2402 4th Avenue South got Pami-KO'd

Post and photo by the Hawthorne Hawkman

When I was in college, one history professor who taught a class on eastern European and central Asian history was particularly troublesome for me. I remember probing for clues about the final exam and asking, "What particular topics should we know well in preparation for the final?" He responded dryly: "Well, everything." And he wasn't joking. I didn't do too well on that final, busting my tail for a B-minus and considering myself lucky.

But I think of that professor's attitude in relation to the housing mess that Paul Koenig (pronounced Kay-neg) has inflicted upon north Minneapolis. Koenig should be in jail or at least face civil charges so steep that they'll bankrupt him. If neither of those things happen, then we on JNS are dedicated to examining every last detail of his cluster bomb of foreclosures so that this does not happen again by Koenig or anyone else. What's most important in that regard? Well, everything.

So when I have the chance I've been stopping by the Hennepin County Government Center to research Koenig/Pamiko/Marklee properties. Eventually I'll do a comprehensive post of what I've found, but as I come across particularly interesting histories that are extensive enough to merit their own post, those will be published. One such scenario presented itself at...

...2402 4th Avenue South. This is a multi-unit structure that has been part of a Koenig mess since at least 2004.

On July 23, 2002, David Kohlenberger, the other half of the Dream Homes Development LLC and DPK Properties LLC (David, Paul, Kohlenberger/Koenig. These guys are real creative with their LLC names) purchased it with a $465,200 mortgage from American Summit Mortgage Corp. I thought for sure American Summit would have imploded, but I guess not.

On July 21, 2004, Kohlenberger/Dream Homes Development LLC took out a mortgage from Guyer's Superior Walls in the amount of $147,393.84. Koenig and his buddy must not have made a single payment, at least initially, because on October 20, 2004, GSW filed an intent to foreclose.

On December 15 2004, A $75,000 lien was filed against the property by Morrison, Fenske, and Sund. Eighteen parcels were listed, but only legal descriptions were given. This was likely a part of the court case regarding fraudulently inflated incomes of many DHD/DPK properties.

On February 16 2005, MERS (trust me, you don't want me to try and explain what MERS is right now) filed an intent to foreclose on the property, listing David Kohlenberger as the owner.

Despite the ever-changing list of owner entities (Kohlenberger to DHD to DPK), I did not see a formal transfer of ownership until February 17 2005, when DPK filed a quitclaim transferring ownership to Marklee Construction, another known Koenig LLC. On March 1 2005, there was a Sheriff's levy filed against this property. I had never seen such a document before, and neither had the helpful employees at the desks. But as far as I can tell, this essentially says, "Gee whiz, there seems to be a lot of fishy title transfers happening here at the same time as a court case that alleges fraud. So how's about we just tell you all to keep DPK LLC as the owner for now?"

On April 12 2005, Franklin Bank did a $750,000 loan to Marklee Construction for the following properties, including 2402 4th Ave S:

3434 6th Street N
1418 11th Avenue North
1612 25th Avenue North
2101 Bryant Avenue North
2714 Bryant Avenue North
2722 Bryant Avenue North
2938 Bryant Avenue North
2616 Cedar Avenue South
2822 Colfax Avenue North
611 Edmund Avenue, St. Paul
3009 Emerson Avenue North
4858 Emerson Avenue North
2003 James Avenue North
1028 Knox Avenue North
1030 Knox Avenue North
1032 Knox Avenue North
1034 Knox Avenue North
1317 Knox Avenue North
2407 Lyndale Avenue North
3008 Lyndale Avenue North
1012 Morgan Avenue North
1312 Morgan Avenue North
625 Newton Avenue North
2324 Queen Avenue North
1717 Thomas Avenue North

On June 8 2005, the Franklin Bank mortgage was recorded as satisfied, although it is unclear if that referred to the $750,000 as a whole or simply the portion that applied to 2402 4th Avenue S.

On June 17 2005 the sheriff's levy was discharged.

On November 11 2005, Chicago Title Insurance Company filed a release of the $75,000 mortgage from Morrison, Fenske, and Sund to DPK LLC. The lawyers must not have been too happy about that, because on December 28 2005 they filed a request to be included as lien holders in any foreclosure proceedings.

On February 8 2006, Guyer Superior Walls' intent to foreclose was discharged.

Now if you're still reading and you're not confused YET, this should help get you there. A court order from a filing made by MERS says essentially this: "Hey, remember, ah, 'member how last year, we foreclosed on David Kohlenberger? Remember that? Well, none of those crazy title transfers really matter. We kind of, you know, still OWN this property. And we want it back."

So then Pamiko Properties LLC picked up the property from MERS and New Falls Corporation (the entity MERS was representing) on a quitclaim deed for $450,000. This happened on February 26 2006, and on March 3, a mortgage from US Federal Credit Union was taken out against the property in the amount of $602,250.

Then on September 19 2008, Aspen Funding LLC placed this property in a bundle of properties with their $500,000 loan that they made to Pamiko. And Pamiko must have really needed that half-mil because on November 5 2008 US Federal Credit Union filed an intent to foreclose.

The sheriff's sale occurred on February 6 2009, but Aspen must have missed SOMETHING, because they modified the loan on May 20 2009. They were also late to the game, filing their own intent to foreclose on October 26 2009. Sorry guys, Pamiko's all out of money.

On February 4 2010, a court order mandated the ownership of this property be transferred to US Federal Credit Union.

From the documents available, it's not entirely clear what happened to the money that was paid out on loan transactions that were later reversed. It's not known at this time if Guyer's Superior Walls or Morrison, Fenske, and Sund were paid for their interest in the property. And why did Pamiko pick up the property for $450,000 and then a week later get a loan for $150,000 more?

What is clear is that this blog will not rest until Paul Koenig is held accountable for the extensive, almost incomprehensible harm he has inflicted upon north Minneapolis.

Pamiko-Induced Foreclosure Crisis Gets Even Bigger

Post and photo by the Hawthorne Hawkman

I've been stopping at the Hennepin County Government Center on occasion when I've had other business to do downtown recently. In what little spare time I've got, I researched more about various slumlords and the mortgages behind them. I found out something new on the property above, 3053 15th Ave S.

On 5/23/05, a $575,000 mortgage to Marklee Construction, a company known to be operated by Paul Koenig, was filed against this property by US Federal Credit Union. But the dollar amount wasn't the only thing that was strange about the loan. There was also...

...a satisfaction of the mortgage filed on 2/23/06. US Federal Credit Union signed off on the satisfaction, but it was a senior mortgage loan officer, Pete Olson, who did the deed. Fellow mortgage geeks will recognize how rare it is for a mortgage originator to be involved in signing satisfactions in any way whatsoever.

But little quirky things like this wouldn't merit a blog post all by their lonesome. On 11/5/08, US Federal Credit Union filed an intent to foreclose on 3053 15th Ave S AGAINST PAMIKO, not Marklee Construction.

But wait, there's more! The original mortgage to Marklee Construction included a total of ten OTHER properties as collateral. The first seven are currently owned by private individuals, so it's possible that Koenig sold them properly. Those seven properties are:

1418 11th Ave N
625 Newton Ave N
1032 Knox Ave N
1034 Knox Ave N
3434 6th St N
2822 Colfax Ave N
1317 Knox Ave N

There were three properties besides 3053 15th Ave S that are currently listed on the Hennepin County website as owned by US Federal Credit Union. I believe it is reasonable to assume that US Federal foreclosed upon these properties while Koenig or one of his LLC's was the owner.

