The city wants to demolish the one-time rooming house.
Apex Mortgage Company has launched a lawsuit at the city accusing Department of Planning and Development representatives of making “false and fraudulent” statements about the city’s interest in acquiring a former East End rooming house.
The legal action filed last week in the Cuyahoga County Court of Common Pleas by the Fort Washington, PA-based company seeks damages in excess of $25,000 for each of three separate counts.
Accusations in the lawsuit echo comments made by Apex Mortgage President Ted Kapnek in May after the Board of Building Standards upheld the Division of Housing and Building’s nuisance designation of the one-time rooming house at 11900 Madison Ave., known as Newman Corners.
In essence, Apex Mortgage maintains that the city reneged on a deal to buy the property and is now preventing the company from repairing and reopening the building.
City’s interest in property began in December 2009
Apex Mortgage specializes in loans to small businesses that are unable to obtain traditional commercial real estate loans. It acquired the 16-unit rooming house in May 2009 when the previous owner defaulted on the mortgage. It expected to repair and market the property for sale.
According to text from e-mail messages revealed in Apex Mortgage’s complaint, then-Director of Planning and Development Nathan Kelly began internal inquires about buying the property in December 2009.
He wrote to Mary Leigh, a program manager in the Division of Community Development:
“Would you dig around on the above? It’s a nuisance property that is in foreclosure and would be a good one to purchase.”
A few days later, he wrote to Leigh again:
“Dru [Siley] is going to see if he can get some info on the inside of the building. This is the kind of property that would warrant going to council, even if it’s under $60k, to purchase.”
Leigh wrote to Emma Petrie Barcelona, a development officer with city, about the possibility of using federal funds to acquire the property – noting it had to be vacant to qualify:
“To my question. The property is 11900 Madison. Need to know if, based on the below circumstances, would qualify for [federal Neighborhood Stabilization Program funding].
Not sure if vacant (but obviously would need to be). A foreclosure action filed in 2007 but it appears that instead of going through that whole process, the owner signed the property over to the bank.
If vacant could 1) nuisance? And/or purchase and either rehab or demolish with intent to redevelop with some new purpose (commercial or residential).”
County land bank raised red flag over city official’s inquiry
In September 2010, the city filed a building code violation complaint in Lakewood Municipal Court against Apex Mortgage due to the condition of the building.
Apex Mortgage alleges the complaint was filed in an attempt to pressure it to sell the property to the city.
Later that month, Director Kelly contacted Kim Steigerwald with the Cuyahoga County Land Bank, who the city works with to use federal funds to acquire and demolish or rehab failing properties.
Kelly wrote that the property would soon be vacant and he wanted to see it turned into a parking lot, even though it would be an expensive acquisition:
“I’ve come across a property that has a number of blighting influences, will be vacant, and should probably be torn down. My guess is that we could own it for $80k, would cost about $40k to tear it down. I’m using larger numbers. It would be a nice development site in the long term and [a] nice place to park in the short term. It’s in our NSP II area. It is bank owned- Apex Mortgage.”
Steigerwald replied that it was “not a good idea” to discuss any property that wasn’t already vacant because it would create a sticky legal situation:
“My first concern is the ‘will be vacant’ note. Last thing we want to do is consider a property w/tenants in it and trigger not only URA but the Tenant Protection Act. Even discussing this property at this point is not a good idea—as it would trigger both.”
Steigerwald also noted that the land bank usually paid “little, if nothing at all” to acquire properties for demolition. She hinted the city would have to make a contribution to any effort to buy the property.
An under-the-table agreement or a misunderstanding?
Apex Mortgage says in its lawsuit that the city decided not to purchase the building outright. Instead, it wanted to have the building vacated in order to acquire it through a less expensive nuisance/demolition process.
In October 2010, Apex Mortgage President Ted Kapnek claims to have had a conversation with Kelly who said the city was interested in buying the property, but could only do so if it was vacant for at least 90 days and not used in any manner.
Based upon the conversation, Kapek evicted several of the tenants and emptied the building, which had been grossing $3,000 in monthly rent income.
Kapnek further alleges the city withdrew its building code violation case due to his agreement with Kelly.
New mayoral administration, new direction
The city’s interest in the Madison Avenue property significantly dwindled earlier this year after Michael Summers was appointed mayor and Dru Siley effectively took control of the Department of Planning and Development.
Kapnek believes Siley intentionally failed to inform him of the city’s disinterest in the property in order to keep the building empty and prevent it from being reopened as a rooming house.
The building was declared a public nuisance by the city in March. The decision was upheld by the Board of Building Standards in April, not long after which the building was vandalized and rendered “economically unfeasible to repair,” according to Kapnek.
The city informed Apex Mortgage it would never permit the building to be used as a boarding house again. It gave the company the option of either donating it to the county land bank as a tax deduction or paying the city’s cost of demolition.
