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Wednesday, January 21, 2015

What Can the City Do for the VA Homes?

After striking out on another round of bidding on the VA homes, what can the city do to get this moving?/FTM file

It’s been almost a decade since the city began the laborious process of gaining the necessary approval from the Department of Veterans’ Affairs to acquire the historic military homes located on Alexander Circle in Tower Park, known around town as the VA homes, and put them on the market for development.

Now, as FTM reported Monday, even though the city has secured all the necessary stamps and approvals from the feds — in addition to going through several rounds of appraisals to determine the properties’ real value — when it came time to bid, no buyers came calling.

This is not the first time the city has been left without an offer, leading some to wonder if the city is doing enough to incentivize the deal.

The development, which would require a massive abatement to remove lead paint and asbestos from the old homes, as well as significant upgrades to Alexander Circle’s infrastructure, will be a costly one any way you slice it.

“My phone was ringing off the hook Tuesday,” said City Administrator Don Martin. “When people read that the properties only cost $900,000, they were calling to say, ‘I’ll buy them all!’” But, Martin said, that’s a misconception.

The $900,000 minimum bid, Martin explained, accounts for the appraised value of the properties ($510,000), VA administrative costs ($167,000), required environmental and engineering oversight ($127,000), as well as nearly a decade’s worth of labor on the project from Fort Thomas city staff (approx. $100,000).

But the reality, according to Martin, is that the project will cost much more. On top of acquiring the properties, Martin estimates the abatement alone will cost roughly $1 million, and the infrastructure improvements would cost the developer another $500,000-1 million.

All told, that’s between $2-2.5 million just to make the properties suitable for restoration, which would then tack another hefty sum on the bill. Because the homes are listed with the National Register of Historic Places, there are numerous restrictions on how the homes can be restored to inhabitable conditions after the abatement.

It is the piling up of these additional costs that, developers say, have kept them at bay.

“It’s a huge project,” said Mark Ramler, owner of Mansion Hill Properties, “and a huge risk for any single developer to take on."

After Monday’s lack of bids, council members had some questions for Martin at Tuesday’s City Council meeting. Councilman Ken Bowman said, in a post-meeting interview, "There has been a lot of interest in individual properties, but not so much as a complete development. More could be done to market to a targeted group of potential developers, as well."

Ramler has echoed the notion of targeting multiple developers instead of a single buyer, even saying he would like to be a part of such a conglomerate. “Unless the city is willing to structure the deal differently, and work with multiple developers, then I fear they will never get anyone to touch these houses."

But, according to Martin, such an option has been possible all along, but would require those multiple developers to form an LLC to acquire the properties. “We certainly envision and encourage this approach for the next time around,” he said.

Freshman Councilman Adam Meier wondered whether the properties could be sold one at a time. "I would personally like to find a way to sell each parcel individually and spread the risk that way, but it will be difficult given the parameters of the agreement with the VA,” he told FTM.

The difficulties involved in this approach, though, expand beyond the city’s agreement with the VA, according to Martin. Martin said, to do so, the city would basically have to take on the role of developer, covering additional costs like surveying, lot divisions, and street resurfacing.

“Getting into a project like that, with no experience with a such a project, is not a good idea,” Martin said. “We don’t have the expertise, and it shouldn’t be incumbent on taxpayers to fund what, in reality, is a private development like this."

In short, the $2 million or greater price tag, for Martin, is not a wise cost burden for the city to endure.

For Bowman, though, it is clear the city needs to step in, and there might be a happy medium. "It appears that the city is going to have to do more to move this project forward,” he said. "This could mean using general services to install sidewalks and help with infrastructure on the site, or share in the cost of asbestos and lead paint abatement."

“There may be (something the city can do), but I’m not sure what it might be,” Martin said. “We want to hear what the developers have to say” before committing any more city moneys to the project, he said.

The next step for the city is to meet with developers who have previously expressed interest, although none have offered a bid, to survey how exactly the city could alleviate the risk which, so far, has prevented any developer from taking the plunge.

Martin hopes to have new recommendations ready to present to City Council by next month.


  1. Looks like it's a showdown on who'll blink first, the developers or the city.

  2. Yes the city should definitely subsidize these homes for the top 5% instead of spending that money elsewhere

  3. As I pointed out when the City heard crickets at the bid opening Monday, it is time for the Mayor and Council to step in and look for ways to make this happen, including a public recognition that preserving and developing these homes as historic assets is a CITY priority. Given that it is a priority, it needs to be in the budget. Yes, they will be high-end private homes, but before they have a shot at being high-end private homes, we are saying that there will be $2.5 million in acquisition, administration, infrastructure, abatement, etc. required to get the properties to a base level where there is feasibility for private development. Although an initial iinvestment by the City will be required, the good news is that ultimate long-term conservatorship will be the responsibility of the homeowners who end up with the properties. The City needs to preserve the homes and needs to think on its feet to make that happen. Creative thinking like a developer LLC or something of the sort to spread the financial burden / risk, while also spreading the work and the technical expertise sounds like a great idea, as the construction industry is booked heavy right now and worn thin on capacity and the expertise to handle the complexities of this project. Pooling the physical and technical resources from various players will promote the right solutions for the various moving parts which reside in this project. With no disrespect, doing the Quarterback on this deal is above Don Martin's pay grade, as his role is to implement not formulate policy. Mayor Haas has more than enough business and real estate development savvy to make this happen and should do so, as his resume is why he occupies the Mayor's chair.