rehabilitated the building to bring it up to code. During his 14
<br />involvement in ownership of the complex, Mr. Brohman noted that one side of the complex (east side 15
<br />with 100 units) was tied into one (1) alarm system, while the we st side had four (4) separate alarm 16
<br />systems. Mr. Brohman noted the problems this created when an alarm may have been tripped by an 17
<br />unhappy tenant, and subsequent notices and fines from the City for false alarms. 18
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<br />Mr. Brohman reiterated that how the progra m was regulated would be most important; and agreed that 20
<br />rental/housing licenses could be good. However, Mr. Brohman opined that it was important to have 21
<br />part of that regulation address how people choose their tenants, with credit checks for example. Mr. 22
<br />Brohman noted one of the biggest problems as a manager/owner is how to evict residents once living in 23
<br />a unit, given their protections and rights. Mr. Brohman noted that, when possible, the process was not 24
<br />fast, and hindered owners/managers from addressin g problem residents in a timely manner. Mr. 25
<br />Brohman noted that it was to the benefit of property owners to remove bad tenants before they lost their 26
<br />good tenants. Mr. Brohman asked the HRA to take his comments into consideration accordingly. 27
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<br />Chair Masch ka asked Mr. Brohman, based on his experience, how the HRA/City could incent good 29
<br />management; and whether he was aware of any techniques that worked well. Chair Maschka reiterated 30
<br />his preference to reward good management; while also addressing another pro blem with some real 31
<br />estate having deteriorated and how to address resulting maintenance and ownership issues, without 32
<br />necessarily evicting current tenants. 33
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<br />Mr. Brohman referenced the St. Paul, MN programs, as well as those used in Brooklyn Center and 35
<br />Broo klyn Park, MN, and the specifics of their programs, their advantages and disadvantages. Mr. 36
<br />Brohman noted that he had managed buildings in the Brooklyn Park area, with inspections done by the 37
<br />City on an annual basis, and basing license renewals on those i nspections with all units checked. In the 38
<br />St. Paul, Mr. Brohman advised that they inspect the building initially on an annual basis, and then 39
<br />reduce those inspections to once every three years, based on the results of those inspections, and as the 40
<br />landlor d addresses issues or improves the building. 41
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<br />Mr. Brohman referenced recent news articles regarding multi -family code violations in one particular 43
<br />complex, noting that the landlord took the heat for the violations; however, he noted that the landlord 44
<br />didn’t bring in the bedbugs and cockroaches, or have electrical appliance violations, it had been the 45
<br />tenants themselves who had created those issues. Once those issues moved beyond a simple fix, Mr. 46
<br />Brohman advised that the landlord may have been unable to ad dress them due to tenant rights. Mr. 47
<br />Brohman suggested that the HRA and City work with landlords experiencing tenant problems, to allow 48
<br />them to address those problems quickly and effectively, rather than focusing on the negatives. Mr. 49
<br />Brohman noted the m any variables in rental vacancies, and fluctuations between purchase versus 50
<br />rentals, and how owners/managers gauged those cycles. 51
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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, 53
<br />and therefore could address issues immediately before they became bigger problems. As taught in the 54
<br />industry, Mr. Brohman advised that in the multi -housing industry, you minimize your risk; and if you 55
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