The Compost Bulletin

Trail Ridge Apartments, located at 875 21st Ave SE in Rochester, has been making headlines the past two months, along with its mysterious owners. What is going on at this building and is it a preview of what is happening at many similar properties in the city? What is the city doing, if anything, to correct the situation and make the owners responsible for their actions or neglect? These are just a few of the questions that arise. The Trail Ridge property has a long history of problems. The Campustown subdivision on which it resides was first platted in 1976 as potential student housing for the nearby Rochester Community and Technical College. The 60-unit complex was built in the 1980s as Carnaby Apartments. From the beginning it was a low-income subsidized housing unit and quickly developed a bad reputation and problem tenants.

In 1992 it was purchased by a Midwestern real estate investment trust, Dominium. Dominium owns and manages over 20 rental properties in the North Central area, many of which receive federal assistance in the form of subsidized rentals known as “Section-8” housing. They still own several properties in Rochester, including the almost equally notorious Homestead Village townhouses across from Cub Foods. In its defense, Dominium has done much to keep Homestead in better condition than its previous owners and has evicted problem renters.At Carnaby they hired a “cleanup man”, Scott Eggert, as manager and gave him the task of evicting troublemakers and renovate the property. In 1994 Eggert was shot in the leg by a “visitor” of one of the tenants. Gang graffiti had recently made its presence in the complex and the shooter was a suspected gang member. Eggert escaped serious injury when the bullet ricocheted off his key ring instead of entering his thigh. This was a rather rare occurrence in Rochester at that time, unlike now. It was not that rare at Carnaby. Under Eggert police visits to Trail Ridge dropped dramatically. In 1996 Carnaby was heavily renovated and emerged as Trail Ridge Apartments. The opening was attended by former Minnesota Twins pitcher Jim Perry, who was an investor with Dominium.

In July, 2004 Dominium was cited for failing to warn their tenants about the use of lead-based paints in their rental units. They spent over $1 million dollars to correct the deficiencies and were given a civil fine of $10,000. Trail Ridge was one of the properties affected. In August, 2005 Dominium unloaded the property to the current owner, Rochester Service Corp LLC. The purchase was accomplished through a mortgage from Minnwest Bank for $2.9 million. This was a surprising mortgage amount for a property with an assessed value of only $2.4 million by the county. The LLC (Limited Liability Corporation) that owned the complex was just a corporate shell. The real owners are Hyder and Asgher Jaweed, two brothers residing in the wealthy suburb of North Oaks. Rochester Service listed its “headquarters” at another problem property of theirs, Brookhaven Apartments in Brooklyn Center.

The pattern of events that followed after this purchase could have been redicted from the previous behavior of the owners. From the date of purchase, conditions at Trail Ridge went from bad to deplorable. Maintenance ground to a halt. What little maintenance that was done usually resulted in contractors being unpaid, including a train of apartment managers. Tenants, disgusted with the rapid disintegration, filed a civil action in Olmsted District Court on October 31, 2005. They arrived in the courtroom with evidence of water leaks, broken appliances, faulty fire and smoke alarms and an infestation of cockroaches.

The action was settled in January, 2006, but the terms were ignored by the
owners. In April, 2007 tenants returned to court brandishing evidence of the neglect, including plastic bags filled with cockroaches collected from the buildings. The Trail Ridge owners were ordered by the court to set up a fund, monitored by the court, to contain $5,000 at the end of each month for use in repairs and maintenance. They were also ordered to pay contractors who had filed
claims against them. All of these orders were ignored. The fund never contained sufficient funds, if it was set up at all. In May, 2007 the city filed charges against the Trail Ridge citing a dozen housing code violations, many related to fire protection. To top things off, the owners failed to pay their $18,625 first half 2007 property tax. At this point they had paid off only $24,000 of the $2.9 million mortgage on the property. A couple of suspicious fires in empty apartments at the complex in July, 2007 highlighted the problems. The fires were deliberately set in garbage cans placed under the non-functional sprinklers in some vacant apartments. Not surprisingly the sprinklers didn’t sprinkle. After the second fires officials ordered that there be 24-hour monitoring of the building and that all the locks be changed. No word on who would volunteer to do that work or who would insure they were paid.