2200 Irving Ave N, which is boarded and vacant.
3128 5th Ave S
2324 Queen Ave N

None of these properties is on the Unabridged Pamiko list.

The more one digs into the Pamiko problem, the worse it appears. When will charges be filed against Koenig? That seems inevitable at this point.

Minnwest Bank is Being Watched...

Post and photo by the Hawthorne Hawkman

Two mortgage-geeky things happened today. First, I received the postcard above from John as he was on the road. The caption reads "Tennessee Mortgage Lifters," and I for one don't get the joke or point. But it's the first time I've seen mortgages referenced on a postcard.

John noticed the same thing and had to send this one my way. He also pointed out, "Don't get used to it, I save my postcards for the chicks."

The other mortgage item relates to Minnwest Bank, the lender behind most of Paul Koenig's (pronounced Kay-neg) Pamiko loans. It turns out that Minnwest...

...has been cited by the FDIC for "unsafe or unsound banking practices." The link to the FDIC's order can be found here. (WARNING: DO NOT COMBINE THIS DOCUMENT WITH ALCOHOL, AMBIEN, OR ANY OTHER DEPRESSANT. DO NOT OPERATE HEAVY MACHINERY WHILE READING THIS DOCUMENT. DO NOT ATTEMPT TO OPERATE A MOVING VEHICLE WITHIN FOUR HOURS OF READING THIS DOCUMENT. IF YOU ACTUALLY FIND THIS DOCUMENT INTERESTING, SEE A DOCTOR IMMEDIATELY. YOU NEED HELP.)

Minnwest has been ordered, among other things, to analyze the value of its collateral (such as foreclosed Pamiko properties) and to not extend further credit to "adversely classified borrowers." One thing that is missing is any way to force Minnwest to be part of cleaning up the colossal damages done to NoMi as a result of their loans to Koenig. Admittedly, I would not expect the FDIC to impose such a burden. But our State Commerce Department should press for this.

For the sake of Minnwest employees and shareholders, I do hope they emerge from this as a solvent and profitable financial institution. But the heat on Koenig should only intensify.

Has Paul Koenig Ever Paid ANYONE? (part 2)

Post and photo by the Hawthorne Hawkman

I happened to be in downtown Minneapolis today doing a bit of research, and decided to look into our friend Paul Koenig (pronounced Kay-neg) a bit more deeply. Specifically, I wanted to see what I would find out about 621 26th Ave N, which has a demolition order on it and a long list of unpaid contractors.

Several months ago, I documented how some Dream Homes had unpaid mechanics' liens, went through foreclosure, and then were repurchased by Koenig. Presumably the workers were never paid. So when it came to the contractors at 621 26th...

...I wasn't surprised at all to find even more unpaid mechanics' liens.

KB Mechanical filed a lien for unpaid work in the amount of $7,470. Wallboard Inc. filed their own lien against this property for $4,833.25. These were for unpaid work, materials, and/or use of equipment.

Then KB filed a lis pendens (basically an intent to foreclose) on the property for unpaid work at this address as well as several others: 1812 16th Ave S, 2119 4th St N, and 2316 Fremont Ave N. I checked, and all of these were already on the unabridged Pamiko list.

The intent to foreclose was for "rough-in, duct work, two new furnaces per property, gas line and furnace installation, and related work" and totaled $29,880. Also, it's quite possible that this intent to foreclose was the tipping point that caused the rate increases described in this article, which would have then led to the collapse of Koenig's entire empire. Exactly how this might have happened would bore most readers to tears, but 621 26th Ave N could very well be the Pamiko Properties' equivalent of the Piltdown Man.

Then, a few months AFTER THAT, Creative Home Construction filed a $17,102.40 lien for "home demolition and remodel labor."

And now this property has gone through foreclosure, meaning that in all likelihood the people who did this work will never be paid. I should note that in merely scratching the surface of two properties - 2321 Lyndale Ave N and 621 26th Ave N - a total of over $93,000 in unpaid mechanics' liens filed against these and ten other properties has been found. I strongly suspect that a thorough investigation of all such unpaid work would show a systematic refusal to pay contractors. I believe that the total amount of unpaid mechanics' liens against Paul Koenig's properties is well over one million dollars.

How many people had trouble staying in business after being ripped off by Koenig? The ripples of his financial misdeeds continue to be discovered.

Pamiko House Set for Demolition

Post and photos by the Hawthorne Hawkman

I dedicated the day today to a Hawthorne Hawkman patrol, where I went through (mostly) Hawthorne, took pictures of properties, called 311, and removed plenty of sign spam. In my travels, I came across a demolition/raze order posted at 621 26th Ave N.

I already knew this property was a Pamiko house and that Paul Koenig (pronounced Kay-neg) was largely responsible for driving this house into the ground. The property has been vacant for three years and is bordered by 623 26th Ave N, where slumlord Bashir Moghul was reportedly shot, and 619 26th Ave N, one of the worst-managed rental properties in Hawthorne.

But what I found REALLY interesting was...

...the list of names on the Director's Order. It's my understanding that everyone with a financial interest in the property is a recipient of such an order. We have:

Pamiko Properties (ok, that's only a surprise to the extent that Pamiko still has ownership in ANY property)
Angela Larson, Keller Williams Integrity Realty (I want to know what HER involvement is)
Aspen Funding LLC
KB Mechanical Inc
Wallboard Inc
Creative Home Construction Inc
Floor Technologies Inc
Lien Guaranty Inc

If I had to guess, I'd say that everyone from KB through Lien Guaranty is an entity that did work on the property and never got paid. Then I speculate further: were these companies just innocent victims, or have they done other work on slummy properties in my neighborhood? After all, this house has all the trappings of a slumlord in terms of horrid windows, a converted porch, and virtually no curb appeal.

JNS readers are encouraged to share what they know about these companies.

Paul Koenig to be Barred on Seven Properties!

Post and photo by the Hawthorne Hawkman. Image from an online gambling site that I'm hesitant to provide a live link to.

I have information from a reliable source that Paul Koenig will lose his rental licenses on seven properties in the city of Minneapolis. This is very significant because if a person loses two rental licenses in the span of one year, they lose all rental licenses in the city of Minneapolis for a period of five years. If I'm not mistaken, that restriction applies to all LLC's that Koenig is or may be a principal of. It would be nice if there were harsher penalties for SEVEN properties instead of just two. Just sayin'. I must point out that this information has not been independently confirmed, but I do consider it reliable enough to publish.

Also, last week I was able to speak with a representative from Management Resolutions, the company appointed to manage Pamiko properties after Paul Koenig's second 80-property foreclosure cluster bomb was dropped on NoMi.

Pictured above is 2013 Hillside Ave N, one of the nicer-looking Pamiko properties. I used this photo because the house looks pretty good, it's being managed by Management Resolutions, and my dialogue with the receiver was fairly positive. Chris Deuth, who works for the company, said he actually WANTS people to contact him at...

chrisd@managementresolutions.com if there are any problems with properties they are managing. It appears that they have addressed the sewer pipe afflicting Rosie Lee and her children, so that's a big step. I also explained that many residents in the community made the mistake of contacting Paul Koenig about concerns with his properties, but NOT calling 311 or otherwise filing reports. Then, when things finally reached a boiling point, they started calling the city. The problem with that approach was that the issues with Pamiko Properties had been ongoing for quite some time, but the city wasn't officially aware of it until things had already gone from bad to worse.

