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VineBrook, in debt, is ditching Midwest rental properties and facing angry tenants

Published

1 year ago

April 9, 2024

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As Julia Cowell talked about the cockroach problem in her four-bedroom home, a pair of them — as if on cue — scurried up the wall behind her before vanishing into a crack.“My kids walk around with bottles trying to spray them and stomp them,” Cowell said. “All I want to do is take my kids out of here.”Cowell, a former engineer who is now a stay-at-home, moved into her rental home in Hazelwood in northern St. Louis County, in 2019. Her landlord, VineBrook Homes, was a single-family rental provider new to the St. Louis area, and the house was ideal for her growing family.With four bedrooms, there was space for her five children. There was even a finished garage where she could homeschool them. It was affordable enough for she and her husband William, a disabled veteran, to manage.“It looked beautiful, and it was perfect for our family, so we moved right in,” Cowell said.Cowell’s story is familiar to many current and former VineBrook Homes renters. Tenants the Midwest Newsroom interviewed described moving into an apparently pristine VineBrook home, only to run into maintenance and safety problems soon after.

Kavahn Mansouri

The Midwest NewsroomFour years ago, when the Cowells started renting this VineBrook property in a St. Louis suburb, they paid $1,000 a month. As of 2024, she and her husband were paying $1,600 a month.

From spree to sell-offCurrently, VineBrook owns more than 574,000 single-family homes nationwide.A 2023 investigation by NPR’s Midwest Newsroom examinedVineBrook Homes’ fast-paced buying spree of more than 27,000 homes throughout the country—nearly 3,800 in the St. Louis, Kansas City, and Omaha metro areas combined. In the wake of that spree, tenants complained about unresolved maintenance issues, unfounded evictions, aggressive rent collection tactics and poor customer service.Now, the company faces new pressure in the form of debts accrued by its rapid and massive expansion. Recent Securities and Exchange Commission (SEC) filings show that for the first time in its four-year history, VineBrook’s rampant purchasing of single-family homes throughout the region has shifted to a sell-off as it struggles to pay what’s due this year.In the same SEC filing, VineBrook said it would sell at least 1,700 homes nationwide to pay the debt balance. Experts say it could be a sign of what’s to come for other real estate investors in the single family rental market.
Part of the planVineBrook is Milwaukee’s single largest property owner. In a December 2023 SEC filing, VineBrook’s Dallas-based executives told regulators they weren’t sure VineBrook could “continue as a going concern” in the next 12 months.”If any property owner of that size were to go under, it’s a concern to the entire region, but especially to the neighbors,” said Wisconsin Rep. Evan Goyke in a Milwaukee Journal Sentinel article.But the situation for VineBrook may be less dire than it appears.“When you get into hard times, it’s easy to cull the portfolio and sell homes,” said Noel Christopher, a single-family rental expert and a member of Forbes Real Estate Council.Property taxes, insurance, labor costs, and soaring interest rates are making the business of single-family rentals increasingly difficult to sustain, Christopher said. For VineBrook, the current sell-off may be an opportunity to prove that its business plan works.“This is what these funds planned for,” Christopher said. “The difference in single-family rentals is, instead of having to cull a 100-unit building, you can cull 100 different homes. And really, what’s left over is you have a stronger portfolio.”Christopher said single-family rentals have twice the value of other assets because they create profit as rentals. And, if they underperform or become problem properties, companies can sell them to deal with debt — like VineBrook is doing — or use them to raise funds for new ventures.Christopher said single-family rental investors bought homes with less due diligence before interest rates skyrocketed. He said many investment funds treated the low-interest rates like “free money.”“That’s really the thesis,” he said. “You could buy a move-in-ready home when rates were really low and move somebody in there with minimal work.”Now, Christopher said, investor funds are applying a more “sharpshooter” approach to buying new properties, carefully considering data instead of buying available housing stock. He said VineBrook likely isn’t the only investor company going through the same sell-off, but may be the only one struggling in a public way.“A lot of groups were able to buy a lot of homes, and then, they kind of have the philosophy of ‘we’ll figure it out later,’” Christopher said.Christopher said proposed regulation and a bigger spotlight on the single family rental business is putting pressure on VineBrook and companies like it to change the way they operate their business.VineBrook declined a request for an interview but said in an email that its core missionremains the same: expanding access to quality, affordable single-family homes.“Our business is structured to revitalize and expand the stock of properties available for lease, but we do sell homes at various times for a variety of reasons,” a VineBrook spokesperson said in the email. “Homes identified for sale are typically sold vacant and we make every effort to align properties for sale with owner occupant buyers where possible.”The company recently completed a bond offering, raising more than $400 million from investors to pay down its debt.Laura Brunner is CEO of the Port of Greater Cincinnati Development Authority, a development agency based in a city where VineBrook has significant holdings. For her, VineBrook and other private equity investors are creating an unfair cycle for renters.

