The Aspen Companies was founded in 2009 as a subsidiary of Treetop Development by Azi Mandel and Adam Mermelstein, combining their experience in real-estate development, investor relations and managing HUD properties. The company went on a buying spree in 2013, building a portfolio of 1,067 units in Tennessee, Georgia and South Carolina, according to a timeline posted on the company website.
Mandel and Mermelstein’s company snapped up Rolling Hills in February 2014 from a California investor named Gregory Perlman. The apartment complex had once been owned by the Housing Authority of Winston-Salem. Then, as now, it was plagued with code violations, along with drug dealing, and the housing authority’s efforts to unload the property in 2010 unsettled residents. When the housing authority eventually closed a deal with Perlman in December 2011, the apartment complex’s Section 8 voucher stayed with the buildings.
The Aspen Companies website boasts of upholding “a standard of excellence,” while highlighting its purported practice of “acquiring mismanaged apartment communities and upgrading them” through renovations, new amenities and social service programs.
By its own estimate, the company doubled its portfolio to 10,000 units spread across 15 states from 2014 to 2016. Based on an early 2015 prospectus for an initial public offering on the Tel Aviv Stock Exchange and recent press accounts, a conservative estimate puts the number of total HUD properties owned by the company at about 36. A chart created to illustrate the Aspen Companies’ holdings indicates that Rolling Hills is part of a portfolio, one of four such funds based on HUD properties that the company was offering as an opportunity to Israeli investors.
Speaking to the company’s growing status as a Section 8 provider, Mermelstein described one acquisition move to AL.com in July 2015 as “playing an important role as we solidify our position as one of the most active HUD property owners nationwide.”
The Aspen Companies said “each of the claims” made by Gene Smith is “categorically false,” without specifically addressing why Derhy didn’t respond to Smith’s slight against his personal integrity, or the allegation made to TCB that the company is manipulating the current property owner and left her in the lurch when she moved to Winston-Salem.
The Aspen Companies has publicly highlighted its relationship with HUD, boasting on its website of possessing “a strong working relationship” while being “held in high regard by HUD national and field offices throughout the country.”
After informing Eileen R. Wooten, the senior account executive at HUD’s Greensboro field office, that he had been fired, Gene Smith followed up with a brief email on Aug. 17, stating, “There’s a lot of lies being told at Rolling Hills by management.”
He said he has received no response from Wooten. Reached by TCB last week, Wooten said she is not allowed to speak to the media, while promising to forward a request for comment to a public affairs person at the agency’s Atlanta regional office.
Smith said that while Wooten never responded to his disclosure that he had been fired and his allegation of deception by the Aspen Companies management, he received a phone call from Wooten’s supervisor over the following weekend. The supervisor, who identified herself only as “Dottie,” asked Smith “not to mention her name,” he said. A personnel list for the Greensboro field office lists Dottie Troxler as a senior account executive and senior advisor to the AE Division. Troxler could not be reached for comment for this story.
Joseph J. Phillips, a spokesperson with the Atlanta regional office, said in an email on Tuesday that “HUD continues to closely monitor Rolling Hills Apartments.” Phillips went on to say that the federal agency “takes allegations of fraud seriously,” adding that Smith could contact the HUD Office of the Inspector General to report his concerns.
In statements to TCB, the Aspen Companies said Rolling Hills received a passing score of 80 from HUD, with 100 being the highest possible score. The reported score is perplexing, considering that the city of Winston-Salem has documented nearly 650 violations in 94 out of 110 units at Rolling Hills since early June. HUD did not respond to a question about how the site could have passed the most recent inspection considering the extensive violations that have been reported.
Rep. Alma Adams, whose district currently includes part of Winston-Salem, said her office continues to monitor the situation at Rolling Hills. She said in a prepared statement on Tuesday that on Aug. 16 she requested a timeline from HUD “for a second inspection of the property given the deplorable conditions still present at the Rolling Hills Apartment complex.” She added that she planned to speak with department representatives by phone in the coming days. Phillips, the HUD spokesperson, followed up on Tuesday afternoon with a pledge that the federal agency will a new inspection of Rolling Hills Apartments in late September.
