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City bans bulk land-bank sales after lopsided deal with not-for-profit

November 3, 2012
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A Tennessee investor bought this 912-square-foot house at 1837 Albany St. for $71,500 in February. The city sold it to Homeless & ReEntry Helpers Inc. last year for $1,000. (IBJ photo/Perry Reichanadter)
allow the organization to raise money from charitable sources and by selling the best-conditioned vacant properties, using the proceeds to help save some of the worst.

“Clearly, we need a way to more proactively manage that inventory of land bank properties and actually take in more and get them out in a way that’s more strategic,” Taft said. “The problem is, [with a small staff] it’s difficult to analyze which are desirable and which are the dogs.”

Nice, the real estate attorney, has two ideas. The first scenario: The city petitions a judge to appoint receivers to oversee the turnaround of vacant and abandoned properties, ensuring maximum return for the city.

Another option is to hire someone who “knows what they’re doing” to handle disposition of vacant properties, Nice said.

“There are plenty of real estate brokers looking for jobs—people who understand the market and investors’ mentality,” he said. “Most nonprofits have no business flipping properties. The city should acquire some expertise and probably could do it for $100,000 per year.”

Help wanted

Since neither the land bank nor the Marion County Treasurer is set up to handle such a heavy volume of vacant property dispositions, assistance from supervised not-for-profits is a smart move to keep the process moving, argued Doug Dale, whose locally based Fortune Property Group was the largest buyer of homes from Homeless & ReEntry Helpers.

Dale bought 90 units for $6,000 apiece and figures he’s spending an average of $25,000 to $30,000 each to get them into shape for renters.

Fellow local investor Brad Andrews said he spent about $20,000 each to rehab the 15 or so HRH properties he and his partners bought. That’s a higher investment in mechanicals, carpet, paint, windows and plumbing than properties he buys from other sources, including the multiple listing services.

Investors say with those costs, properties purchased through HRH wound up costing about as much as they would pay through the county directly. The advantage was inventory.

“The city needs multiple options to handle the problem,” Dale said. “I think Don’s motives are honest and pure. He legitimately makes sure it’s a rehab. I think it’s a good way to move properties; otherwise, we have a lot of properties not doing anything and not generating taxes.”

Chad Handley, a former executive at The Estridge Cos. who partnered with another firm to buy about 10 of the HRH homes, said he’s finished all of his properties, including the three-bedroom, one-bathroom house at 4007 Cass Court, near 38th Street and Post Road, that he sold to Westfield City Councilor James Ake.

Ake paid $42,000 for the home, which rents for $750 per month. It’s one of four he purchased through Handley.

“It’s much better than demolition or letting them sit vacant,” Ake said of the city’s deal with Homeless & ReEntry Helpers. “I think it serves a good purpose and everybody wins.”

More money, more charity

Homeless & ReEntry Helpers operates out of three aging industrial buildings in a 5.5-acre compound along East Michigan Street just northeast of downtown.

Most of the buildings are in some stage of remodel. Hawkins has outfitted the campus with a kitchen and large dining area, where volunteers serve as many as 700 hot meals a week. A large room is piled with donated clothing. Another building has office space for four referral case managers who meet with homeless people and ex-offenders seeking services.

“I had no intentions of feeding people; it just kind of happened,” said Hawkins, who added that he sought income from properties as he began to understand the scope of the homeless problem. “As we get money, we do more work.”

He said he came up with the idea of buying vacant homes and approached investors Brad Davis and Doug Dale for financing. Hawkins said his goal was to hold the properties, but the investors were only interested in flipping.

Davis, who acquired about 25 homes from Hawkins, said he pledged assets to help him qualify for the purchases.

“This was a good way to put a lot of houses back into service,” Davis said. “The end result is houses are rehabbed and put back on the property tax rolls.”

Hawkins can relate to the veterans, ex-offenders and homeless people he serves. He served a few months in prison for theft after a tanning bed importer he ran went belly-up in the late 1980s; he also was accused of theft in 2002 by the motorcycle organization Abate of Indiana Inc.

He twice has filed for personal bankruptcy, most recently in 2006, and Hawkins said he eventually lost his home in Fishers and 12 rental properties he had over-extended to buy.

Hawkins was homeless when he moved into what is now the Homeless & ReEntry Helpers campus in 2008, with permission from property owner Jim Henke but initially without paying rent.

He now pays about $4,500 per month, which counts as a credit toward an eventual purchase of the property.

Hawkins said he doesn’t take a salary. HRH gives him a place to live, meals and gas money to fill the tank in his 2006 Chrysler Town and Country minivan.

For two years, Hawkins slept on a couch in his office. Now he’s building an apartment upstairs.

“I don’t have a high lifestyle,” he said. “It doesn’t take much to make me happy. Me and my group are very dedicated to what we do.”

Spend a few minutes talking to Hawkins, and it’s difficult to doubt his sincerity. But there’s no question he’s in over his head on the details.

His organization hasn’t filed the required disclosure form with the IRS since 2009, a year after he created HRH. That filing shows no revenue and no assets.

Hawkins said in August that the organization was finalizing its financials after he finally got around to buying a copy of QuickBooks. In mid-October, he said the filing would be finished in two more weeks. It was not complete by IBJ’s Nov. 1 deadline.

Hawkins said he’s behind on paperwork after suffering an aortic aneurysm in May. Now that’s he’s back to work, catching up on IRS filings isn’t the only thing on his to-do list.

The man listed first on HRH’s board on its website and in IRS filings—Gregg Keesling, president of Workforce Inc., which provides jobs to ex-offenders—said he never accepted an invitation to join the board.

The reason: He hasn’t seen financials or proof the organization secured insurance for directors and officers.

Keesling said he’d heard about Hawkins’ plans to fund the operation by buying and refurbishing homes—an idea that “seemed too good to be true.”

“Don’s a good guy with a good heart,” Keesling said. “He wants to do the right thing. It’s just a matter of getting him the best advice.”•

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