Home foreclosure to end battle in Anoka blight fight

The deal that went down at 302 Fremont Av. in Anoka in 2005 could possibly be written off as "irrational exuberance" at the height of the real estate boom. Nowadays, that exuberance has gone sour.

Business was going great for Paul Kaiser, a general contractor whose new construction work centered in the western suburbs. The city of Anoka saw an opportunity to end a protracted eminent domain fight with the previous owner and make a model of a blighted property that nonetheless had a place on the National Register.

Three years later, the 1880 Greek Revival home, close to completion, is in foreclosure, with a delinquent loan of nearly $313,000 to Wells Fargo; the sheriff's sale is Aug. 29. The city has written off $185,000 of an unpaid $200,000 Housing and Redevelopment Authority (HRA) construction loan.

Kaiser, far from his dream of having a remodeled showcase of a home office, is living with his mom and other friends and family members. Although he's largely left the construction trade, he still harbors hopes he can make one last deal that would allow him to finish the project.

City officials now note that if the sheriff's sale goes through, the house still is in much better condition than it was when Kaiser took possession of it, and that it's the nature of HRA departments to take risks.

"What HRA does is take projects the private sector won't take on," said Jennifer Bergman, the authority's executive director. "Whatever the reason is, that's really our role, to try to make improvements to the city."

'House ... held up by hope'

Kaiser now notes ruefully that he signed papers for the property about the time his own business went south.

"When the housing market turned, it divided my focus," he said. "It really added difficulty to a project such as that. Things that were almost automatic with my business, scheduling work and finding work and budgeting and getting paid, were no longer automatic. I was chasing money and finding work. That distracted the focus from 302 [Fremont] to kind of an ancillary, collateral issue."

The house itself ended up being even more of a challenge than an experienced contractor like Kaiser expected. The cost of a roofing project doubled when Kaiser discovered that the topmost layers of shingles and plywood decking had been laid, not right over the roof joists, but over three layers of preexisting asphalt and cedar shingles. The foundation had to be rebuilt. Workers on the second floor felt the building sway when workers on the first floor pulled off old plaster.

"We used to joke that the house was held up by hope," Kaiser said. "It was no one thing that happened; it was a horrible series of events, nailed down by the failure of the housing market."

Kaiser was fined after he was caught living in the house without an occupancy permit. He says he was just trying to maximize his cash flow.

The city has made other large investments, sometimes to repair blighted properties, sometimes to remove them. In most cases, there is a return on the investments. This case was unique, though, because of the historic nature of the house, Bergman said.

Patrick Walker, an HRA member who was not on the board when Kaiser's construction loan and a $285,000 swing loan, now repaid, were approved, said there's no way he would have OK'd such a project.

"The end result is that the neighborhood is better off because regardless of who gets it or how much we've lost it's a pretty fair-looking house now, and the neighborhood is going to come out ahead," he said. "But a whole year's worth of HRA money given to one project, that's a bad idea. I would rather have seen 10 $20,000 projects than one $200,000 project."

Mayor Bjorn Skogquist, an early supporter of Kaiser, says he's disappointed, like many others, that the project tanked. He'll continue to reflect on the lessons learned, he said. Maybe the city should pair with a professional appraiser to decide which projects are worthwhile, for example, because he doubts this will be the last project of its kind.

"Whoever the next mayor is there's going to be another vacant house, or another vacant building downtown," said Skogquist, who is running for the Anoka County Board. "This isn't ever going to be over, quite frankly the money doesn't exist to redevelop the town as fast as some would like it. Continuing to work with the private market is going to be necessary, and we're just going to have to get better at that, I guess."