"So we want to work with you, but you're on a tight leash," I said. Deuth understands that because this kind of work is exactly what Management Resolutions does. JNS readers, you are encouraged to email Mr. Deuth with any concerns regarding the properties managed by Management Resolutions. When you do that, please email me as well, at jskrenes@hawthorneneighborhoodcouncil.org. And if problems are not resolved quickly or if there are serious issues, don't hesitate to include 311 in the conversation.

Click here for a pdf of the receiver documents, which include a list of Pamiko properties now being managed by Management Resolutions. You can also click here for the full JNS pdf support documents about Paul Koenig's legal woes, which include accusations of fraud surrounding Dream Homes and a personal bankruptcy.

In case anyone wants to know which properties are being managed by this firm, a full list is below. Adding hyperlinks is cumbersome, so if anyone wants to know the most recently available information about these properties, open up the unabridged Pamiko list in a separate window. The hyperlinks on that post should take you to the property info as it stands today.

After these properties, I will also list the seven properties where Koenig is expected to lose his rental licenses. I will provide live links to those properties so that readers can check to see if and when this information becomes available on the city website. First, the receiver properties:

817 Penn Ave N
1812 16th Ave S
4652 Aldrich Ave N
2943 Morgan Ave N
3015 Oliver Ave N
3101 Dupont Ave N
2701 Aldrich Ave N
1417 Logan Ave N
2918 Colfax Ave N
2727 Girard Ave N
1622 Girard Ave N
1608 Hillside Ave N
3242 6th Ave N (sic), the address on the receiver document is listed this way, but is most likely 3242 6th STREET N, a known Pamiko property.
1100 24th Ave N
1229 Oliver Ave N
907 Penn Ave N
3223 Fremont Ave N
2211 6th St N
3531 Emerson Ave N
2013 Hillside Ave N
2420 Bryant Ave N
3025 Clinton Ave
2708 Bryant Ave N
2435 Portland Ave S
1507 Newton Ave N
2905 Colfax Ave N
1611 Hillside Ave N
2710 Girard Ave N
726 Morgan Ave N
1318 18th Ave N
3119 Queen Ave N
1414 16th Ave N
1016 Newton Ave N
1605 Girard Ave N
24 4th St E, St. Paul

And here are the seven properties where Koenig is expected to lose or perhaps already has lost his rental licenses:

2119 4th St N, which has $4,156.26 plus prior year(s) of delinquent property taxes.
2736 16th Ave S, which has $3,680.44 plus prior year(s) of delinquent property taxes.
1317 Emerson Ave N, which has $8,961.90 plus prior year(s) of delinquent property taxes.
2827 Emerson Ave N, which has $4,353 of delinquent property taxes.
2316 Fremont Ave N, which has $3,631.02 plus prior year(s) of delinquent property taxes.
2400 Lyndale Ave N, which has $2,314 of delinquent property taxes.
2314 Sheridan Ave N, which has $1,096 of delinquent property taxes.

This blog will continue to monitor Koenig's rental license eligibility, and asks that readers provide information on the topic as well.

JNS Blog Declares "Pamiko Comeuppance Day!"

Post by the Hawthorne Hawkman, photos by Johnny Northside

In the spirit of Mayor RT Rybak's declaration of "Get to NoMi Day," the two contributors to the Johnny Northside blog met last night at an emergency meeting to formally declare Wednesday, February 24, 2010 "Pamiko Comeuppance Day." Pictured above, I am drinking from a special cup purchased to commemorate just this occasion.

The declaration of "Pamiko Comeuppance Day" reads as follows...

WHEREAS Dream Home Development LLC and DPK Investments LLC were two limited liability corporations owned in part by Paul Koenig and operating primarily in the Hawthorne, Jordan, Near North, and Willard-Hay neighborhoods of north Minneapolis;

And WHEREAS homes constructed by Dream Home Development and DPK Investments LLC were built in a manner that did not support healthy communities, nor did they provide quality housing to their tenants;

And WHEREAS many contractors had to file liens or sue in order to get paid for their work (if they were paid at all);

And WHEREAS neighbors living around and near Dream Home properties often complained of problem tenants;

And WHEREAS fraudulently inflated rental incomes led to a first wave of scores of foreclosures attributed to Paul Koenig’s business practices;

And WHEREAS Pamiko Properties LLC, Marklee Construction LLC, and MCK Investments LLC are three other such corporations owned and operated by Paul and Michelle Koenig;

And WHEREAS Pamiko Properties and its associated LLC’s continued the practice of poorly-done repairs, failure to pay contractors, and renting to tenants who caused problems in primarily the same four neighborhoods listed above;

And WHEREAS three multi-million dollar sheriff’s sale bids were placed at 2420 Bryant Ave N ($2.5 million), 4652 Aldrich Ave N ($1.3 million), and 1417 Logan Ave N ($1.9 million), with an additional $1 million foreclosure in St. Paul;

And WHEREAS publicly available documents give strong indications that Paul Koenig, Michelle Koenig, Pamiko Properties, Marklee Construction, and MCK Investments may have benefitted from fraudulent or otherwise criminal activities in their business practices;

And WHEREAS said business practices directly contributed to a second wave of Koenig-related foreclosures in less than ten years;

And WHEREAS Paul and Michelle Koenig were able to sustain a lavish lifestyle including thoroughbred racehorses, a million-dollar farm home, an RV, and four washing machines, while their properties, tenants, and surrounding neighborhoods suffered from poor or fraudulent business practices;

And WHEREAS the Johnny Northside blog has extensively documented said events, beginning with the post titled, “Does this House Look Like it’s Worth $2.5 Million?” and most recently, “City Pages Makes Paul ‘Pamiko-gate’ Koenig a Slumlord ‘Supastah;’”

And WHEREAS today’s cover story of the City Pages is titled, “The One-Man Housing Crisis,” in reference to Paul Koenig and his various LLC’s;

And WHEREAS the front page of today’s Star Tribune article, titled “Who’s Responsible for this Mess?” also tells the story of extreme disrepair at 2420 Bryant Ave N that put the lives of Rosie Lee and her children at risk;

And WHEREAS the good citizens of north Minneapolis, the Johnny Northside blog, and our elected officials are committed to holding the appropriate parties responsible for these events;

THEREFORE BE IT RESOLVED THAT the Johnny Northside blog declares Wednesday, February 24, 2010 to be “Pamiko Comeuppance Day” throughout all of Minneapolis.

Has Paul Koenig Ever Paid ANYONE?

Post and photos by the Hawthorne Hawkman

...Other than himself, of course.

Recently I came across MLS listings for Koenig/Pamiko/Marklee properties for sale. These were interesting because they listed the last sale date and purchase price. Most of the purchase prices were in the $30-50,000 range, but two jumped out at me: 1403 21st Ave N and 2321 Lyndale Ave N. (pictured above. Which one is which? They're Dream Homes, so that doesn't really matter.) The last sale date on these two properties is 6/24/05, they were purchased via Contract for Deed, and the sale price was $1,360,000. On each of them.

Naturally I was suspicious, so I went down to the Hennepin County Government Center to research these documents, similar to the multimillion-dollar foreclosures. This is what I found...

At 2321 Lyndale Ave N, DPK Properties was the owner. DPK was a limited liability corporation run by David Kohlenberger and Paul Koenig as its principals. DPK was one of several entities responsible for the Dream Homes fiasco.

(My notes prior to Pamiko taking ownership of this property aren't as detailed as they are in the next round. It was getting close to 4:30 and I had to hurry to get as much info as possible.)