In May, Apex Mortgage appealed the Board’s ruling in county court, where the case is still pending. The city has temporarily agreed to hold off on its demolition plans.
City accused of ‘false and fraudulent’ behavior
The lawsuit asserts that the city’s actions have damaged Apex Mortgage’s property rights and caused “a loss of distinct investment backed expectations.”
It calls the representations made by Kelly “false and fraudulent” and uses the same term to describe Siley’s omissions.
The city has not yet filed a response to the accusations alleged in the lawsuit.
Is it all just blustery posturing?
One has to wonder if this lawsuit is merely a strategic effort by Apex Mortgage to motivate the city to cut them a modest-sized check in exchange for the property.
The mortgage companies that owned nuisance properties on West 117th Street and Lakewood Avenue each claimed they had every intention of repairing the properties for resale – similar to what Apex Mortgage claims.
In each case, the mortgage companies ended-up dropping their court appeal challenges, and selling the properties to the city at a cut-rate price.
Don’t bet on it, but this matter could go in the same direction.
Lakewood Plaza ownership and the proposed Quaker Steak and Lube
Ownership of the property could change.
About a month ago, the Sun Post-Herald ran a story indicating Quaker Steak and Lube will open in December, and renovations at Lakewood Plaza will begin in mid-August.
Overlooked by some may have been a July 19 article in Nation’s Restaurant News that described the type of QSL slated to open in the plaza as a “mini-lube.”
It will not be the full-sized restaurant some residents dread. It will take up about 5,500 square feet – that’s just about the size of the Blockbuster space. The mini-lube opened in Madison, WI features a slimed-down menu and smaller portions targeted at a younger, more health-conscious audience.
Plaza renovations may still go forward, but possibly under new ownership, according to a recent court filing. The property has been under court-appointed receivership since April.
The receiver’s report filed on July 27 noted negotiations are currently taking place involving the sale of the mortgage note and/or property. The current owner, Giltz and Associates, defaulted on the $6 million mortgage and has been involved in foreclosure proceedings since the beginning of the year.
Incidentally, the report revealed Discount Drug Mart paid $22,750 in rent for the month of May. Blockbuster, Dots, and Radio Shack paid $5,155, $4,556, and $2,383, respectively.
Other commercial buildings in foreclosure trouble
Online reviews of Days Inn suggest it has serious problems, but what will city officials do about it?
The economy is still causing havoc in the local commercial real estate market.
Several buildings on Detroit Ave. – some housing notable businesses – are in foreclosure including the Baker Motors building, the Edgar Building (next to Merry Arts), the Donatos Pizza building, and the Two Dads’ Diner building.
Another building in foreclosure and under court-ordered receivership is the Days Inn at 12019 Lake Avenue. Last week the mortgage company received a default judgment when the building owner failed to show up at a foreclosure hearing.
A glance at some of the online reviews (see below) of the hotel suggests there are some major issues that need to be addressed.
I e-mailed the Division of Building and Housing regarding these issues in June. Remarkably, the department director indicated the city didn’t have any active violations on file for the property. He said he’d investigate the matter further, and possibly involve the county board of health.
Unfortunately, he was laid-off in the interim and the new department head didn’t exactly express the same urgency or concern. When queried, he replied with a one-sentence answer indicating the property would receive an inspection before the end of August.
Reviewed by a Hotels.com guest on August 3, 2011:
“This hotel was cheap, and centrally located to the sites we wanted to see around Cleveland. But it wasn’t clean at all. There was hair in the shower drain and butt fuzz on the toilet seat. The wall paper was peeling a little bit.”
Reviewed by a Hotels.com guest on July19, 2011:
“The ceiling seemed to be caving in on our room, the wallpaper was falling off the walls, and the bathroom was disgusting with long brown hairs stuck to the shower walls, We even had to walk to the store at the end of the street for a can of air freshener because it was so smelly. While checking in the guy at the front desk wouldn’t even look at us. […] But I guess you get what you pay for.”
Reviewed by a Hotels.com guest on July 2, 2011:
“Stay away!!! This place wins the “Slum King Award”…Body fluids on floor, filthy towels, peeling wallpaper, paint chippings, mold/mildew stained shower…only thing missing was the rats…”
Reviewed by a Hotels.com guest on June 17, 2011:
“Refused to fix a fire hazard in our room. I expected a budget buy, but not to have no working lamps and clock only to find out that there was a prong of an extension cord snapped off in the plug. The night staff refused to fix it and said they couldn’t call maintenance either.”
Reviewed by a TripAdvisor.com guest on May 28, 2011:
“First, the room was the dirtiest I have ever seen, without exaggerating, cobwebs on the ceiling, dirty carpeting, leaking toilet, tub that wouldn’t go down, filthy mirrors bedside lamps without light bulbs, dirty lampshades, nasty furniture and a tv with very few clear stations…By the way, the people at the front desk know exactly what this place is really used for, they just turn their heads and take the cash.”
