Little Rock apartments seek up to $589,692 in damages after city closed complex

The city of Little Rock's decision to close a Colonel Glenn Road apartment complex cost its owners between $414,759 to $589,692 in lost income, an economic analyst told a Pulaski County circuit judge on Monday.

The city's analysis of losses at the Alexander Apartments comes in at about a third of the low estimate, $155,237.

Judge Alice Gray is considering how much the city must pay the apartment complex and four of its former tenants for closing the 141-unit apartments in December 2015 and giving its occupants a week to vacate. She ruled last month that authorities used an illegal procedure to close the complex and force out tenants. The Alexander Apartments had sued to challenge the closure procedure.

Monday's hearing was the first day in a three-day trial to determine what damages the city will have to pay.

Former residents Melody Branch, Carolyn Ford, Ingram Murphy, and Linda Wheeler are to testify today about what the closure cost them. They've settled claims against the Alexander Apartments' owners out of court.

The city is expected to offer its defense to the damages claims on Wednesday. Proceedings resume at 9 a.m. today.

City officials justified the apartments' closure by citing fire and safety violations found during inspections at the complex just west of Colonel Glenn and University Avenue. City inspectors and the Alexander had been battling in the city's environmental court for several months in 2015 until the fire chief shut down the complex.

Challenging the closure in Circuit Court, the apartment owners and tenants countered that city officials apparently considered none of those issues dangerous enough to require an immediate evacuation. The shutdown order was based on a week-old inspection with tenants then given a week to find new lodging.

The closure lasted just over a week, but the loss in tenants and resulting bad publicity almost immediately sent the apartments' occupancy rate plummeting down to one-third of what it had been before the city's shut-down order, said Jason Bolden, the managing partner for the apartments.

He said tenants in 58 of the 90 available apartments moved out, some of whom had been living at the Alexander for 15 to 20 years. Bolden said all 141 of the apartments in the 17-building complex have been brought up to city standards.

The four-partner consortium, which includes Jerry Bedford, Clyde Wesley Freedman and Paul Sheptow, bought the 7.4-acre property in March 2014 for $2.8 million, property records show.

Income from the 51-year-old complex dropped from $45,480 per month in November 2015 to about $26,000 in December 2015 after the closure order, Bolden said. Revenue further dipped to $15,146 in January 2016, a "tremendous financial impact," Bolden told the judge.

To attract new tenants, the apartment reduced rents by $50 to $100 per month, substantially increased its Craigslist advertising, courted tenants from the Little Rock Housing Authority and changed its standards for tenants, allowing some tenants with old violent felony convictions to rent, Bolden testified. Applicants with criminal backgrounds are decided on a case-by-case basis, he said.

"It seems like we did everything we could," he told the judge. "We had dozens of vacant apartments. We needed to rent them out as quickly as we could. We were desperate ... trying to rebuild our occupancy."

Ralph Scott, a Hendrix University economic professor, testified that he reached his lost-revenue conclusions by studying the Alexander's occupancy rate, the number of apartments the complex has available to rent each month and the monthly number of new rentals.

Considering an average occupancy rate of 88.2 percent over the past two years, Alexander has lost $414,759, Scott told the judge. Using the 92.7 percent rate that the complex had over the 18 months before the shut-down order put losses at $491,256, he said.

Another loss the judge should consider is the Alexander's decision -- as part of its efforts to attract as many new tenants as possible -- to join a Veterans Administration housing program that requires the complex to pay the electric bill for eligible tenants, Scott told the judge.

So far, apartment operators are out $5,481 for that extra expense for the 10 veterans who are renting through that program, he said. Projected out over the next 10 years, that cost will reach $98,436, he said.

"Totally incorrect ... totally nonsensical" is how Scott described the city's cost analysis, which uses a 72 percent occupancy rate and does not include the additional electrical expenses the apartments have taken on.

According to the latest survey, which was shown to the judge, Little Rock has about 10,934 apartment units like those offered by the Alexander, and they have an average occupancy rate of 88.2 percent. Citywide, there are 42,260 apartments with a 92-percent occupancy rate and an average rent of $716 per month.

How much weight the judge should give the reasons for the shut-down order is a source of contention between the sides.

Alexander Apartments attorney Michael Shannon said the physical state of the property back in 2015 shouldn't matter because those conditions didn't have any impact on the city's decision to use an illegal procedure to shut down the complex.

City attorneys Sherri Latimer and Shawn Overton countered that the judge must keep the property's condition in mind when considering damages. Describing the Alexander as "unsafe" and "rife" with safety and fire code violations, Latimer said there is a reason that tenants left and never came back.

"The conditions are exactly the reason tenants left and didn't return," she said. "Our position is the apartment complex was not a place tenants chose to return to. These people had a very good reason not to return."

The only thing the city and apartment lawyers appeared to agree on Monday was that they do not want news cameras in the courtroom. They had them banned.

Gray ruled last month that the city's closure procedure, initiated at the order of the fire chief, violates fairness provisions of the Arkansas Constitution because neither the Alexander owners nor the tenants were given an opportunity to contest the decision.

She's also ruled that the city fire code authority the chief relied on -- his emergency evacuation powers -- was insufficient to shut down the apartments because there was no immediate danger to the property and tenants.

The Alexander Apartments were closed for eight days in December 2015 until Gray, in response to the lawsuit by the apartment owners, ordered the complex reopened. A group of ex-tenants later joined the lawsuit complaining that they also hadn't been given an opportunity to challenge the closure order.

The former tenants are being represented by Legal Aid of Arkansas and the consumer protection clinic at the W.H. Bowen School of Law at the University of Arkansas at Little Rock under the supervision of attorney Amy Pritchard, the clinic director.

Metro on 12/12/2017

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