On 6/25/04, Truck Crane Services Company filed a mechanics' lien for unpaid work, in the amount of $4,500. On 12/17/04, the property went into a voluntary foreclosure with Franklin Bank, and the amount bid at the sheriff's sale was roughly $190,000. No satisfaction of Truck Crane's lien is recorded, but on 3/15/05, a second mechanics' lien for $9,800 was filed for unpaid excavation work. No satisfaction of that lien is recorded either.

On 1/27/06, a $240,000 mortgage from US Federal Credit Union to Pamiko was taken out. On 7/26/06, a limited warranty deed from Franklin Bank to Marklee Construction was recorded. It stated, "The total consideration for this transfer of property is $500 or less." This is believed to be the most accurate assessment of Dream Home real estate value ever recorded. (mortgage geek sarcasm font) We'll get to an explanation of how Marklee Construction entered the picture with the next property. On the same day, Marklee transferred its ownership to Pamiko via quitclaim deed.

On 9/19/08, Aspen Funding LLC had a $500,000 line of credit attached to this property. The same list of Aspen Funding properties as mentioned in previous JNS posts about Pamiko was filed here. For some reason, this document was not filed with the county until 1/16/09. In the interim, US Federal Credit Union filed an intent to foreclose on 11/5/08. The sheriff's sale occurred on 2/6/09 and the amount bid was $241,551.82. Somehow the foreclosure from US Federal was avoided.

On 4/9/09, the Aspen loan was modified and the maturity date was changed to 10/1/09 I did not find a maturity date on the initial Aspen loan, but wasn't looking for one until I saw this. I'm also not clear on why Aspen would give $500,000 to an LLC that had a history of not paying its own workers AND was behind on mortgages. Oh, and it would be repaid in a year? Well, no. Aspen filed an intent to foreclose on 10/26/09, but by that time Minnwest Bank had already been moving in on Pamiko with sheriff's sales on 10/15/09.

Interestingly enough, the $1.36 million-dollar contract referenced in the MLS listing is not recorded against this property.

We get more insight about what happened here from 1403 21st Ave N. On 7/1/04, Urban Initiative/Believers in Action deeded the property to DPK/Dream Homes. No value is indicated, and David E. Whiteford is listed as the vice chair and signatory for Urban Initiative/Believers in Action. On the same day, Franklin Bank gave DPK a $185,000 construction mortgage.

On 11/17/04, a mechanics' lien was filed against the property by Reliant Electric, Inc. in the amount of $3,000. Exactly one month later, Franklin Bank filed an intent to foreclose. On 2/1/05, a voluntary foreclosure agreement was signed, and on 3/1/05 the sheriff's sale occurred with a $197,000 bid. But wait! Franklin Bank came back and offered Marklee Construction the previously referenced $1.36 million contract for deed. This was subject to TWO mechanics' liens: Reliant Energy (now $6,000) and Vern Craven Concrete for $10,500. Once again, it's not clear if these workers ever received a dime.

This agreement listed eight properties:
2321 Lyndale Ave N, currently owned by US Federal Credit Union
2122 Penn Ave N, owned by a private individual, not homesteaded.
2515 Irving Ave N, owned by Paul Koenig, but listed as boarded/vacant since 12/22/09.
621 Penn Ave N, owned and homesteaded by a private individual.
1234 Knox Ave N, owned and homesteaded by a private individual.
2130 Bryant Ave N, owned and homesteaded by a private individual.
2400 13th Ave S, owned and homesteaded by a private individual.
1403 21st Ave N, owned by US Federal Credit Union, with Marklee Construction as the previous owner.

A stipulation in this agreement was that in order to remove a property from the contract, Marklee needed to pay Franklin Bank $170,000 (170,000 x 8 = 1,360,000). This is rather interesting in and of itself because on 1/27/06, US Federal Credit Union gave a loan to Pamiko on this property in the amount of $240,000. On the same day, Franklin Bank transferred the property to Marklee and then Marklee handed it over to Pamiko. This series of transfers, although potentially confusing, would have happened even if the deal were legitimate. But if only $170,000 was needed to satisfy Franklin Bank, then why was the loan amount $240,000 with US Federal?

After this, the same series of events occurred on the same days as 2321 Lyndale:

On 9/19/08, Aspen Funding LLC had a $500,000 line of credit attached to this property. For some reason, this document was not filed with the county until 1/16/09. In the interim, US Federal Credit Union filed an intent to foreclose on 11/5/08.On 4/9/09, the Aspen loan was modified and the maturity date was changed to 10/1/09. Aspen filed an intent to foreclose on 10/26/09.

An interesting footnote is that on the Aspen lines of credit, near the top of one of the first pages, "Michele S Pamiko" is written in cursive, almost as if it were a signature of an actual person. The area where this appears, however, is not a place on closing documents where one would sign.

There are plenty of unanswered questions here. If $170,000 was all that was needed to satisfy Franklin Bank, what happened to the other $70,000? How is it that The principal of one LLC (Koenig) is able to continuously repurchase his foreclosed properties under a different LLC, of which he is still a principal? How is it that Pamiko apparently continued to get access to credit when they were in a state of near-constant default? Did his contractors who had to file for mechanics' liens ever get paid? If so, by whom? Who is Michele S Pamiko? And how is it that in the course of losing scores of properties to foreclosure over the years, the Koenigs are still able to maintain such a lavish lifestyle?

The Koenigs are free to respond with a message or comment to explain their side of things, and it will be published by this blog. JNS readers, if you have more information or ideas, you too know what to do.

The Smallest Big-Money Pamiko Foreclosure Yet!

Guest post by the Hawthorne Hawkman. Image from a merchantcircle.com profile of Pamiko Properties.

I was back at the Hennepin County Government Center last week, looking at more Pamiko foreclosure records, when something very unusual caught my eye. A loan number didn't match up with what I'd seen before. So why did something seemingly as obscure as that matter? Well, on Pamiko's three multimillion-dollar foreclosures, there were several loan modifications. Each of them had loan numbers that matched with the previous lines of credit granted for that property. Each of them, except this one.

So with a closer look, I found a new address in...

downtown St. Paul. 24 4th St E, to be exact. This foreclosure notice was probably delivered in record time, since the Ramsey County Sheriff's office that processes such matters is a mere 470 feet away, at 25 W 4th St. I've been trying to find the actual direct link confirming the foreclosure, but haven't yet. Ramsey's and St. Paul's websites aren't as searchable and user-friendly as Minneapolis and Hennepin. But a reliable source has confirmed that this property has had a sheriff sale with a bid amount at just over $1,000,000.

If you want to see what specifically caught my eye, click here. Then go to the top of page 4, where I circled and marked with an asterisk the loan number 501281. This was different than loan number 501388, the $2.5 million-dollar line of credit tied to 2420 Bryant Ave N, or 4652 Aldrich Ave N, which had loan number 501339 as a $149,850 loan that was later modified to a $1,259,060 line of credit, or Minnwest's two loans on 1417 Logan - 501394 for $135,450 and later #501423 for $2,045,000.

Yes, this is confusing. It helps if you're already obsessed with the hidden meaning behind obscure number sequences.

Anyway, the point being, there is another million-dollar Pamiko foreclosure out there. What properties are attached to this foreclosure? Are there others that we don't yet know about? The rabbit hole gets deeper and deeper.