On August 14, 2007 Asgher Jaweed (who is now operating under the name Ali Ashgar was to appear in Olmsted District court to answer the code violations. He was absent and a bench warrant for his arrest was issued. This was the second
warrant for his arrest this year fro the same reason. It was time for the end game. Minnwest Bank, sensing a problem, filed a mortgage foreclosure notice against Rochester Service LLC in June, 2007 citing lack of payment on the mortgage. A sheriff’s auction on the property was scheduled for August 30, 2007. Sensing things were getting tough, Hyder Jaweed filed for chapter 11 bankruptcy on July 23, 2007 in St. Paul. In a previous action he had also filed bankruptcy on another of their “corporations“, Robbinsdale Apartments Housing Assoc. I, on July 5, 2007. The bankruptcy proceedings effectively blocked the foreclosure proceedings by Minnwest. It is unclear whether the rent checks to the owners ceased. Also unknown is how much public subsidy money was collected by the owners while running this sham.

That is where the situation at Trail Ridge now stands. A fairly decent apartment building has been turned into a slum by neglect and has become a blight in an already blighted part of the city. The situation is similar to what happened in the mid 1990s, when a local property manager working for non-Rochester owners, turned much of Center Street and its surroundings into a slum by mismanaging the properties. The city eventually was able to revoke his rental license, but it took an excessive amount of time and energy. What Rochester Service did to Trail Ridge should not be a surprise. It follows closely the owners’ behavior with similar properties they owned in the Twin Cities.

The Jaweed brothers have run a string of limited liability corporations to own and manage apartment complexes in the Twin Cities and nearby suburbs. In June, 2006 four properties owned in Fridley under the control of Sunshine Management LLC were cited for numerous housing code violations. These included fire code violations, utility problems and numerous previously cited infractions which had not been fixed under previous orders. The city council revoked the rental license for Sunshine Management. Revocation was finally approved in September, 2006. The Jaweeds managed to sell the properties to a new owner before that date and claimed as they were no longer the owners they were not responsible for fixing the problems. That ploy worked as the new owner fixed the property and applied for a new rental license.

In July, 2005 a property in St. Paul came to the attention of city officials after residents of the neighborhood petitioned the city council to take action and revoke the owners rental license. This property at 729 8th Ave. SE was owned by Minneapolis Apartments Association, which was managed by Hyder and Asgher Jaweed. The building was filled with drug dealers, criminals and an active prostitution operation. It was a frequent destination for St. Paul police. The building was in a state of complete disrepair with broken windows, litter and little maintenance. The mayor of St. Paul along with city and University of
Minnesota officials went on a tour of the complex and witnessed a drug dealer
openly conducting business from his front window on the first floor. The Jaweeds claimed that since the building was used for section 8 housing and some of the occupants were part of the Hennepin County re-entry program, it was difficult to
evict problem tenants. They neglected to mention they had actively recruited such residents and gladly pocketed the government money their subsidized rent provided. The St. Paul city council revoked the rental license in September 12, 2006. Subsequently the property was purchased by a Dr. Syed Raza who managed University Court Apartments LLC and refurbished it. Raza was granted a new license in January, 2007.

Another problem property was Brookhaven Apartments located in Brooklyn Center. (This was the “headquarters” of Rochester Service Corp as well – at least on paper.) This property was the site of numerous criminal activities, a few fires and neglect. Its rental license had been yanked, before being reinstated November, 2006. On February 4, 2007 a cab driver was murdered in the parking lot outside the Brookhaven Apartments at 3:45 in the morning. Robinwood Apartments in Robbinsdale has a similar history and pattern of operation. The list could be extended. These owners have either had an extraordinary string of bad luck in their investments, or something else is going on.