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Port of Greater Cincinnati Development Authority Laura Brunner, CEO of the Port of Greater Cincinnati Development Authority.

“Because of a shortage of housing in general, (tenants) are victims to accepting the unfair practices of the landlord,” she said. “So, you got a great big guy pushing down on the small guy that is willing to pay too much for the rent, because they don’t have choices.”Cowell said she’s experienced that sort of behavior from VineBrook. She described the house she lives in as falling apart, and no matter how much she cleans or hires professionals, the roaches still emerge from the floors and walls. Yet, VineBrook cancels her requests for maintenance regularly, she said.“We’re over $800 into this, and (pest control) can’t do anything about it,” Cowell said. “We’ve contacted (VineBrook) multiple times to see if they’ll fix it. They’ve never responded because there’s nobody to talk to.”Brunner said when private equity landlords like VineBrook buy up tremendous amounts of housing stock, they fundamentally change communities and neighborhoods. When VineBrook sells, the problems multiply.“That street for 50 years might have had very stable homeownership where people knew each other now has a more rotating population and the sense of place is diminished,” Brunner said.The business practice also prevents people in those neighborhoods, particularly people of color, from building wealth through homeownership, she said.A Midwest Newsroom analysis found the majority of homes managed by VineBrook Homes in Kansas City, St. Louis and Omaha are in census tracts that are predominantly non-white and have median household incomes between $40,000 and $60,000.The picture is similar in Milwaukee, where VineBrook acquired more than 1,000 single-family homes in similar neighborhoods starting in 2019.

Nebraska Legislature

Nebraska SenateNebraska Sen. Justin Wayne represents Omaha, where VineBrook Homes began buying single-family homes in 2019.