Applying Some Horse Sense to Pamiko-gate

Guest post and photo by the Hawthorne Hawkman

Thanks to the tireless work of many JNS readers, quite a bit of information has come to light regarding Pamiko, the Koenigs, and their previous Dream Homes venture into NoMi-land. Quite a few posts and more than 150 comments later, I thought I'd try to boil things down a bit; apply some common sense, or horse sense, if you will. And since a lot of folks might be hesitant to wade through the legal documents posted here, I plan to focus on that.

But first, let's start with some numbers...

The Star Tribune reported a breakdown of where Dream Homes were located by neighborhood. They rounded percentages, so we might not get an even 100%:

Willard-Hay: 21%
Hawthorne: 21%
Near North: 20%
Jordan: 14%
Phillips: 7%
McKinley: 4%
Central: 2%
And the following neighborhoods with just 1%: Lind-Bohanon, Webber-Camden, Cleveland, Logan Park, Harrison, and Whittier.

Here's a breakdown of Pamiko properties by neighborhood based on lists on this blog. The same disclaimer about rounding numbers applies, as well as a reminder that some Dream Homes are still (temporarily, at least) owned by Pamiko.

Jordan: 28%
Hawthorne: 23%
Near North: 16%
Willard-Hay: 8%
McKinley: 7%
East Phillips: 3%
Folwell: 3%
And the following neighborhoods with one property (roughly 1.5%): Ventura Village, Whittier, Lind-Bohanon, Webber-Camden, Phillips West, Logan Park, and Central.

These numbers clearly indicate that the Koenigs have basically caused irreparable harm to the same four neighborhoods (Hawthorne, Jordan, Near North, and Willard-Hay) TWICE in the past decade. Also, I want to point out the Dream Homes fiasco came crashing down in 2005, right in the middle of the housing boom. Buying a house was so easy back then that pretty much all you had to do was stand on a street corner and say in a slightly raised voice, "I've been thinking about buying a home." Within moments, dozens of mortgage brokers would lunge at you from out of nowhere, thrusting their business cards into your hands. Even if you somehow didn't qualify for a mortgage, the volume of business cards alone would give you the raw materials to build a better structure than what the Koenigs were putting up at the time.

So how exactly does one fail at such a venture in a historically friendly financial climate? The legal documents provide a bit of insight into that question. But before Koenig failed for the first time at housing in north Minneapolis, he managed to fail at paying his bills entirely. It's ironic that one commenter said Koenig would complain about things like welfare fraud, where people are living off of government money without deserving it.

See, included in the list of creditors who didn't get their money is a list of about every level of government that collects funds from you and me. $6,173 owed to Hennepin County, $1,545 to the IRS, $24,835 to the state of Minnesota, $135 to the city of Eden Prairie, and $326 in bounced checks to the license bureau (If I had to guess I'd say it was for the license tabs so he could keep on driving his Lexus). That's $33,014 that the rest of us paid for with our tax dollars. Now maybe there was a legitimate reason for the bankruptcy and the discharge of those particular debts, but it still diminishes one's credibility when complaining about other people supposedly living off of the government.

The bankruptcy also shows $10,853 in association dues discharged, and my personal favorite bit, $19 to Blockbuster.

Some folks have speculated as to how Koenig got access to credit after the bankruptcy, but keep in mind when this was happening, credit was much looser. You could qualify for a conventional mortgage and most other lines of credit a mere two years after the discharge of a chapter 7 bankruptcy, provided you didn't have any new bad debt since then. (And some subprime mortgages were available the DAY AFTER a discharge of bankruptcy.) That gave him just enough time to turn around and inflict Dream Homes on our neighborhood.

Anyone unfamiliar with what a Dream Home is only needs to drive through north Minneapolis and keep your eyes peeled for a gigantic yellow box, usually with no basement, cheap vinyl siding, no garage, and virtually no distinguishing features whatsoever. That's a Dream Home, which was apparently called such by the Koenigs and Kohlenbergers without a sarcasm font. With no garage, no basement, and six bedrooms, these houses were constructed in such a way that they were and always will be dependent on a property manager. Where will the lawn mower and rakes, snowblower and shovels, and other tools be stored? There isn't a place for the basic accessories to owning and maintaining a home.

Most Dream Homes are currently non-homesteaded, and owned by landlords who have multiple properties. At least one, 2818 Aldrich Ave N, is owned by Highland Bank - meaning it was in all likelihood purchased by Danna D III and then lost to foreclosure. The plan was to build upwards of 350 such homes, and all I can say is thank God they went under before they got much past 80.

I've gone through the legal documents posted here, and I'm not sure if they're complete or if perhaps the cases haven't been fully settled yet. Heck, I'm not even clear about who was lying to who about what. But it is obvious that our neighborhood caught the fallout from their little war. Here's what appeared to have happened:

In August of 2006, Stephen Kranz, Donal (legal docs say "Donal," so if this is a misspelling of "Donald," this blog has not made the error) Parks, and Round Table Properties LLC sued Paul Koenig, Michelle Koenig, Pamiko Properties LLC, and MarkLee Construction LLC. "Dream Home entities" were also listed as relevant parties: DPK Properties LLC, Dream Home Development LLC, and KOKO Property Management LLC, as well as David and Sharon Kohlenberger.

A side note here: The Koenigs appear to have either a narcissist streak or are rather uncreative. DPK = David, Paul, Koenig/Kohlenberger. KOKO = Koenig/Kohlenberger. MarkLee Construction consists of the middle names of Paul and Michelle Koenig. Heck, even Paul, Michelle, Koenig = Pamiko. It's like a slimy version of Donald Trump. Ok...slimiER.

So the plaintiffs here essentially alleged that they were owed money from some Dream Homes they invested in, that they were lied to about the income streams that were being generated, and that the Koenigs and Kohlenbergers were attempting to transfer properties in a way that would prevent them from collecting money owed. A total of 71 properties with a $2 million dollar value was detailed. The plaintiffs alleged insider activities and said that six sales had already happened, resulting in $270,000 being made from those sales.

Also sued were Michael Czarnik, an agent of Dream Homes, and three Realtors, Jay Jasper, Tammi Panning-Jasper, and Amy Jasper-Fenske. Tammi is singled out as acting as a dual agent in the sale of six Dream Homes. Dual agency, or representing both the buyer and the seller, is fairly uncommon and can much more easily allow Realtors to engage in and get away with fraud.

Specifically, the plaintiffs alleged that Jay and Tammi provided a Dream Homes sales brochure that showed rental income of $2,247 per month per home. This dollar amount consisted of two separate portions: Section 8, and a "subsidy" from third-party charitable organizations established to supplement HUD rent payments - specifically to supplement Dream Home's "unique six bedroom houses." DHD (Dream Homes Development) claimed to have contact with over 30 such non-profit organizations, and had been receiving supplemental rent payments from them "for a long period of time."

Based on this information, the plaintiffs purchased six properties. But what was the ACTUAL non-profit subsidy amount?

The court documents allege: "On September 24, 2004, Kranz and Parks discovered that the 'subsidy or grant money' was not coming from third-party non-profits, but that DHD was paying this money out of its own pocket. Kranz and Parks subsequently discovered that defendants' representations concerning the amount of income each rental property generated on a monthly basis, and the multiple sources of that income were false. No non-profit or charitable organization had been supplementing rent payments with grant or subsidy money. That source of income simply did not exist." (Emphasis mine)

Also, Kohlenberger, DPK, and DHD owed plaintiffs money as a refund of $5,160.87 in overpaid closing costs. The defendants issued a check to repay that amount. Well, apparently the plaintiffs never called Mystic Lake Casino or the License Bureau to find out what happens when you try to cash a check from the defendants. And a jury might not be able to do so either, since the Koenigs had filed a motion to have the bankruptcy information excluded from the court proceedings.

