30 April 2008

Model Looking to Develop Foreclosed Buildings

Model Management has become one of the largest property owners in Over-the-Rhine, and I am always wondering what they are up to. This article, in a national trade magazine is about the foreclosure problem in the Midwest and how some developers like Model are trying to finance the rehab of these foreclosed properties. They fund these projects by syndicating Low Income Housing Tax Credits (LIHTC) and bundle them with Historic Tax Credits. I have never exactly understood how this funding is bundled and syndicated, but it is a mechanism that gets lots of historic buildings rehabbed into low-income housing.

I left the paragraphs in at the bottom about Cleveland, because I was shocked by the huge numbers of foreclosures and abandonned buildings:
Midwest HFAs Focus on Foreclosures
In March, The Model Group finished construction on Magnolia Heights, an 18-building, 98-unit scattered site redevelopment in Cincinnati’s Over-the-Rhine neighborhood. All units were Sec. 8 properties, and the work was done in conjunction with 42 market-rate condominiums that The Model Group was renovating in the same neighborhood.

“As the neighborhood started to gentrify we saw that the affordable housing stock was at risk,” Smith said. “We were able to use LIHTCs as an economic stimulus tool for the neighborhood and partner with some local community development corporations (3CDC) to do market-rate condos at the same time.”

Magnolia Heights was financed with $10 million in LIHTC equity and $2.3 million in historic tax credits. ...

The Model Group owned all 98 units in Magnolia Heights. But a scattered-site development of foreclosed properties is a more challenging proposition. Developers would need to negotiate with many different lenders to get the units out of foreclosure— basically developing one unit at a time—and some would likely have to be bought outright.

“The best thing would be if the city were to foreclose on those properties and somehow get them back through a landbank process,” said Jack Kukura, OCCH’s chief of acquisitions. Such a land bank, a fund which the city or county could use to buy foreclosed properties, could make it easier for developers to execute a scattered- site redevelopment of abandoned homes.


Ground zero for Ohio’s foreclosure problems is Cuyahoga County, where county Treasurer Jim Rokakis is working on a different kind of land-bank proposal. Cuyahoga County had about 15,500 foreclosure filings in 2007, up from around 13,500 the year before. The county is on track to see another 15,000-plus foreclosure filings again in 2008. And the foreclosure crisis has spread out to Cleveland suburbs like Euclid and Cleveland Heights, which contain about 1,200 and 900 foreclosed vacant properties, respectively.

Until recently, Ohio was one of only two states ... that had no regulatory oversight of the appraisal industry...

Cuyahoga County is hoping to stop the blight by creating a local land bank that would allow it to purchase vacant properties for demolition. “We’ve got 10,000 properties that need to be demolished,” Rokakis said. “They’ve been gutted, stripped, and vandalized, and we have to get them down.”

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