New buyer lined up to acquire troubled Rolling Hills Apartments

City council members addressed two troubled low-income housing communities on Monday.

City leaders advance a plan to help a new owner renovate the troubled Rolling Hills Apartments, while treating a plan by the housing authority to take over a similar property with more skepticism.

A Colorado-based real estate investment company anticipates closing on the purchase of the troubled Rolling Hills Apartments in November.

The finance committee of Winston-Salem City Council unanimously recommended a resolution approving a revenue bond to help finance the purchase on Monday afternoon, moving the item to the full council for consideration later this month. The revenue bond, combined with a loan for low-income housing backed by federal tax credits will finance the purchase, said David Asarch, vice president of development for Steele Properties.

The resolution does not commit any city funds to the project. In exchange for city council signing off on the revenue bond, Steele Properties would agree to invest $4.3 million — or $42,760 per unit for 106 out of 110 units — to bring the property up to code. The resolution replaces an earlier agreement for the new owners to invest about $17,000 per unit, which council members deemed inadequate.

“As the council member and a neighbor to the residents, I think the new owner will be able to make the kind of investment that we won’t be here in the next five, seven years having the same conversation,” said Councilman Derwin Montgomery, adding that the transfer of ownership will ensure that residents have access to affordable housing that meets a high standard of quality.

The troubled apartment complex, whose units are entirely dedicated to tenants who qualify for federal housing assistance, has been plagued by physical deterioration and crime for years. Previously owned by the Housing Authority of Winston-Salem, the public housing agency sold the property in 2011 while promising that a private owner would commit new investment. In early 2014, the property was sold again — to New Jersey-based Aspen Companies, a leading Section 8 provider that has made an aggressive push to acquire low-income housing complexes across the Southeast while shopping its HUD portfolios to investors through the Tel Aviv Stock Exchange.

City leaders have become increasingly frustrated with the Aspen Companies in recent months as widespread code violations such as sewage backups, leaks, mold, unsafe electrical wiring and inoperable appliances, along with unannounced power shutoffs, mounted. From June through August, the city levied more than 600 code violations, affecting 96 out of 110 units in the complex. Ritchie Brooks, the city’s director of housing and community development, said staff was puzzled that Rolling Hills managed to earn a passing score of 80 from HUD during an inspection in April. Responding to concerns from residents, city officials and US Rep. Alma Adams, HUD has agreed to conduct a new inspection later this month.

Meanwhile, two former Aspen Companies employees — a property manager and maintenance supervisor — who were fired over the summer have accused the company of fraudulently billing HUD for unoccupied units. Jeremy Cox, the former property manager, told Triad City Beat he overbilled HUD as much as $6,000 per month at the direction of the company’s regional manager, resulting in the deposit of the excess funds in a company account. The Aspen Companies has categorically denied the two former employees’ claims.

Councilwoman Denise Adams warned Asarch that city leaders will be watching Steele Properties to ensure the company meets its obligations to the residents of Rolling Hills.

“This would have never gotten here if the people hadn’t risen up,” she said. “You’ve seen how loud their voices are, and I can tell you they’re going to hold you more accountable then we are, and I commend them for that.”

The four members of the finance committee also moved forward on a resolution, though without great enthusiasm, to loan the housing authority $1.6 million to acquire another apartment complex that is similarly blighted by extensive code violations. Formerly named after Mayor Pro Tem Vivian Burke, the current New Hope Manor has acquired the uncharitable nickname of “No Hope Manor” from its residents. The apartment complex, located just to the north of the Cleveland Avenue Homes public housing community, lies within an area targeted for revitalization by the housing authority. The local agency is seeking a $30 million grant from the federal government to transform the high-poverty area into a mixed-income neighborhood, or so-called Choice community.

Council members have chafed at the idea that the property’s current owners — Nathan Tabor, a former chairman of the Forsyth County Republican Party, and Bob Crumley, a prominent Asheboro lawyer with offices in Greensboro, Winston-Salem and Charlotte — would profit from the sale. Housing authority officials assured council members that would not be the case.

Considering that the outstanding debt on the property is $2.5 million and the purchase price is $1.9 million, the lender would take a loss of $600,000, said Kevin Cheshire, vice president for real estate development for the housing authority. He added that Crumley signed an affidavit stating that the owners would respectively make an “equity contribution” of just shy of $500,000 and just over $550,000.

David Asarch of Steele Properties
David Asarch of Steele Properties

“I don’t think they took a haircut on this,” Councilwoman Denise Adams said. “However long they’ve been in this business they’ve made money. They wouldn’t be going in in the first place if the owners didn’t make money. To not get $600,000 and to have their bills paid, they’re okay with it. It’s just like a bankruptcy. They’re just trying to unload it.”

Housing Authority CEO Larry Woods said that half of the 120 units are vacant. Of the 63 households, he said half of them are squatters. Over the weekend, a fire broke out in one of the vacant buildings in the complex.

“When I visited the area there was an open-air drug market, with people running in and out of the vacant building,” Woods said. “We talked to the police, and they thought it would be a good idea to demolish the vacant buildings.

“There were a few units upstairs that we labeled as uninhabitable because there was raw sewage running out,” he added.

Woods said that none of the units will be supported by federal housing subsidies, but the housing authority will keep them affordable by renting them for $450 to $475 per month. Those who are squatters “will have the ability to sign a lease,” he said, “and if they choose not to, they will be viewed as trespassers.”

Montgomery cast the lone no vote against the project, citing the estimated $13,000 investment per unit under the housing authority’s plan.

“The money that’s being invested is not enough,” he said. “It’s going to be a Band-Aid. We saw in Rolling Hills that when you got into the nuts and bolts, the needed investment was more than $17,000, and we negotiated with the new owners to bring it up to $42,000.”

But Mayor Pro Tem Vivian Burke, whose ward encompasses New Hope Manor, said she supports the project because New Hope Manor could jeopardize the city’s plans to invest bond funds in a nearby park if left unattended.

“It’s gonna be a beautiful park,” she said. “What we have there with that undesirable mess, then no matter how hard we try to encourage people that want to use that park, that want to walk on the street, it’s going to be a loss. So I have to go with what I think is best for this city.”