Looming legislationThe pressure of debt and high interest rates aren’t the only factors putting pressure on VineBrook. The pace at which VineBrook purchased homes over the past five years — along with mounting tenant complaints — have spurred local and federal legislative proposals to regulate the single-family rental business.In February, Nebraska Democratic state Sen. Justin Wayne introduced a measure to rein in companies like VineBrook. Under Wayne’s proposal a corporation, hedge fund or other business would not be able to purchase a single-family home unless the company is based in Nebraska and its principal members are state residents. Wayne is from Omaha, where VineBrook quickly became the city’s third largest single-family property owner after a buying spree that began in 2019.In 2023, U.S. Sen. Sherrod Brown (D-Ohio) introduced the Stop Predatory Investing Act to prevent investors from snatching up real estate nationwide. The act would prohibit buyers who acquire 50 or more new single-family rental homes from receiving tax breaks.“They take advantage of federal law, which essentially subsidizes these predatory investors and do great damage to their communities and to these families,” Brown said. “Too many people are evicted as a result, too many communities are hurt as a result. Too many cities lose tax revenues for their streets and water systems and bridges and everything else.”In its statement to the Midwest Newsroom, VineBrook Homes said legislation should seek to promote collaboration with public and private groups instead of leading efforts to, “drive them apart and discourage collective action.”“Affordable housing is a complex issue, and effecting meaningful change at scale requires the public, private, and nonprofit sectors to work together at the local, state, and national levels,” the company stated. “Lawmakers are well-intentioned, but their actions often create unintended consequences and costs for consumers.”VineBrook is a major property owner in Ohio. In fact, a significant portion of its single-family rentals are in the Cincinnati area, where the company has run afoul of the city government, which sued VineBrook for violations of the Ohio Landlord Tenant Act and Cincinnati Municipal Code, and again for allegedly breaking a settlement agreement from the first lawsuit.”VineBrook’s neglectful behavior has caused significant harm to renters, and the City of Cincinnati will fight back with everything we have to protect our residents,” said Mayor Aftab Pureval in a press release regarding the lawsuits.The End Hedge Fund Control of American Homes Act, proposed by U.S. Sen. Jeff Merkley of Oregon in 2023, would require private equity investors to sell all of their homes over ten years. Those that don’t would be heavily taxed.In January, Sen. Jacky Rosen of Nevada introduced the Housing Oversight and Mitigating Exploitation (HOME) Act. It would task the U.S. Department of Housing and Urban Development (HUD) with investigating alleged price manipulation and gouging by corporations.Brown said that in addition to the tax dollars lost, companies like VineBrook Homes and other investment funds are also outbidding prospective homeowners, making it harder to buy a home in an already difficult housing market.“Families can always be outbid by these gargantuan Wall Street companies who keep cash that they can use and then get tax breaks on top of it,” Brown said. “They’ve got really good accountants, really good lawyers, they take advantage of federal law, which essentially subsidizes these predatory investors.”Brown said investment groups typically buy houses in middle to low and middle income neighborhoods, where families are already struggling to find homes they can afford.
Moving dayIn response to the Midwest Newsroom’s request for an interview in 2023, VineBrook sent us a statement, which read, in part:“Our team prioritizes customer service. We are committed to providing a transparent rental process for our residents and are constantly seeking ways to enhance our customer service offering, incorporating new technologies and touchpoints to deliver a high-quality experience.”Cowell said her family’s experience does not reflect VineBrook’s promise of quality and responsive customer service.Over the past four years, Cowell said the nearly 70-year-old VineBrook house her family lives in fell further into disrepair with little maintenance by VineBrook. Meanwhile, the rent continued to rise.When the Cowells started renting the home, it was $1,000 a month. As of this year, she and her husband pay $1,600 a month.For the Cowells, moving day can’t come soon enough. They plan to rent again, somewhere out of state and far away from VineBrook Homes.“We’ve actually already started packing,” Cowell said. “We are looking to take the kids and ourselves and get out of here. Hopefully, by the end of the month.”This story comes from the Midwest Newsroom, an investigative journalism collaboration including IPR, KCUR 89.3, Nebraska Public Media News, St. Louis Public Radio and NPR. Do you have a tip or question for us? Email midwestnewsroom@kcur.org.

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Laclede’s Landing is moving from nightlife hub to neighborhood

Published

1 year ago

August 28, 2024

Natural Bridge

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Laclede’s Landing has cycled through many identities throughout the history of St. Louis. Now, some people involved with its redevelopment in recent years hope the landing’s next one will be as a residential neighborhood.The small district tucked directly north of the Gateway Arch National Park has quietly undergone a massive redevelopment with more than $75 million pouring into the rehabilitation of many of the historic buildings at the landing.“We are starting to feel that momentum, especially in the last really 60 days. Things have drastically changed around here,” said Ryan Koppy, broker and owner of Trading Post Properties and the director of commercial property for Advantes Group.Advantes alone shouldered the rehabilitation of six of the historic buildings, which now sport a mix of apartments and retail or office space, he said. Four of those buildings are completed, and of the 119 apartments available, about 90% are filled, Koppy said.“It just shows you what kind of demand we do have for the area,” he said. “We’re separated from downtown a little bit, and for the tenants, their local park where they’re walking their dogs, it’s a national park.”

