Re the Koenigs, it appears from our database of their acquisitions that the
properties that Pamiko is involved in are the former Dream Home properties with
which the Koenigs were previously involved. Two stories I wrote earlier this
decade on the rise and fall of Dream Home are attached below.
Steve Brandt
Star Tribune
Access #: 1098312
Paper: STAR TRIBUNE (Mpls.-St. Paul) Newspaper of the Twin Cities
Headline: New modular rental houses draw criticism from some on North Side //
Neighborhoods in north Minneapolis are objecting to a developer's factory-built
housing.
Date: 08/25/02
Section: NEWS
Page: 01B
Edition: METRO
Byline: Steve Brandt; Staff Writer
Graphic: MAP;PHOTO
Length: 37.7
Subject: land;housing;minneapolis;standard;business
Slug: DREM25
After years of accumulating empty lots as boarded homes were
razed, the lower North Side of Minneapolis now has a booming
housing demand. Chanhassen-based Dream Home Development has filled some of
it,
erecting six-bedroom, factory-built houses that are hauled to sites
in four pieces and assembled in a matter of hours. "We go from dirt to tenant
in three weeks," said Dream Home
partner David Kohlenberger. But two neighborhoods have told city officials
they don't want
Dream Home's style of development, and some housing activists
express similar views. They object to adding low-income rental
units in areas that already have plenty, and they worry about the
homes' design and durability. "I really see that housing as becoming future
slum landlord
housing," said Deb Wagner, a real-estate seller and a member of the
Jordan neighborhood's housing committee. Activists question the single-family
homes' lack of basements and
garages, asking where residents will store lawn mowers or bikes.
They point to bedrooms as small as 82 square feet, not far over the
city housing code's 70-square-foot minimum. They say the
all-electric heat in many of the houses will be expensive for
tenants. And they dislike the fact that Dream Home buys lots
directly from private owners or county tax-forfeit auctions. Such purchases
cut neighborhoods out of design reviews they get
when the city acquires lots for redevelopment. Kohlenberger said that his
homes meet building codes and are
designed "to be as durable as possible." He said a design revision
will address many of the objections. But an even bigger issue for some is
that Dream Home is
reintroducing rental housing on lots they targeted for
owner-occupied houses. In Near North, Willard-Hay and the adjoining Harrison
neighborhood, for example, the last census showed that half of the
households were renters. Almost half lived in government-subsidized
housing, according to Patti Marsh, a veteran housing activist. The settlement
of a federal lawsuit alleging segregation in
public housing curbs the government's ability to develop federally
subsidized housing in the city's poorer, more minority areas. But
private developers aren't bound by those limits. "Our neighborhoods are prime
targets for investors who are trying
to cash in on the affordable-housing mania," Marsh said. So far, Dream Home
has put up 30 homes, most in Minneapolis. In St. Paul, where it installed
its third home last week, DFL
state Sen. Mee Moua said she likes a model she was shown and sees
potential for sales to large immigrant families, who she said have
trouble finding homes with enough bedrooms in the urban core. Dream Home has
worked to hold down the cost of the homes so it
can make a profit renting to people holding federal Section 8
rental vouchers. A family big enough to qualify for one of its
typical six-bedroom homes holds a voucher worth $1,889 per month in
Minneapolis. The family pays 30 percent of its income toward rent
and utilities, and the voucher pays the remaining rent. Kohlenberger said
tenants have flocked to the 1,856-square-foot
houses. One of the renters, Aziza Sarwar in Minneapolis' Jordan
neighborhood, said that many Section 8 units are dumps and that
their landlords are "out for the money." But "it seems to me these people, so
far, want to help the poor
people," she said. . Diminished role The Minneapolis Community
Development Agency (MCDA) used to get
its pick of tax-forfeit lots in poor neighborhoods for no cost.
When it felt the market was right, it offered them to developers
for a few thousand dollars. Neighborhoods had design leverage
because their views on proposed sales were forwarded to the City
Council. That changed, apparently inadvertently, with a 2001 rewrite of
state law that has been interpreted to mean the city must pay the
appraised value for such lots. It has obtained fewer as prices have
risen. "We are seeing developers go to the county auction and picking up
vacant lots mostly, and then putting up housing that doesn't fit
the neighborhood," said state Sen. Linda Higgins, DFL-Minneapolis.
Kohlenberger said his company is finding it harder to dig up
Minneapolis lots outside MCDA control. It made offers on 10 MCDA
lots in the Jordan neighborhood, and three in Near
North/Willard-Hay. But the neighborhoods told the agency they don't
want lots sold to Dream Home, and agency officials say they will
recommend against the sales. "We refused them flatly," said Char Perry,
housing director for
the Jordan Area Community Council. The neighborhood group's letter
to the MCDA said its housing committee members who toured a Dream
Home house found its quality less than adequate and doubted the
houses will hold Dream Home's estimated finished value of $220,000. Dream
Home has said it hopes to develop a plan in which tenants
may buy the houses in which they live. But it will be months before
it firms up details, Kohlenberger said. Some who work with
neighborhood housing predict that tenants will be disappointed if
they move in expecting to buy. . About the company Dream Home is a
partnership of Kohlenberger - a former commercial
general contractor - and Paul H. Koenig, a rental property manager.
