If you want stop owning property, the best thing to do is to default on your mortgage. Particularly if its historic property thats going to cost too much to keep up.
At least, thats what Saperstein and Associates say. The Bingham Farms-based owners of the Alden Park Towers apartment buildings on Detroits waterfront, northeast of Belle Isle, have defaulted on their mortgage. Lee Saperstein is the managing partner.
Saperstein and Associates bought the place for $6.5 million in 1971, but only started heading toward default in December of last year, according to U.S. Housing and Urban Development spokeswoman Patricia Campbell. Its mortgage was HUD-insured, which means the department can auction off the property to cover the debt if the borrower comes up short.
Saperstein attorney Mort Noveck says the complex has not been paid off completely; it was bought with a 40-year mortgage. So far, some $3 million is still owed. Altogether, he says, the buildings will cost more than $20 million to fix up.
Noveck says Saperstein has been trying to figure how to fix the buildings since 2001. Their historical significance, he says, adds 30 percent to the total cost of the apartments.
Noveck says the 88-year-old buildings are starting to show their age. Things wear out, and things have to be replaced, he says.
Saperstein, the attorney says, is only involved with first-class properties, so when it became financially prohibitive, they didnt want to be involved anymore.
So they decided to stop paying the mortgage? Noveck says the buildings owners spent four years trying to sell the buildings, while trying to muster up funds to make needed repairs, before deciding it was a lost cause.
First-class? Sounds more like second rate. Or maybe bottom of the barrel.
The building is not economically viable at this point, Noveck says.
Thats a fine explanation. News Hits makes a note of it, in case we decide to divest ourselves of pesky assets like houses and cars.
Residents of the complex arent surprised to learn Saperstein doesnt consider it first-class.
One resident, who didnt want to be named, says conditions there have been deteriorating for years.
Bricks dislodged from one of the towers during a windstorm more than a year ago havent been replaced, the resident says. But minor things, leaks from like a radiator upstairs, they fix, she adds. Theyve milked the building for whatever it was worth without making a major investment.
Campbell says she doesnt know the particulars of the Alden Park Towers case. But Jerry Brown, a spokesman for HUDs national office in Washington, D.C., says the agency will first work with the property owner to find a way to recover the mortgage. If not, he says we take over the property thats it.
Wed certainly hope so. Since HUD is a government agency, its taxpayer money thats being used to insure the loan.
Campbell says backing mortgage loans to encourage development is one of HUDs functions. She says theres no way to know how much the department will be able to recoup at auction.
Saperstein says he doesnt know the buildings true worth, but says the city of Detroits Web site lists the 2002 true cash value of the property at $3.2 million, and is probably right. Thats the most recent figure available.
Theres no minimum bid for the auction, Campbell says. A certain amount of earnest money will be required, but she couldnt say what that figure would be. News Hits isnt sure what the going rate for large, historic, riverfront apartment buildings is, but well be sure to keep an eye out for the final sale price, i.e., how much of a hit taxpayers are taking.
Bid packets and information about the property will be posted on HUDs Web site (www.hud.gov) July 6, and the auction is scheduled for Aug. 18.
Alden Park Towers, built around 1920, has 388 units in four eight-story buildings. Rents range from $400 a month to $1,500, Noveck says, for units ranging from efficiencies to three-bedrooms.
The complex has been listed on the National Register of Historic Places since 1985. Its said to be full of elegant architectural details like Pewabic tiles in the basement laundry room.
Noveck didnt know how much of the buildings are occupied, but says he believes the vacancy rate is substantial. He adds that the sale of the buildings will be subject to a use agreement, requiring the new owners to maintain the existing use and tenants at Alden Park.
Campbell couldnt confirm any terms of the upcoming auction, but HUD bid packets may include requirements of some kind.
Any low-income residents may qualify for a HUD-enforced two-year rent freeze, Campbell says, and HUD will contact them, if any exist.Send comments to [email protected]