Sunday, February 23, 2014

City-Owned Vacant Properties Made Available for Purchase


Several days ago I received notification from the city that they were making available for sale several dozen boarded/vacant structures as well as a far larger number of city-owned vacant lots.  The City Planning and Economic Development arm (CPED) took out an ad in the Star Tribune to notify potentially interested parties of the offer period from February 10th through the 21st.  The act of seeking out and engaging private developers instead of fast-tracking houses for demolition is a huge step in the right direction for our city.  Quite a few staffers and council members put in a lot of work to get us to where we are today, and that deserves recognition.

But there are a few ways this rollout could have been better, and a few questions still unanswered.  Such as...

Were the Star Tribune and the City of Minneapolis website the only places where notice was given?  More to the point, where do smaller developers go to find their next deal?  Because if the target audience doesn't look for their next acquisition in either of these places, then the city shouldn't expect announcements there to produce much interest.

I remember the several years when the city was trying to find a buyer for the Sheltering Arms House, and they put out advertisements and requests for proposals in the Finance & Commerce publication.  That was all fine and good, except that the project was too small of a project for the developers that use Finance & Commerce as their source for new projects to take on.  When a developer finally came forward, it happened through connections made by concerned residents.  For initiatives like this to be successful, the information has to be distributed in places and through means that the target audience is already familiar with.

The next big concern is timing--both what happens with any properties that don't generate interest and how quickly developers can close on the ones that do.  First, there are fifty properties for sale with structures on them.  It's fairly likely that most of these won't generate viable offers from an 11-day window of opportunity, especially with limited information and no open houses (we'll get to that later).  So what happens then?  Will the city rush to demolition?  Will they put the properties in a different stream that is more susceptible to slumlord acquisition?  Or will there be multiple rounds of applications, with the process tweaked as awareness is raised and we get better at this?

I would hope we lean towards the latter.  Basic market conditions are that inventory is drying up just about everywhere.  It makes no sense that we would tear down otherwise viable structures just as market forces are making their rehab more feasible.  Furthermore, the city's process is almost impossible for a non-developer using purchase/rehab financing to navigate.  That may be acceptable when the outcome is either a non-profit or for-profit acquisition.  But choosing demolition over marketing salvageable homes to programs like FHA's 203k rehab is foolish at best.

The timing of offer-to-close is another important factor.  Understandably, anyone seeking to do business with the city should accept that there will be additional layers of bureaucracy to navigate, and that doing so will take more time than a typical transaction.  But a good process should mimic the private market as closely as possible.  The city's documents indicate that the process takes about ninety days to complete, but is that ninety days from offer to close, or ninety days from offer to acceptance?  An early draft of the city's proposal to engage the private market in this way indicated a process that could take as long as nine months to complete--before a developer could even begin work.  Ninety days is reasonable, but nine months is too long for most developers' money to be tied up in acquisition limbo.

And let's come back to information for a bit, shall we?  The list of fifty properties provided by the city is just that--a list.  There are no photographs to show even the condition of the exterior.  An interested party will either have to already know a property by address, or take the time to drive around and look.  The spreadsheet is outdated as well, listing north Minneapolis houses that were once in ward three but are now part of ward five.  And the dimensions of the lot are given, but not of the property.  The spreadsheet could be interpreted to describe a smaller home as a 5,000-square-foot mini-mansion.  How many potentially interested parties would look at this list and think that the scope of a project is beyond their capacity to take on?

Again, the information made available should mimic the private market as closely as possible.  The data ought to resemble an MLS listing, with at least basic property and structure characteristics and a few exterior photos.  Although internal photos when available, and a hyperlink to code compliance reports or other public data would be helpful as well.  A series of open houses would be another great way to gauge interest and raise awareness.  And there ought to be a mechanism for holding properties if an interested party is unable to begin acquisition for a few months - especially if the other option is demolition.

Finally, there are four north Minneapolis duplexes on this list that are zoned for single-family use only, such as 2701 Oliver Ave N, pictured above.  There should be some clarity, ideally through staff reports from city planners, whether continued use as a duplex is appropriate for the structure and for the area.  Smaller businesses generally won't have the savvy to navigate rezoning or variance issues, so properties like those are going to need extra hand-holding if they are to be paired with a good buyer.

The availability of these properties to the private market is a tremendous step in the right direction.  But that's all it is; a step.  There is a long way to go before we really get this right, but it's encouraging that we are on our way.

4 comments:

  1. Do you have a link to the vacant lots that are for sale? Thanks.

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  2. Seems like this program was deliberately mishandled. The City can say they "notified the public" but there was no press release posted on the main page of the City's website.
    I only found out about this by chance, by seeing a advertisement in the classified ad section.
    And you are absolutely right, they sent a list with zoning and square footage but that was it.
    This would encourage the kind of investor who purchases properties in bulk sight unseen. Or would they really be purchasing the land?
    Prices were listed for vacant lots, but not the houses. When questioned about this the City staff said "if there was interest in any of the properties they would be appraised" Appraised and sold at what price? A price too high for anyone to pay?
    Then there are the qualifications, you have to be an "experienced" rehabber, comply with a standard restoration agreement...that is all the work has to be done and everything up to code within six months...you have to have insurance and bank financing and neighborhood approval AND approval from one or more of the City's planning commissions.
    Doesn't this all seem like someone decided, "Okay, those folks criticised our way of destroying buildings so we will put out a list because we were ordered to but hope nobody finds it and THEN we will impose SO MANY intimidating bureaucratic requirements and SO MANY delays that only the most determined and deep pocketed investor will acquire even a few of these and ONLY those that are in the best condition in the best location and the best location aint "over north."
    This seems like deliberate sabotage intended to make a new positive effort to rescue these properties...FAIL.
    Since the deadline has passed who will follow up and get access to their records of how many "rehabbers" applied and qualified and what properties made it at least to the first stage of their journey back to life...and then follow those investors and properties all the way through this toxic, inefficient, building killing City process?

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    1. That's certainly one way to look at it, and a whole bunch of fair criticisms. I preferred to take a more conciliatory tone to push the city along, in hopes that we catch more bees with honey than vinegar. But yes, the process leaves a lot to be desired and could make one wonder how much they actually expect to get done regarding preservation in the first place.

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  3. Can only the pre-qualified see these properties?
    WHEN will they be open?

    General Notices - Ad Detail
    Published: 03/03/2014
    CITY OF MINNEAPOLIS Properties for Sale The City of Minneapolis has vacant publicly owned residential structures that may be candidates for rehabilitation. Beginning March 2014, these properties will be opened to the public for viewing. Eligible buyers will need to meet minimum qualifications to be considered. All properties are advertised for housing development. Visit http://www.ci.minneapolis.mn.us/cped/housing/cped_vacant_lot_home to get a list of properties and the process for acquiring lots from the City of Minneapolis. To be added to a list of interested parties and for more information, please call Susan Schempf: (612) 673-5245.

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