They met about a year ago and decided that modular housing with a
long-term warranty offered fewer headaches than older housing stock. The
company is accelerating its pace and could be installing
three homes a week by November, Kohlenberger said. If Dream Home can hold
that pace for another 20 months - meaning
it will have installed more than 350 houses - Kohlenberger said the
cash flow from rents will cover all overhead and debt. He said the
firm is finding cheaper, more plentiful lots in St. Paul and is
starting to talk to suburbs. The firm also installed its first fourplex this
month, on a Cedar
Avenue parcel only slightly bigger than a typical single-family
lot. Carol Pass, an activist in the housing committee for that
area, said putting the 20-bedroom fourplex on so small a lot gives
children no room to play. "It's just not a very responsible way to
do development," she said. Pass recalls with distaste Dream Home partner
Koenig's stint as
the manager of a duplex in the area. Koenig and duplex owner Michelle
Milbrandt, now his wife, were
sued by a housing advocacy group last year. Tenants had called a
city inspector who found 34 building code violations. After many
went uncorrected, the city condemned the building, and the group
sued to force repairs. A housing referee found that although
tenants didn't always make timely payments and had poor
housekeeping, Koenig gave them eviction notices to punish them for
calling the inspector. The referee ordered cuts in rent as
compensation until repairs were made. At one point in the dispute, a judge
ordered Koenig not to have
any contact with tenants after their attorney described him in
court papers as "very volatile and intimidating." Koenig described
the issue as a vendetta against landlords by the advocacy group. Michelle
Koenig sold her seven rental properties shortly
afterward, which helped Dream Home get its start late last year.
She is listed as Dream Home's co-owner with Kohlenberger in offers
the firm made to buy city lots, but Kohlenberger said Paul Koenig
is his partner in the enterprise. There are indications of financial stress
in both men's pasts.
Koenig shed some of his debt by filing a bankruptcy liquidation
petition in 2000. He listed assets of less than $21,000 and debts
of about $107,000, including back taxes and bad checks written at
Mystic Lake casino. Kohlenberger last year paid off a federal lien
for $31,177 in federal income taxes for 1997 and 1999. Both Koenig and
Kohlenberger acknowledged these events. . - Steve Brandt is at
<email obscured> or 612-673-4438. . . Dream Home locations: .
Chanhassen-based Dream Home Development has been buying vacant
lots in north Minneapolis, but neighborhoods aren't necessarily
pleased with the resulting houses. Here is the biggest cluster of
lots for which it has obtained building permits or has made
purchase offers.
Access #: 1227103
Paper: STAR TRIBUNE (Mpls.-St. Paul) Newspaper of the Twin Cities
Headline: An inner-city dream fades // Affordable housing is orphaned by its
developer's demise
Date: 02/19/05
Section: BUSINESS
Page: 01D
Edition: METRO
Byline: Steve Brandt; Staff Writer
Graphic: CHART;MAP;PHOTO
Length: 30.29
Subject: housing;development;cost;minneapolis
Slug: dream0219
Rest of post
The factory-built houses started popping up three years ago
across the North Side of Minneapolis, on vacant lots where
dilapidated housing had been razed years before. Now the company that erected
dozens of instant houses, there and
elsewhere in Minneapolis and St. Paul, is folding. That leaves
neighbors wondering who will run the six-bedroom rental units, most
lacking basements or garages. They fear the reappearance of blight. "I truly
believe that the afterlife of each one of these is going
to be a horror story," said Roberta Englund, who staffs a
livability task force that covers much of the North Side. She's concerned
about maintenance of the houses, mounting back
taxes owed on some of them, the impact on tenants, and potential
public costs for dealing with the properties. "This is a case where building
new homes in a community
diminishes the value of the property around them," she said. The homes were
put up by Dream Home Development of Chanhassen.
The plan was to finance manufactured housing with the federally
subsidized rents of the people who occupied them. The homes were
assembled from factory-built modules and were completed in days. Erect 350
houses, co-founder David Kohlenberger said in a 2002
interview, and the company could make a profit. But Dream Home
barely got one-fifth of the way there before running out of money.