The Kohlenbergers settled for $1,000,000, but it's not clear if they actually PAID Kranz, et al. The Koenigs, on the other hand went on to blame this whole thing on the Kohlenbergers. They sued the Kohlenbergers for $1.2 million over the transfer of four properties. Interestingly enough, they claimed that they were "personally liable" for the unsettled debts related to the properties. Wait a minute...I thought this was all done through LLC's...so why are the Koenigs "personally" liable? Could they be mixing personal and business enough to be held personally liable for the colossal scale of foreclosures and slumminess they've inflicted on our neighborhood?

In their suit, the Koenigs attest that the Kohlenbergers listed properties that didn't even exist. This accusation jumped out at me because I thought the Koenigs were doing the same thing with Pamiko properties this time around. Since my notes weren't clear, I went back to Hennepin County and double-checked. It turns out my notes are inaccurate, and there are no currently known fictional properties associated with the Pamiko issues listed on this blog.

The Koenigs also alleged that the Jaspers were listing several Dream Homes for sale without properly notifying them. The Dream Homes, according to the Koenigs, were selling for almost $300,000 at the time. Which leads me to wonder once again, what kind of people can't work together to make money when properties are selling for $300,000 in NoMi?

And that's the summary of the court documents posted on the JNS pdf site. It is not known by anyone on this blog whether this case has been settled. And even though the neighborhood has clearly paid the highest price here, we don't even know who will fix up these homes, how much that might cost, or who might be the next round of buyers. What we do know is that the Koenigs can't shovel enough sidewalks in NoMi to make up for the damage they've caused.

Paul Koenig Fought "Impact Statements" On One Scummy Pamiko Property...

Image from the captured and mirrored "Majestic Farms" Koenig blog, published under First Amendment criticism and commentary

Word comes through the grapevine about a NoMi resident's little adventure with Paul "Pamiko-gate" Koenig last year. Here it is, straight from the horse's mouth:
--------------------------------

In the summer of 2008, I had organized a bunch of neighbors to file impact statements in order to get Paul Koening's property at 3025 Clinton Avenue (South) onto Karen Notch's problem properties caseload. I told Karen that it had gone into foreclosure and some of what has been coming out now regarding Mr. Koening.

I just received a reply from Karen in which she told me that every time she had to address a complaint with Mr. Koening regarding the property that he would immediately contact the Mayor to make complaint that the city
problem properties system was corrupt! Isn't that laughable?!
-----------------------------------
JNS answers: Laughable, indeed! This is a man who wrote bad checks to Mystic Lake and then listed the checks on his bankruptcy. Oh, how I wish the long slow holiday season would end...our city government would ramp up to full speed...and this man would be staring at some kind of indictment or, at least, an invitation to come and answer some pointed questions. Heaven knows he won't answer MY pointed questions.

Oh, I Remember This Pamiko Property Well...

Photo By John Hoff

The house pictured above is at 2400 Lyndale Ave. N., right across the avenue from the infamous Wafana's grocery. If you check the city and county's property records information as of today, December 27, 2009, the records will show the last sale was in July of 2005, for the nice sum of $178,000.

That is NOT how much Pamiko paid for the property. The city and county records simply are not up to date by, oh gee, a full year. In fact, other online real estate data shows Pamiko bought the property on November 13, 2008. Care to guess how much Pamiko paid for it?

Wait for it...

Wait for it...

Pamiko paid $7,700 for this roomy duplex. It's certainly not the only spectacular bargain in the Hawthorne neighborhood but, all the same, it's quite a bargain.

And, actually, I remember when 2400 Lyndale Ave. N. went on the market. For one thing, I personally made a couple 311 calls on the place--it's hard to remember the details, since my 311 calls literally number in the thousands--and I also remember when the house was "trashed out" before hitting the market. In fact, I specifically recall how the dumpster sat by the property, day after day, filled to overflowing...and some of the items inside the dumpster included really good quality roast eggplant dip in cans from, like, Europe.

I have reason to believe it was very yummy.

Anyway...

A couple days ago an active and informed member of the neighborhood called me up, saying he'd been reading about the Pamiko scandal on this blog and he was all, like, "I know these properties...I know EVERY ONE OF THEM." The uncomfortable closeness of the story to the fiber of our neighborhood...to our collective neighborhood memory...it is amazing and infuriating. I remember seeing house after house hitting the MLS lists, and thinking how I'd like to buy ANOTHER house in addition to my own, and hoping some good owner occupants would get the houses. Instead, so many of the vacant, boarded up bargain houses were snapped up by Pamiko (Expletive) Properties, and now many are going vacant AGAIN.

I can remember calling 311 on litter at the $2.5 million "slum dog millionaire" house. (And, believe me, a yard has to be really bad before I'll stoop to calling 311 on mere LITTER) I remember 1547 Hillside Ave. N. as the property "almost across from Kip 'n' Kelly and right near Dave 'n' Amy," visible from the front yard of Council Member Don Samuels. And, of course, 621 26th Ave. N. is right in the middle of all the interesting revitalization action happening around Farview Park, next to the house where slumlord Bashir Moghul caught a bullet.

It is indeed a revelation to see a list of houses and think: THAT house? THAT one? I know that house. I have history with that house. Pamiko was involved with THAT house?

By the way, it appears "Pamiko" is a combination of letters from PAul, MIchelle, and KOenig. Marklee Construction appears to bear the middle names of both Paul MARK Koenig and Michelle LEE Koenig. The Koenigs do not appear to be particularly creative people, just narcissistic slumlords who put their names on everything they screw up.

One can't help but hope that, with Christmas and the long post-Christmas weekend ending, the first order of business for some public officials will be getting to the bottom of the Pamiko fiasco.

Paul Koenig Reportedly Doing "Snow Blower Penance" In North Minneapolis...

Photos from the Koenig blog, used under First Amendment fair comment and criticism

At least one person in the Hawthorne Neighborhood has a kind word about Paul Koenig, mastermind of the Pamiko Properties scandal which this blog has been extensively reporting. The following was circulated by email among some "neighborhood types" in Hawthorne:
-------------------------
Well Pamiko had someone Snow blow all of the members of our Block Club on December 24th. What a nice gesture, Thanks Paul we are not quite sure what he's hoping for in return. Yes that was sidewalks and driveways. Here he has been a good Landlord, at 2211 6th Street. It was a nice Christmas Eve Present.
------------------------

JNS Blog suspects this is some kind of minor Koenig effort to appear "part of the solution, rather than part of the problem," and launch a minor PR effort. In the meantime, above, here for readers' viewing pleasure are some photos of the Koenig lifestyle, supported by sucking the life out of North Minneapolis.

From top to bottom: Dessert at Disneyland, just a small part of EXTENSIVE vacations all over the country. Second, a horse named L'etoile du Nord takes a little swim. L'etoile is one of the "barn mates" of the Koenig horses, of which several are named in the blog and even have their own blog categories. Third, Paul Koenig takes in a Twins game. The blog even documents their family vacation to Florida where they watch the Twins in spring training.

Fourth, the "rock star size" recreational vehicle of the Koenig family.

Last, the Koenig swimming pool in winter. Why, think of the sacrifice of Paul Koenig...coming to North Minneapolis to clear sidewalks while all these fun trinkets of his lifestyle are waiting for him. (Sarcasm font)

Please keep in mind, these five photos are just a little sampling of the exquisitely well-documented life of affluent gluttony documented on the "Majestic Farms" blog, supported on the bleeding back of North Minneapolis.