Sophie Proe

St. Louis Public RadioInterior of the Peper Lofts at Laclede’s Landing on Aug. 16

Another 40 apartments are set to come online next year along with some retail space, Koppy said. He added he’s noticed a wide range of people who are considering and moving into the newly refinished apartments.“It’s very mixed, surprisingly,” Koppy said. “We have a lot of young professionals, maybe on their second job out of [university], we have some empty nesters too.”Part of the newfound momentum comes from a new market, the Cobblestone, and coffee shop, Brew Tulum, opening recently and bringing more foot traffic to the area, said Brandyn Jones, executive director of the Laclede Landing Neighborhood Association. She added that more apartments are set to come online within the next few months.“We have a great riverfront area here and so there are plans in the works to activate those spaces, bring people in,” she said.That could be more daytime events, like a farmers market, music festivals (one of which is happening this weekend) or just bringing in food trucks to Katherine Ward Burg Garden, Jones said. It’s a departure from the identity the district held a few decades ago as a hub for nightlife and entertainment.“That’s part of what connects so many people to Laclede’s Landing,” Jones said. “It’s important to tell the story of where we’re evolving. It won’t be what it was in the same exact way, but it will still be fun, and it can be fun early morning, midday or late night.”It’s a view shared by Koppy.“It’s grown up, it’s a bit mature,” he said. “We’re not going to have 3 a.m. bars here anymore because we have residents here.”Koppy added that Advantes is joined by other developers working to rehabilitate buildings in the district.“We all work in unison,” he said. “If I get a call and [a client is] asking for something and maybe the square foot doesn’t really match up with what I have available, but I know it matches up over there, they’re getting a very warm welcome and introduction.”

Sophie Proe

St. Louis Public RadioRyan Koppy looks out the window of Brew Tulum Specialty Coffee Experience on Aug. 16 at the Cobblestone on Laclede’s Landing in downtown St. Louis.

This push toward making Laclede’s Landing a residential neighborhood also comes alongside broader conversations about the future of downtown St. Louis more generally as it looks to move away from a dependence on office space. While the city as a whole continues to lose population, downtown added about 1,700 people between 2010 and 2020, according to U.S. Census data.“It’s been wonderful timing to have all that going on, that stress that you’re not just in downtown to work has been critical to part of this rejuvenation and energy down here,” Jones said. “Sometimes people forget Laclede’s Landing is part of downtown, really the original downtown.”And success in the small district could spread beyond its small confines and potentially serve as a model for success, Koppy added.“My idea is, if we could get all the great things of St. Louis coming in through here, we can eventually spread that,” he said. “We understand we can’t change the whole world, but we’ll just make the effort to try and change the world around us.”

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St. Louis barbecue festival Q in the Lou canceled

Published

1 year ago

August 27, 2024

Natural Bridge

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The largest barbecue competition and tasting festival in St. Louis, Q in the Lou, has been canceled. The event was planned for Sept. 6-8, but organizers decided to cancel it due to poor ticket sales and insufficient corporate sponsorship.The traveling festival had low attendance in Denver last week, said Sean Hadley, a festival organizer.“We made the tough decision to cancel Q in the Lou,” said Hadley. “We’re seeing a lack of support … it’s just not there.”The traveling event first came to St. Louis in 2015 and drew hundreds of people to downtown St. Louis for barbecue, live music and a “major party.”“It shut down out of the blue … I’ve gone every year,” said Scott Thomas, local chef and food blogger. “It’s brilliant. You could take a tour of some really amazing barbecue restaurants and competition barbecue guys all in one place.”In a late July news conference, city officials touted Q in the Lou as a significant tourism draw and a boost for downtown revitalization.“Bringing a signature national festival back to downtown St. Louis … is making us stronger,” Greater St. Louis Inc. CEO Jason Hall said then.Less than a month later, ticket holders from every festival stop learned they’d be refunded. On Monday, organizers privatized the Q in the Lou website and deleted its social media accounts.Conner Kerrigan, a spokesperson for Mayor Tishaura Jones’ office, said city officials are disappointed the festival won’t be back this year.“St. Louis knows how to throw a festival … bringing people together to celebrate our culture is one of the things we do best as a city,” Kerrigan said in a statement. “Should Q in the Lou try to come back next year or any year after that, they’ll have the support of the Mayor Jones administration.”