In the same statement, which also touted the hiring of Tursha Ellis as being part of a turnaround strategy, the Aspen Companies also told TCB that “the property’s onsite maintenance staff has been increased from two to seven professionals.”
Not true, according to Gene Smith.
“It’s a lie,” he said. “They didn’t hire seven maintenance workers. They hired two extra. It was only me, Terry, George and Antonio. The rest were contractors. Some of the people they hired off the street were druggies. They buy drugs at Rolling Hills. One of the tenants told me: ‘I don’t want him in my house. I just saw him out there doing drugs.’”
Aspen Companies did not specifically address the allegation, but asserted that each of Smith’s claims to TCB was “categorically false.”
Smith said he took the job with the Aspen Companies in the hopes that he could earn quick money to buy an investment property. While he was employed as maintenance supervisor at Rolling Hills, he was also working side jobs in the evenings to earn additional money. Getting fired by the Aspen Companies won’t ruin him financially, he said: He contracts jobs installing and repairing skylights, and putting in ADA-compliant bathrooms, and “if I keep myself busy” he said he can earn as much as $40,000 in six months.
All the same, he feels a twinge of regret about the way things turned out at Rolling Hills.
“I really wanted to show them what I could do,” Smith said. “I wanted them to spend the money and get the materials.”
Residents interviewed by TCB in early August complained that the Aspen Companies’ efforts to address the extensive violations have only superficially addressed problems, and that the city’s code inspector signed off on repairs that were inadequate.
“They did a Band-Aid fix,” resident Veronica Campbell told TCB. “The city inspector came in and signed off on it. I said, ‘Why would you sign off?’ The most serious violation they didn’t do anything about — the mold coming up from underneath my carpet.”
Smith confirmed the residents’ concerns.
“When I walked through with the architect and the contractors, none of them were talking about removing the mold,” he said. “I said, ‘This is like a scam on top of a scam.’ There was one lady who was sick. I went in myself and ripped the mold out of her closet. You’re not really supposed to do that if you’re not certified. I know the mold was making her sick.”
Smith charges that the city code inspector assigned to the Rolling Hills case has been signing off on repairs that are not adequate. As an example, Smith said the inspector didn’t make any effort to confirm that mold-damaged drywall and insulation were removed.
“If it’s a crack and water leak, they’ll let them plaster it with mold inside and say it’s okay,” Smith said.
Smith provided a list of four units where he said the inspector signed off without requiring the Aspen Companies to make adequate repairs.
Ritchie Brooks, the city’s director of housing and community development, said to his knowledge the inspections are being handled appropriately.
“This is the first time I’m hearing of an inspector signing off on work that’s not been done,” he said.
Smith provided four cases where he said the inspector signed off on inadequate work. In one, at Building 720 Apt. 2, the city cited the unit with 17 violations, and eventually signed off on 12 repairs, including repairing defective light fixtures, cleaning carpet, clearing a kitchen sink drain and replacing smoke detectors. But five other violations remained unresolved, including two coded as “unfit” — defective locks on the front door and defective electrical outlets. Two other violations on the list also remained unresolved because some of the violations have not been corrected, while Brooks said he could not find any paperwork for the fourth case alleged by Smith.
Aspen Companies said in a prepared statement on Monday: “We are fully committed to ensuring quality conditions at Rolling Hills by taking all necessary measures to immediately address residents’ concerns. Over the past several months, we have taken significant steps to improve the onsite management and maintenance of the property, and we’ll continue to do so.”
Smith said the city inspector eventually said he couldn’t “let it slide anymore with the Band-Aid fixes” because Rolling Hills’ troubles were “in the news.”
“When you got a contractor coming to you,” Smith said, “and saying, ‘Are we really fixing it or putting a Band-Aid on it?’ it’s like, Wow.”