But, hey, I should talk! If Paul Koenig doesn't try to slap me with legal paper in the next couple days, I will win a steak dinner!

(Do not click "Read More")

From Bankruptcy To The Horse Racing Crowd--More Details On The Paul Koenig/Pamiko Properties Scandal...

Photo Of "Little Big Time" From The Koenig Blog, used under First Amendment Fair Comment And Criticism

With invaluable help from friends, this blog has come into possession of a bunch of online documents about the legal woes of Paul Koenig, who somehow managed to go from bankruptcy to being part of the ooh la la horse racing crowd within a relatively short span of years.

The Koenig blog--known as "Majestic Farms"--contains 38 posts which are tagged under the subject of horse racing. The blog was set to "private" some days ago, but not before every scrap of information was captured in a "mirror site" for use as evidence. You might say the horse is already out of the barn.

By way of comparison, the same Koenig blog had five posts on the subject of "church" and one about potty training before the blog "went private." The category of "horse racing" has more posts than any other category.

Their blog documents in extensive detail how--while creating more vacant houses in North Minneapolis and sucking down big fat lines of credit--the Koenigs constantly engaged in a form of high-stakes gambling called a "claiming race," click here for a technical explanation, in which horses that race are also, in effect, up for sale to other participants in the race.

There will be more time to digest and analyze this information later. For now, I just want to put the documents out on the internet in the form of PDFs. So, without further ado, here are the documents on the JNS PDF Support Site, click here to your heart's content.

(Do not click "Read More")

JNS BLOG HISTORY LESSON: Paul Koenig And The So-Called "Dream Houses" Fiasco...

(Not having a photo of a Dream Home, I have substituted this video as a kind of commentary)

The Pamiko Properties scandal which has dominated the attention of this blog lately is also drawing in commenters on the infamous Minneapolis issues list forum. One of those commenters was Steve Brandt of the Star Tribune, who re-posted some stories he'd written years ago about the "dream homes" debacle.

Since moving to NoMi only a couple years ago, I'd often heard there was a complicated story involved with the so-called Dream Homes, but I never had all the gory details laid out in front of me. These STrib stories tell a...

...lot of the tale, and since Brandt sees fit to reproduce the stories online in a public forum, I see fit to do likewise. As the Pamiko Properties scandal continues to unfold, it is good to review what damage Paul Koenig has already done to North Minneapolis.

New modular rental houses draw criticism from some on North Side

By Steve Brandt

August 25, 2002

After years of accumulating empty lots as boarded homes were razed, the lower North Side of Minneapolis now has a booming housing demand. Chanhassen-based Dream Home Development has filled some of it, erecting six-bedroom, factory-built houses that are hauled to sites in four pieces and assembled in a matter of hours.

"We go from dirt to tenant in three weeks," said Dream Home partner David Kohlenberger. But two neighborhoods have told city officials they don't want Dream Home's style of development, and some housing activists express similar views. They object to adding low-income rental units in areas that already have plenty, and they worry about the homes' design and durability.

"I really see that housing as becoming future slum landlord housing," said Deb Wagner, a real-estate seller and a member of the Jordan neighborhood's housing committee. Activists question the single-family homes' lack of basements and garages, asking where residents will store lawn mowers or bikes. They point to bedrooms as small as 82 square feet, not far over the city housing code's 70-square-foot minimum. They say the all-electric heat in many of the houses will be expensive for tenants. And they dislike the fact that Dream Home buys lots directly from private owners or county tax-forfeit auctions. Such purchases cut neighborhoods out of design reviews they get when the city acquires lots for redevelopment.

Kohlenberger said that his homes meet building codes and are designed "to be as durable as possible." He said a design revision will address many of the objections. But an even bigger issue for some is that Dream Home is reintroducing rental housing on lots they targeted for owner-occupied houses. In Near North, Willard-Hay and the adjoining Harrison neighborhood, for example, the last census showed that half of the households were renters. Almost half lived in government-subsidized housing, according to Patti Marsh, a veteran housing activist. The settlement of a federal lawsuit alleging segregation in public housing curbs the government's ability to develop federally subsidized housing in the city's poorer, more minority areas. But private developers aren't bound by those limits.

"Our neighborhoods are prime targets for investors who are trying to cash in on the affordable-housing mania," Marsh said. So far, Dream Home has put up 30 homes, most in Minneapolis.

In St. Paul, where it installed its third home last week, DFL state Sen. Mee Moua said she likes a model she was shown and sees potential for sales to large immigrant families, who she said have trouble finding homes with enough bedrooms in the urban core. Dream Home has worked to hold down the cost of the homes so it can make a profit renting to people holding federal Section 8 rental vouchers. A family big enough to qualify for one of its typical six-bedroom homes holds a voucher worth $1,889 per month in Minneapolis. The family pays 30 percent of its income toward rent and utilities, and the voucher pays the remaining rent. Kohlenberger said tenants have flocked to the 1,856-square-foot houses. One of the renters, Aziza Sarwar in Minneapolis' Jordan neighborhood, said that many Section 8 units are dumps and that their landlords are "out for the money." But "it seems to me these people, so far, want to help the poor people," she said.

Diminished role

The Minneapolis Community Development Agency (MCDA) used to get its pick of tax-forfeit lots in poor neighborhoods for no cost. When it felt the market was right, it offered them to developers for a few thousand dollars. Neighborhoods had design leverage because their views on proposed sales were forwarded to the City Council. That changed, apparently inadvertently, with a 2001 rewrite of state law that has been interpreted to mean the city must pay the appraised value for such lots. It has obtained fewer as prices have risen.

"We are seeing developers go to the county auction and picking up vacant lots mostly, and then putting up housing that doesn't fit the neighborhood," said state Sen. Linda Higgins, DFL-Minneapolis.

Kohlenberger said his company is finding it harder to dig up Minneapolis lots outside MCDA control. It made offers on 10 MCDA lots in the Jordan neighborhood, and three in Near North/Willard-Hay. But the neighborhoods told the agency they don't want lots sold to Dream Home, and agency officials say they will recommend against the sales.

"We refused them flatly," said Char Perry, housing director for the Jordan Area Community Council. The neighborhood group's letter to the MCDA said its housing committee members who toured a Dream Home house found its quality less than adequate and doubted the houses will hold Dream Home's estimated finished value of $220,000. Dream Home has said it hopes to develop a plan in which tenants may buy the houses in which they live. But it will be months before it firms up details, Kohlenberger said.

Some who work with neighborhood housing predict that tenants will be disappointed if they move in expecting to buy.

About the company

Dream Home is a partnership of Kohlenberger - a former commercial general contractor - and Paul H. Koenig, a rental property manager. They met about a year ago and decided that modular housing with a long-term warranty offered fewer headaches than older housing stock. The company is accelerating its pace and could be installing three homes a week by November, Kohlenberger said. If Dream Home can hold that pace for another 20 months - meaning it will have installed more than 350 houses - Kohlenberger said the cash flow from rents will cover all overhead and debt. He said the firm is finding cheaper, more plentiful lots in St. Paul and is starting to talk to suburbs. The firm also installed its first fourplex this month, on a Cedar Avenue parcel only slightly bigger than a typical single-family lot.