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Alton’s Jacoby Arts Center likely to relocate permanently

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1 year ago

August 27, 2024

Natural Bridge

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The Jacoby Arts Center, a staple of Alton for many in the Metro East community, will likely permanently move out of its downtown building at the end of September.Its departure and relocation from the historic building that the arts center has called home for the past 20 years has created a tense situation for not only the arts center’s supporters but also the local development company working to revitalize Alton’s downtown that owns the building.“It’s an unfortunate situation,” said Chad Brigham, the chief legal and administrative officer with AltonWorks, the real estate company owned by another prominent local attorney working to develop the town. “I wish there wasn’t misunderstanding and disappointment in the community. It’s difficult sometimes to clarify that.”When news of the likely departure spread in June via a letter from the Jacoby Arts Center to its supporters, an outcry on social media quickly followed. Some assumed it would be the end of the arts center.“There’s a lot of feelings right now that I think are more about the building itself than there are about the Jacoby Arts Center,” said Valerie Hoven, vice president and treasurer of the nonprofit arts center’s board.For supporters of the Jacoby, moving from the building and likely never returning will be a sad affair. Exactly what’s next for the arts center remains unclear. However, Jacoby board members believe this will not be the end of the organization. It will likely look different though.

Sophie Proe

St. Louis Public RadioThe Jacoby Arts Center earlier this month in downtown Alton

Sophie Proe

St. Louis Public RadioThe Alton-based Jacoby Arts Center features more than 75 St. Louis-area artists and their work.

The history of the buildingFirst dubbed the Madison County Arts Council, the nonprofit arts center renamed itself after the Jacoby family gave it the current building in 2004. AltonWorks founder John Simmons purchased the Jacoby Building in September 2018, according to property records from the county.Managing the large building, at 627 E. Broadway, became too expensive for the Jacoby Arts Center. In 2018, the organization approached Simmons to purchase it, said Dennis Scarborough, a past president of the board and a downtown business owner.“Of course, it sounded really, really good,” Scarborough said of Simmons’ purchase. “He took over the insurance, property taxes, all those kinds of things that were really, really getting into our budget, and he rented it to us at a fair price.”The two parties entered into a lease agreement initially for five years. Since then, Simmons has spent more than $1 million in upkeep, taxes, insurance and more on the building. The lease has been extended twice until the end of September this year.Over the six years, Jacoby paid $1,500 per month, which covered a portion of the utilities.“It’s been wonderfully generous of AltonWorks,” Hoven said.Because the building is aging and needs repairs, Brigham with AltonWorks and those connected to the arts center have long known the Jacoby Arts Center would need to relocate — at least temporarily.

Renovations on the Jacoby building will begin this fall. They’ll include modernizing the aging building, repairing the old elevator and putting in apartments on the second and third floors.

News of the likely departure and controversyRenovations will begin this fall. They’ll include modernizing the aging building, repairing the old elevator and putting in apartments on the second and third floors.In May, it became clear that a preliminary proposal for the arts center to return to the building after renovations finished in 2026 would not work for them, Hoven said.She estimates the first floor and basement of the Jacoby Arts Building span roughly 20,000 square feet.

Chad Brigham is a business and legal adviser for AltonWorks.

AltonWorks’ initial idea floated to the arts center would only provide 2,553 square feet, according to both Hoven and Brigham. While the board calculated the price for the new space to be at least triple the current payment, Brigham said there was never a specific price discussed.“No discussion in terms of actual rent price,” he said.AltonWorks didn’t make a specific rent offer because the organization doesn’t even know itself, Brigham said.In addition to cash from John Simmons, there will be loans, tax increment financing and state tax credits to cover the $20 million in building renovations. The entities financing the cost of renovations will also help determine the rent when the construction is complete, Brigham said.Regardless, the price required to return will be too much for the arts center to pay, Hoven said. Also, the organization would like to maintain the many programs it offers to the community — a rentable event space, a dark room and a clay studio, for example — in the future.“For us to really meet the needs of the community and be sustainable, we need a space where we can offer some of those programs — the artists’ shop, and other spaces that offer some kind of income as well — so that we can continue to give money back to the community,” she said.AltonWorks offered at least two other locations as possible alternatives from their vast stock of buildings along Broadway to house the arts center during the roughly 18 months of construction. Those alternatives came with similar deals requiring the Jacoby to cover only utilities, Brigham said.“We did put in a great deal of work behind the scenes in trying to find an interim solution,” Brigham said. “We wanted to find a place for them to go, where it was easy for them to continue programming, whether it’s 100% of it or some portion of it, that would work for them.”Initially, the arts center hoped to keep the basement during the renovations, Hoven said. When it became clear the preliminary offer to return was for much less space than the arts center anticipated, the letter to the community was sent.“The letter that came out was merely showing our surprise,” Hoven said. “Don’t misinterpret it as panic. Don’t misinterpret it as desperation.”