Now its stock of houses is being sold to try to pay the firm's debts. "My
main goal is to get these things liquidated," said Paul
Koenig, Kohlenberger's onetime partner in Dream Home, who has
assumed control of the properties. Kohlenberger didn't respond to
repeated requests for comment. . A cautionary tale The firm's story is a
cautionary tale of the difficulties of
trying to catch the right wave in the housing market, and of
meshing a company's goals with a neighborhood's aspirations. Dream Home began
buying vacant lots in 2001 just as the prices
began rising because of increased demand from developers of
owner-occupied housing. The company began renting its housing just
as the demand for rental homes softened noticeably. And its cash
flow suffered last year when federal subsidies that supplement
tenant payments were cut back 7 percent. "He had good ideas, probably bad
timing," said Mike Czarnik, the
firm's former housing administrator, about Kohlenberger. Moreover, Dream
Home's path never meshed with neighborhood
aspirations. Neighborhood groups had earmarked for homeownership
the lots that Dream Home snapped up for rental development. They
argued that much of the North Side was saturated with rental housing. They
lobbied successfully to keep the city from selling lots it
owned to Dream Home. And the boxy minimalism of houses by Dream
Home and some other developers prompted the City Council to impose
a one-year moratorium on North Side residential construction until
design standards could be enacted. Dream Home was a marriage of
Kohlenberger's general contractor
background with Koenig's experience as a rental property manager.
But by the fall of 2003, Koenig was ready to sell his share of
Dream Home and two related firms. Kohlenberger agreed to pay Koenig
$1.2 million for his half, according to court documents. But employees say
that as 2004 wore on, Kohlenberger's
refinancing plans were put off in anticipation of a large sell-off
of homes to provide an infusion of cash. He sold more than a dozen
properties to investors, but that was fewer than the firm hoped
for, according to Czarnik, the firm's former housing administrator. Some
employees were laid off in November, and subcontractors
began pressing for payment. An excavating contractor won a judgment
for $83,847 in December, while a foundation contractor sought a
judgment for $147,393. When Dream Home auctioned office and field
equipment in December, the Ramsey County Sheriff's Office seized
proceeds for partial payment of the excavating debt. Then the Koenigs sued
the Kohlenbergers and the companies,
alleging they'd not been paid the $1.2 million and that the
properties hadn't been managed properly. According to Koenig and
his attorney, Steve Silton, the lawsuit was settled recently, and
Koenig will assume control of the properties, sell them in an
effort to pay debts, and fold operations. . Failure's fallout But more
problems may lie ahead. Out-of-state investors who
bought six Dream Home houses have filed a federal suit alleging
fraud. They sued Dream Home, the Kohlenbergers and real estate
agents representing the firm. The investors allege that the rental
income on the properties was inflated with fictitious rent
subsidies from nonprofit sources. A Twin Cities investor, Peter Bazil, bought
seven Dream Home
properties and said similar cash flows were shown to him. "I've had
many problems, many issues with them," he said of Dream Home. Meanwhile, six
former employees have sued to recover almost
$67,000 in wages, expenses and a $20,000 loan Czarnik made to the
company. Czarnik defended the quality of the houses, although he
acknowledged the neighborhood opposition to cookie-cutter designs. "I heard
mostly good things from the tenants about the units
because they were almost brand new," he said. The firm added
basements and garages in its latest models, he said, but those
added tens of thousands of dollars in costs. Yet some community leaders fear
that the problems of Dream Home
property may linger long after those financial and legal issues are
sorted out. They wonder how long the vinyl-sided houses will hold
up with intense use by large families. With no basement or garage
storage, they fear blight spreading across lots, some of which have
yet to be sodded. The reappearance of blighted properties is a sensitive
issue in
some north Minneapolis areas that worked hard and spent hundreds of
thousands of dollars in the 1990s to get such housing razed. "What do you do
with this very poor quality housing, and what
does the future hold for it?" asked Council Member Barb Johnson,
who represents part of the North Side. "It's a very scary thing. It
just is not going to last. Eventually we'll be tearing them all
down in five years." . Steve Brandt is at <email obscured> and
612-673-4438. . Dream Home's demise - Dream Home Development is folding
after putting up 80 "instant"
homes in Minneapolis and St. Paul. - Six-bedroom rental homes, most without
basements or garages,
are being sold to pay off company debts. - Back taxes are owed on some
houses, creditors are demanding
payment and out-of-state investors have filed suit claiming fraud. - North
Minneapolis neighborhood activists fear return of
blighted properties the homes were supposed to replace. . Disappointed
dreams Dream Home Development got building permits for close to 80
factory-built homes in Minneapoils and St. Paul in a three-year
period, most on the North Side of Minneapolis. A chart shows the
neighborhoods with Dream Home houses and their shares of the firm's
Minneapolis total. . Dream
Percent of
Neighborhood Homes city total
Willard-Hay 15 21%
Hawthorne 15 21%
Near North 14 20%
Jordan 10 14%
Phillips 5 7%
McKinley 3 4%
Central 2 3%
Lind-Bohanon 1 1%
Camden 1 1%
Cleveland 1 1%
Logan Park 1 1%
Harrison 1 1%
Whittier 1 1%
Percentages are rounded.