Carol Pass, an activist in the housing committee for that area, said putting the 20-bedroom fourplex on so small a lot gives children no room to play. "It's just not a very responsible way to do development," she said. Pass recalls with distaste Dream Home partner Koenig's stint as the manager of a duplex in the area. Koenig and duplex owner Michelle Milbrandt, now his wife, were sued by a housing advocacy group last year. Tenants had called a city inspector who found 34 building code violations. After many went uncorrected, the city condemned the building, and the group sued to force repairs. A housing referee found that although tenants didn't always make timely payments and had poor housekeeping, Koenig gave them eviction notices to punish them for calling the inspector. The referee ordered cuts in rent as compensation until repairs were made. At one point in the dispute, a judge ordered Koenig not to have any contact with tenants after their attorney described him in court papers as "very volatile and intimidating."

Koenig described the issue as a vendetta against landlords by the advocacy group. Michelle Koenig sold her seven rental properties shortly afterward, which helped Dream Home get its start late last year. She is listed as Dream Home's co-owner with Kohlenberger in offers the firm made to buy city lots, but Kohlenberger said Paul Koenig is his partner in the enterprise. There are indications of financial stress in both men's pasts. Koenig shed some of his debt by filing a bankruptcy liquidation petition in 2000. He listed assets of less than $21,000 and debts of about $107,000, including back taxes and bad checks written at Mystic Lake casino.

Kohlenberger last year paid off a federal lien for $31,177 in federal income taxes for 1997 and 1999. Both Koenig and Kohlenberger acknowledged these events. .

(Now here is the second Steve Brandt story about the Dream Homes fiasco)

February 19, 2005

Steve Brandt

The factory-built houses started popping up three years ago across the North Side of Minneapolis, on vacant lots where dilapidated housing had been razed years before. Now the company that erected dozens of instant houses, there and elsewhere in Minneapolis and St. Paul, is folding. That leaves neighbors wondering who will run the six-bedroom rental units, most lacking basements or garages. They fear the reappearance of blight.

"I truly believe that the afterlife of each one of these is going to be a horror story," said Roberta Englund, who staffs a livability task force that covers much of the North Side. She's concerned about maintenance of the houses, mounting back taxes owed on some of them, the impact on tenants, and potential public costs for dealing with the properties. "This is a case where building new homes in a community diminishes the value of the property around them," she said.

The homes were put up by Dream Home Development of Chanhassen. The plan was to finance manufactured housing with the federally subsidized rents of the people who occupied them. The homes were assembled from factory-built modules and were completed in days. Erect 350 houses, co-founder David Kohlenberger said in a 2002 interview, and the company could make a profit. But Dream Home barely got one-fifth of the way there before running out of money.


Now its stock of houses is being sold to try to pay the firm's debts.

"My main goal is to get these things liquidated," said Paul Koenig, Kohlenberger's onetime partner in Dream Home, who has assumed control of the properties. Kohlenberger didn't respond to repeated requests for comment.

A cautionary tale

The firm's story is a cautionary tale of the difficulties of trying to catch the right wave in the housing market, and of meshing a company's goals with a neighborhood's aspirations. Dream Home began buying vacant lots in 2001 just as the prices began rising because of increased demand from developers of owner-occupied housing. The company began renting its housing just as the demand for rental homes softened noticeably. And its cash flow suffered last year when federal subsidies that supplement tenant payments were cut back 7 percent.

"He had good ideas, probably bad timing," said Mike Czarnik, the firm's former housing administrator, about Kohlenberger. Moreover, Dream Home's path never meshed with neighborhood aspirations. Neighborhood groups had earmarked for homeownership the lots that Dream Home snapped up for rental development. They argued that much of the North Side was saturated with rental housing. They lobbied successfully to keep the city from selling lots it owned to Dream Home. And the boxy minimalism of houses by Dream Home and some other developers prompted the City Council to impose a one-year moratorium on North Side residential construction until design standards could be enacted.

Dream Home was a marriage of Kohlenberger's general contractor background with Koenig's experience as a rental property manager. But by the fall of 2003, Koenig was ready to sell his share of Dream Home and two related firms. Kohlenberger agreed to pay Koenig $1.2 million for his half, according to court documents. But employees say that as 2004 wore on, Kohlenberger's refinancing plans were put off in anticipation of a large sell-off of homes to provide an infusion of cash. He sold more than a dozen properties to investors, but that was fewer than the firm hoped for, according to Czarnik, the firm's former housing administrator. Some employees were laid off in November, and subcontractors began pressing for payment. An excavating contractor won a judgment for $83,847 in December, while a foundation contractor sought a judgment for $147,393.

When Dream Home auctioned office and field equipment in December, the Ramsey County Sheriff's Office seized proceeds for partial payment of the excavating debt. Then the Koenigs sued the Kohlenbergers and the companies, alleging they'd not been paid the $1.2 million and that the properties hadn't been managed properly. According to Koenig and his attorney, Steve Silton, the lawsuit was settled recently, and Koenig will assume control of the properties, sell them in an effort to pay debts, and fold operations.

Failure's fallout

But more problems may lie ahead. Out-of-state investors who bought six Dream Home houses have filed a federal suit alleging fraud. They sued Dream Home, the Kohlenbergers and real estate agents representing the firm. The investors allege that the rental income on the properties was inflated with fictitious rent subsidies from nonprofit sources. A Twin Cities investor, Peter Bazil, bought seven Dream Home properties and said similar cash flows were shown to him. "I've had many problems, many issues with them," he said of Dream Home.

Meanwhile, six former employees have sued to recover almost $67,000 in wages, expenses and a $20,000 loan Czarnik made to the company. Czarnik defended the quality of the houses, although he acknowledged the neighborhood opposition to cookie-cutter designs. "I heard mostly good things from the tenants about the units because they were almost brand new," he said. The firm added basements and garages in its latest models, he said, but those added tens of thousands of dollars in costs. Yet some community leaders fear that the problems of Dream Home property may linger long after those financial and legal issues are sorted out. They wonder how long the vinyl-sided houses will hold up with intense use by large families. With no basement or garage storage, they fear blight spreading across lots, some of which have yet to be sodded. The reappearance of blighted properties is a sensitive issue in some north Minneapolis areas that worked hard and spent hundreds of thousands of dollars in the 1990s to get such housing razed.

"What do you do with this very poor quality housing, and what does the future hold for it?" asked Council Member Barb Johnson, who represents part of the North Side. "It's a very scary thing. It just is not going to last. Eventually we'll be tearing them all down in five years." 

(And here is the third article, which has no author listed)

Dream Home's demise - Dream Home Development is folding after putting up 80 "instant" homes in Minneapolis and St. Paul.

Six-bedroom rental homes, most without basements or garages, are being sold to pay off company debts. Back taxes are owed on some houses, creditors are demanding payment and out-of-state investors have filed suit claiming fraud. North Minneapolis neighborhood activists fear return of blighted properties the homes were supposed to replace.

Disappointed dreams

Dream Home Development got building permits for close to 80 factory-built homes in Minneapoils and St. Paul in a three-year period, most on the North Side of Minneapolis. A chart shows the neighborhoods with Dream Home houses and their shares of the firm's Minneapolis total.

Dream Percent of Neighborhood Homes city total

Willard-Hay 15 21%
Hawthorne 15 21%
Near North 14 20%
Jordan 10 14%
Phillips 5 7%
McKinley 3 4%
Central 2 3%
Lind-Bohanon 1 1%
Camden 1 1%
Cleveland 1 1%
Logan Park 1 1%
Harrison 1 1%
Whittier 1 1%

Percentages are rounded.