Sophie Proe

St. Louis Public RadioA smorgasbord of radios are displayed at the Jacoby Arts Center in Alton.

The commentary on social media was passionate. Some critics of AltonWorks said the organization has good intentions but hasn’t executed those plans. Others said Jacoby hasn’t planned well enough for the future.For Brigham and the AltonWorks team, some of the criticism has been disappointing.“I thought that there were some decent solutions. Were they perfect? No, but they were very, I thought, very good solutions,” he said. “And the fact that it has come to the point that it is right now is a bit hurtful.”AltonWorks remains committed to the arts, Brigham said. John Simmons remains one the largest donors of the Jacoby Arts Center, Hoven and Brigham said.“I don’t think there’s ever been a question of our support of that organization — of our affinity for that organization,” Brigham said. “While some of the events were unfortunate, some of them were encouraging. The entire community rallied around the Jacoby Arts Center. That’s a good thing. It’s a good thing to have a love for the arts like that in a downtown community.”Sara McGibany, the executive director of Alton Main Street, an organization aimed at preserving the town, said AltonWorks should be commended for its vision. In many ways, her organization and AltonWorks share a vision for a thriving downtown.Even though AltonWorks hosts public meetings, McGibany believes the current situation lacks true community engagement.“We really think that if AltonWorks can get past some of the communication hurdles — and harness the community’s passion and shift to more of a bottom-up decision-making process that centers on community input — then we can turn around the growing sentiment of distrust that’s happening now,” McGibany said.Scarborough, the past board president and downtown business owner, echoed the praise for Simmons and his support of the Jacoby Arts Center. With the Jacoby likely moving, the future looks bleak, though.“It’s a community arts center that does a lot of good work,” Scarborough said. “The community is going to suffer, and they’re going to be missed by the community if they’re not there.”

Eric Lee

St. Louis Public RadioShalanda Young, director of the federal Office of Management and Budget, talks to Illinois U.S. Rep. Nikki Budzinski, D-Springfield, during a tour of a construction project by AltonWorks last April in Alton. AltonWorks, who is building the LoveJoy Apartment Complex is receiving over $1 million in federal funding.

What does the future hold?AltonWorks will continue forging ahead with its ambitious plans to revitalize Alton. The organization hopes to conclude construction on the Wedge Innovation Center, which will have a restaurant, retail and co-working space, this fall. Lucas Row, a mix of apartments and retail space, is scheduled to be completed next spring.The remainder of the arts and innovation district, currently named after the Jacoby, will also move forward.“I believe in two years it’s going to be a much different place,” Brigham said of Alton. “It’s going to be thriving. It’s going to be new businesses, new tenants — and it’s going to be a nice proof of concept for what you can do in a small community like that.”The Jacoby board recently formed a strategic planning committee. Its task: figuring out what’s next for the arts center. The committee will reevaluate what space the Jacoby needs, what programs it wants to offer to the community and how they want to make that a reality.Keeping the arts center is essential for board members like Hoven. In her experience, it’s been a place where local aspiring artists get their start.“Art is one of the only ways to show your true authentic self,” Hoven said. “And there’s more people than I realized who do not get that opportunity every day.”The Jacoby will shut its doors to pack over the next month. Hoven said she’s optimistic the board will have concrete plans by the end of September when their lease officially ends.“Alton is such a fabulous and supportive community,” she said. “We still have lots of great options, so that the Jacoby Arts Center will continue to thrive in Alton and beyond.”

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