Reviewed by a Hotels.com guest on May 20, 2011:
“…when we actually got to our room there was a stain on the sheets, a leak at the base of the toilet, and a clogged bathtub. So it’s safe to say during my shower I ended up having water up over my ankles. I felt unsafe to have my 5 year old son walk around without shoes on let alone socks…”
Reviewed by a TripAdvisor.com guest on Reviewed May 17, 2011:
“The dirtiest hotel what I ever seen.”
Reviewed by a Hotels.com guest on May 15, 2011:
“…Worn wallpaper and carpets, and cigarette holes in the comforter. Cheap sheets and pillows…”
Reviewed by a TripAdvisor.com guest on May 7, 2011:
“I am laughing because I only have to stay one night here. This is probably the worst hotel I have ever seen. Dark and dirty. Burns in the carpet and on the bedspreads. There is not enough room to type all that is wrong here. The BATHROOM! Oh my dear Lord, the bathroom. I am a little scared to use it.”
Reviewed by a TripAdvisor.com guest on March 11, 2011:
“The bathroom sink handles were broken and there was a mildew/cigarette stench in the room. These things could have been overlooked but when I crawled into bed, the top cover smelled of a dirty man and cheap cologne.”
Reviewed by john t of fl on Oct 18, 2010:
“I have never seen a hotel so dirty in my life. The first room was so dirty wall paper comming off the walls. The 2nd room was just as bad so bad that I cleaned the room myself with bleach cleaner very very bad mold problem.”
Reviewed by Ryan P of Timberville, VA on Oct 10, 2010:
“The building is aged, the floors are creaky, and the shower was moldy.”
Reviewed by a Hotels.com guest on Sep 30, 2010:
“..the first thing I saw when I turned on the lights was the dark stains on the dark green carpet. At this point I was to tired after a ten hour car ride. How ever when I got into bed just before I turned off the light I saw that the ceiling was peeling.”
Reviewed by a Expedia.com guest on Sep 1 2010:
“My room, the bathroom walls the paper was peeling, and it was marginally clean at best. One of the other rooms, the socket was hanging low, you could see mold behind it, and it was obvious that the wall had a major amount of water damage to it. They merely slapped some wall paper over the damage, but it did little to hide how bad of shape the room was in. I would not go back.”
Reviewed by a TripAdvisor.com guest on July 19, 2010:
“The wallpaper in our room was peeling off the walls, there was water damage on the ceiling, the door had to be forced shut.”
Reviewed by a TripAdvisor.com guest on July 19, 2010:
“We were in Non-Smoking rooms that had cigarette burns in the carpet and on the bed spread. The bathrooms were tiny with no bathtub, just a shower stall. The walls were bulging out and not in great shape.”
Reviewed by a Hotels.com guest on June 6, 2010:
“Unfortunately, when we got to the hotel we found our room had no air conditioning and was unbearably hot. The room was also cramped, dirty, and stuffy. All in all it felt like I was back in college in a hot dirty dorm room. When we asked the receptionist to fix the air, her reply was that the unit was “very old” and to just wait about an hour. Of course after waiting that long, the air never turned on and we were forced to leave.”
Reviewed by a Hotels.com guest on Dec 9, 2009:
“The coffee table with the leg barely hanging on. The bedspread with the numerous cigarette burns and *BONUS!* mystery stains”
Reviewed by a Hotels.com guest on Oct 20, 2009:
“The room however, was not very clean. It smelled musty and I later realized it was coming from the AC unit, which by the way was very noisy. I didn’t get the impression that the bathroom was clean either and the towels were stained (yellow stains!).”
Reviewed by a Hotels.com guest on Oct 5, 2009:
“I am traveling cross country and have stayed in a lot of “economical” hotels, this was the WORST!!! Burn holes in the blankets, mildew shower, dirty bathroom, cob webs, holes in the carpet. It was so gross!! Pay a little more and stay somewhere else.”
Reviewed by Renee A of Wilkes-Barre on Aug 21, 2009:
“The shower stall rod was falling off the wall it was barely hanging on, the bathroom sink was all chipped and cracked and the vanity looked like it had been through hell and back. My son couldn’t find his shoe so I looked behind the bed to see if it had fallen and I don’t think anyone really wants me to say anymore about that!!! GROSS!!!”
China Garden liquor license appeal still pending
Even though the city successfully objected to the transfer of China Garden’s beer permit in December, the carryout restaurant is still selling beer.
The owner of the restaurant has appealed the decision and is able to sell beer in the meantime.
David McCallister, the executive director of the Ohio Liquor Control Commission, said the appeal hearing hasn’t been scheduled yet, and likely won’t occur anytime before October at the earliest.