There is a similar pattern of behavior in all these cases along with similar outcomes. The properties have been purchased and neglected with apparently little interest in maintaining or increasing their value. The steps in the process are probably being duplicated by other pseudo landlords for the same purpose. The sequence is:

• Form a limited liability corporation, place yourself in a position of management and control..
• Purchase a property(s) under the auspices of LLC ownership with highly leveraged financing. Preferably the property is already approved for Section 8 low-income housing subsidies.
• Fill it with subsidized renters without regard to their background or character and start collecting the government rent checks.
• Collect “management fees”. This is the nice part – you determine the amount.
• Run the property into the ground by neglecting maintenance and failing to pay bills. Make sure the LLC never accumulates any significant assets.
• Wait for foreclosure or local government action to shut your down. If you are foreclosed upon, declare bankruptcy to delay the process. Search for a new buyer and make a quick sale before either process completes. This relieves you of any further responsibility.
• Oh yes, continue to collect rent as long as possible, especially the
  subsidies.
• Don’t forget to pay your lawyer(s), but hardly anyone else.
• Go back to the first step and repeat.

This has been the pattern of activity that has been going on since 2002 with the Trail Ridge owners. The law appears to be unable to attach any responsibility for their, the laws they have broken and the properties they have turned into squalor. As an example, Asgher Jaweed listed as an owner, was to make two appearances in Olmsted District court in April and August of 2007. He was to respond to claims against the property by companies that performed work there and on the fire code violations. In both cases he was absent and bench warrants for his arrest in Ramsey County were issued. The arrest warrants were cancelled when Jaweed’s attorney’s came up with the minimal requirements of the court. No punishment was ever handed out.

The city of Rochester and the county have paid very little attention to the activities of landlords who seem to deliberately run their properties into the
ground. The result of this omission is a deteriorating rental sector in the city and the creation of slums in once nice neighborhoods. The history of the owners of Rochester Service LLC could certainly have been discovered when they applied for rental licenses. Their activities had been well documented in the Twin Cities. No doubt this was one reason for branching into our fair town. The court system has done little better in dealing with this situation. Numerous failures to comply with court orders and the law have resulted in little action against them. They seem to be able to ignore the court with impunity and no consequences.

If we are to maintain some semblance of order and not let the entire center and southeast section of Rochester become a slum, the city must take action against derelict landlords of this sort. The banks that gave them loans, with apparently no knowledge of their previous history, also share responsibility. Without the easy mortgage money they could not have so easily put their scheme into action. The decent people who were tenants at Trail Ridge and victimized by the owners’ actions also deserve compensation.

And maybe most of all we should begin to examine the idea of subsidized housing itself. Is this really a good way to provide adequate housing for people, and if so, how do we separate the deserving recipients from the scum. It should be noted that even if the renters stop paying rent, which they are entitled to do when conditions reach what they are at Trail Ridge, the subsidized payments still go directly to the owners. The Jaweeds are by no means the only poor landlords in Rochester. The city and county had better wake up and address the issue before this becomes the norm instead of the exception and before the blight spreads across the entire city. As for the Jaweeds, it will be interesting to see if the bankruptcy stands up and they can avoid the foreclosure or if they will be able to peddle the property to another owner before either takes place. They have already attempted to do just that right after they declared bankruptcy. Their most recent gambit was to hire Paramark LLC as new property managers, apparently replacing Equity One Management which just happened to be owned by the Jaweeds. Paramark spent two weeks clearing up the fire code violations and cleaning the property sufficiently to pass a fire code inspection. Paramark had also been approached by the Jaweeds to purchase the property, but so far has declined. The fire code violations, however, still are being applied. The county attorney dropped the charges against Asgher Jaweed and applied them to Rochester Service LLC. At last there may be some
repercussions for their activities.

The owners no doubt are already working on the next step in their plan to pocket public money and ditch their ransacked property. Stay tuned.