LEXINGTON, Ky. (LEX 18) — On Thursday, Manuel Young packed some of his belongings during his lunch break at an apartment complex he's lived in for two decades.
"It was a good home atmosphere. The owners were outstanding individuals," said Young reminiscing.
Since 2001, his family has seen five different owners since Belva Manor, Inc.: Blue Valley Apartments Inc, Augusta Arms HLD LLC, UPC Augusta I LLC, CC Bourbon LLC, and now CSC Bourbon Court Realty LLC.
All companies with addresses out of Kentucky.
"Everything went to hell and a handbasket pretty much," said Young.
New Ownership: from private equity firm to private equity firm
CSC Bourbon Court Realty is associated with Cooper Street Capital, a private equity real estate company that aims to "identify value-add and income-producing multifamily properties with growth potential in select cities" according to their website.
County records show they purchased the multifamily Bourbon Court Apartments for $9.1 million and changed the name to Dawn Run Apartments on April 27.
The company is also managing the property through its "CSC Management" company. Renovations have already begun at the property.
Tenants like Young's family were given 30-day notices to vacate for repairs and renovations after the company inherited more than $56,000 worth of housing violations.
As of June, several units and common spaces were condemned in numerous buildings.
"No one on the premises had an opportunity to know what was going on about the property. What was going on in regard to the building code violations, fire code violations or anything of that nature," said Young.
He believed his family would be allowed to stay during the process.
"We were told by CSC properties. Oh well, you don't have to worry about moving, everything's gonna be fine. We're in the process of remodeling and renovating and what we're going to do, we're going to move you all into the three bedrooms. Once the three bedrooms have been renovated, we're gonna move you and then that'll be your permanent residence," said Young.
Neither Cooper Street Capital nor former owners CC Bourbon LLC, responded to our requests for information.
Because Young's unit was condemned, the city of Lexington does offer income-based relocation assistance. However, his family's combined income was over the $54,000 threshold.
Thankfully for him, his former pastor pointed him in the direction of Mountain Comprehensive Care which is helping them relocate.
"We would have had to struggle on our own. Financially, it's a struggle month to month," said Young.
He says the city of Lexington's Office of Homelessness Prevention and Intervention has also been helpful.
Who holds out-of-state real estate investors accountable?
The city held off on foreclosure and forcing a sale in order to prevent the pending sale from falling through with Cooper Street Capital.
The city said it would discuss utilizing Affordable Housing funds to turn the apartments into affordable housing in April.
Commissioner Charlie Lanter said on Thursday that their Affordable Housing Manager met with the new owners shortly after the purchase and got turned down because their "financing didn't allow any additional subsidy."
Lanter says they had staff on site for weeks making contact with residents and trying to help with relocation. There's a program that offers a thousand dollars to some low-income tenants whose homes are condemned so that they can move.
Some residents allegedly chose to stay based on promises from the new owner of pending improvements.
Code Enforcement Director Alex Olszowy says most of the notices of violations issued are for 60 days to repair.
He says owners seek to get permits as needed for most of the buildings for renovations, and they would be given as much time as the permits allow to complete all the work.
Inspections will need to be done before they are approved for tenants to move in.
Art Crosby, executive director of Fair Housing Council, says he's noticed out-of-state real estate investment has become more common in Lexington over the past five years.
"You didn't use to have this, like when the housing market wasn't as hot, you didn't have as much of this quick flip. We've had investors come in and purchase property sight unseen," said Crosby.
From his experience with hundreds of tenants, he's noticed a difference in accountability between locally owned properties.
"If you're a landlord, there's not always a lot in the process that holds anybody accountable. Right, but at least local landlords are accountable to their neighbors and to their community and to their local officials," said Crosby. "Out-of-state investors don't necessarily always have that, specifically when it's not even like one company that owns it, but a bunch of investors who just pulled together and it's just about a revenue stream not about maintaining the asset."
As far as financial liability goes, code enforcement can issue liens on the property for unpaid fines after a certain period of time.
Property-holding real estate investment trusts (REITs) don't have to pay corporate income tax because at least 90% of their earnings are distributed to shareholders as dividends. The company does have to pay property tax in Fayette County.
CSC reported 64 investors to the SEC in their latest filing.
What's Next?
LFUCG’s Office of Homeless Prevention & Intervention coordinated to have staff from Mountain Comprehensive Care Center and Community Action Council on-site alongside LFUCG’s Division of Community and Resident Services to engage over 25 tenant households.
Lanter says staff were on-site for multiple days, accompanying Code Enforcement and Fire as they worked the property.
Mountain Comprehensive Care Center served 14 households, including 10 households provided with up to 30 days in a hotel. They provided four households with financial assistance toward relocation costs.
"Many households served received braided assistance with Community and Resident Services, with Mountain Comp providing hotel stays or financial assistance in excess of what their programs can provide," said Lanter.
Community Action Council assisted 19 households total, including two households with direct financial assistance toward relocation and 17 households provided with housing navigation and case management services.
Community & Resident Services provided short-term lodging assistance through local hotels for seven residents.
They also provided $1,000 in relocation assistance for seven families to new homes.
There are 17 pending relocation cases. Lanter says once these families find new homes, they will be provided with assistance as well.
Code Enforcement requested a construction plan with a timeline for when buildings are to be put back in service. A supervisor is supposed to be keeping an eye on the property regularly.
